Dual residency occurs when two countries both assert that the same individual is a tax resident under their respective domestic laws. This situation commonly arises during international relocations, where an individual retains connections to their home country while establishing a new tax presence in the host country. Without a bilateral tax treaty in place, the individual would face worldwide taxation in both jurisdictions.
Article 4 of the OECD Model Convention provides the standard resolution mechanism. The treaty applies sequential tie-breaker tests: first, the state in which the individual has a permanent home available to them; second, the state with which their personal and economic relations are closer (centre of vital interests); third, the state of habitual abode; and fourth, nationality. If none of these tests produces a clear result, the competent authorities must settle the matter by mutual agreement.
Dutch domestic law determines residency through a broad assessment of facts and circumstances, with no single determinative factor. The Belastingdienst considers factors such as where the family home is situated, where family members reside, and where social and economic activities are centred. Assignees moving to or from the Netherlands should obtain a formal residency determination at the start of the arrangement to avoid uncertainty and potential back-taxes.