Mortgage deduction in the Netherlands for property abroad

21 March 2017

A resident of Spain earning 60% of his income in The Netherlands and 40% in Switzerland can deduct mortgage interest for his Spanish dwelling from his Dutch taxable income. This was recently decided by the European Court of Justice (ECJ).

The taxpayer cannot deduct all Spanish interest in the Netherlands, but only the part that is in the same proportion as his Dutch income relative to his total income.

The current Dutch tax legislation provides for -briefly stated- a right to deduct mortgage interest re. foreign property, only to residents of EU countries* whose total income is at least for 90% subject to tax in the Netherlands . This legislation seems to need updating now. The judgment itself, however, has immediate effect for all EU Member States and can already be invoked.

The essence of this decision of the ECJ is that the EU countries where work is performed and income is earned, each for a proportional share must take into account the personal and family circumstances. This is different if the State of residence (in this case Spain) does take into account these circumstances.

In the case under review one of the work states was not an EU Member State (i.e. Switzerland). According to the ECJ this does not alter the obligations of the EU Member State(s) involved.

Also applies to residents of the BES islands, Liechtenstein, Norway, Iceland and Switzerland.

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