Assessment deadline does not apply to decision determining a loss
After expiry of the assessment deadline, the inspector can still lawfully issue a decision determining the loss incurred in any year.
6 March 2018
Statutory assessment period
The Inspector’s authority to impose an assessment essentially expires three years after the date on which the tax liability arose. However, this period is extended by the period for which taxpayers have been granted delay for filing their tax returns, irrespective of whether or not this delay has factually been used. For period-based taxes, such as income tax and corporate income tax, the three-year period starts immediately after termination of the taxable period.
Assessments imposed by the inspector outside the period are not legally null and void. This requires taxpayers to explicitly invoke excess of the period. What’s more, the Inspector remains obliged to impose an assessment if a taxpayer still benefits from this after expiry of the statutory period. Recently, the question arose whether the rules explained above also apply to determining the loss sustained in any (fiscal) year. The Supreme Court believed this not to be the case.
Decision determining a loss
In the respective case, the taxpayer filed its 2009 corporate income tax return on 28 September 2010 with a negative taxable amount of EUR 625,660. The inspector had granted an 11-month delay for filing this tax return and the assessment period hence ended on 30 November 2013.
However, the inspector imposed a nil tax assessment dated 3 January 2014 and (in deviation of the tax return) determined the loss over 2009 at EUR 152,948. This loss was subsequently set off against the positive taxable amount over 2006. The taxpayer then claimed that the period had been exceeded and the Court of Appeal annulled the assessment. However, the Court of Appeal upheld the decision determining the loss.
In their appeal to the Supreme Court, the interested party argued that the decision determining the loss should be put on a par with a tax assessment and that - in line with the previously imposed preliminary assessment - a EUR 625,660 loss should be taken into account. But the Supreme Court rejected this argument and judged that the only consequence of exceeding the statutory assessment period is that no tax liability can be determined any longer. The highest court of the Netherlands subtly pointed out that nullification of the decision determining the loss would harm the taxpayer’s interests. After all, without such a decision losses cannot be settled at all.
The Supreme Court’s judgment is beyond dispute from the legal system’s perspective. The consequence is, however, that the inspector can introduce corrections in loss situations after expiry of the assessment period by determining the loss at a lower amount. Excess of the statutory assessment period does not mean the inspector is bound to the amount of the loss reported by a taxpayer.
Source: Dutch Supreme Court HR 23 February 2018, 17/00188, ECLI:NL:HR:2018:264