Employer duty of care and cross-border tax changes

The Dutch Supreme Court has recently confirmed the outcome in the KLM pilots case. The case concerned two KLM pilots who lived in Switzerland and were confronted with Dutch income tax consequences following a change in the Dutch-Swiss tax treaty.

The pilots argued that KLM should have warned them more explicitly about the impact of that treaty change. In earlier proceedings, the Supreme Court had already confirmed an important principle: under Dutch employment law, an employer may, in certain circumstances, have a duty to inform employees about changes in legislation that are relevant to their tax position.

After referral, however, the Court of Appeal rejected the pilots’ claims. The court considered that the pilots could not successfully argue that they were unaware that their KLM income would be taxable somewhere, either in Switzerland or in the Netherlands. The Supreme Court has now upheld that outcome.

The case is therefore nuanced. KLM was not held liable, but the underlying duty of care principle remains relevant. Employers with internationally mobile staff should not assume that payroll treatment, treaty positions or historic practice will automatically remain correct.

Action point: employers with employees living or working across borders should periodically review tax treaty positions, payroll withholding, social security coverage and employee communication.

For more information about your obligations as an employer, please contact your Nassau specialist at info@nassau.tax.