I am a US citizen living in the Netherlands, and I have an FAA PPL(A) with current IR as well as an EASA PPL(A) without IR. I am currently trying to figure out my easiest path to IR conversion, as I do not have the required 50 hrs PIC time to do a direct conversion. I know I can do the CBIR, but I'm wondering if I'm permitted to fly N-reg aircraft under IFR in order to build the required hours. I've heard that as an EU resident I'm required to fly using both an EASA PPL and FAA PPL in an N-reg, and therefore I assume the answer is technically no. Am I correct in this assessment?
Long story short, European residents apparently require an EASA license to operate a foreign aircraft, even if they also hold a foreign license from the country the aircraft is registered in.
European regulations are really difficult to pin down because implementation is delegated to member states, however it looks like as a resident in an EASA country you do need an EASA license to operate an N-registered aircraft based there. There are many online sources that say that, although they typically don't link to actual regulations. Several of them mention that you get a 12-month period to acquire the EASA license, during which you can still fly with your foreign license.
The European Aviation Safety Agency, a pan-European regulator, had passed a regulation some years earlier requiring that European residents acquire a European equivalent license to fly an N-registered aircraft in Europe. This requirement didn’t apply to nonresident foreigners.
If your N-reg aircraft would be classified as an EASA aircraft if you registered it under the G registration, AND it is based in the UK now, you do need either an EASA licence to fly it or an EASA validation. If you wanted to fly it outside the UK, you would need your FAA licences too.
The underlying EASA regulation appears to be REGULATION (EC) No 216/2008, which says that it applies to foreign aircraft if the operator is based in Europe (Article 4, paragraph 1(c), emphasis mine):
registered in a third country and used by an operator for which any Member State ensures oversight of operations or used into, within or out of the Community by an operator established or residing in the Community
Paragraph 2 says that the regulations apply to personnel too, it's not just about the aircraft itself:
[...] Personnel involved in the operations of aircraft referred to in paragraph 1(b), (c) or (d) shall comply with this Regulation
The tricky part is that EASA leaves it to each member state to actually implement the regulations and sometimes they implement at different times (see comments in the AOPA article above). I couldn't find the Dutch regulations, but the UK regulations do confirm that only non-residents are exempt from European licensing requirements. Air Navigation Order, Article 149, emphasis mine:
This paragraph applies if the operator of the aircraft is neither resident nor established in the European Union, and the person acting as a member of the flight crew is the holder of an appropriate licence granted or rendered valid under the law of the country in which the aircraft is registered or the State of the operator.
(As an aside, the ANO article is written in a very confusing, double-negative construction, but it does line up with other sources.)
Because EASA delegates to each member state, the best way to get a definitive answer that applies to your situation is to contact the Dutch civil aviation authorities. When and if you do find out what the requirements are, it would be great if you would come back here and add your own answer to this question. There's surprisingly little definitive, sourced information available about this and a first-hand answer would be really helpful.