Dutch State Secretary sends House of Representatives a letter on approach to tax evasion

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Dutch State Secretary sends House of Representatives a letter on approach to tax evasion

The Dutch Finance State Secretary announces serious measures to reduce tax evasion: cancellation of the voluntary disclosure scheme and restriction of the right of non-disclosure for lawyers and notaries.

24 January 2017

Dutch version

Approach to tax evasion

On January 17, 2017, the Dutch Finance State Secretary sent a letter to the House of Representatives discussing the approach to international tax evasion. This letter describes the progress made on a number of initiatives to combat tax evasion by the EU and the OECD, and announces additional measures under national law to curb tax evasion. The State Secretary plans to publish the plans this year for Internet Consultation. Below is an overview of the proposed measures.


Cancellation of the voluntary disclosure scheme

In the present situation, the Tax Administration does not impose negligence penalties on taxpayers who voluntarily provide complete and correct data to the Inspector within two years after they filed an incorrect or incomplete tax return, or after they should have filed a tax return. On top of that, moderated negligence penalties are due for voluntarily filing an adjusted tax return after this two year period. This so-called voluntary disclosure scheme (inkeerregeling) was already tightened considerably on July 1, 2016, but now the government wishes to take it to the next level and cancel the scheme altogether. Voluntary disclosure will, however, remain a circumstance that warrants remission of the penalty.


Approach to bearer shares

The government wants to make it easier to trace the identity of holders of bearer shares (that can be issued by NVs) by only allowing them in the form of book-entry securities. To this end, bearer shares should first be mandatorily deposited with an intermediary or central institute. As long as this has not been done, the rights relating to the shares will be suspended. On top of that, a provision will be added to the Dutch Civil Code stipulating that bearer shares may only be issued as book-entry securities.


Tightening of the right of non-disclosure

Notaries, lawyers, priests, doctors, and pharmacists may rely on their right of non-disclosure and deny requests from the Inspector for information which may be relevant for the taxation of third parties. The rationale behind this is that people should be able to turn to these persons without fear of disclosure of sensitive financial or other information. However, the government believes the scope of this right to be too broad for lawyers and civil-law notaries. For this reason they propose to restrict the right of non-disclosure for these occupations to certain legal activities, such as assessing a client’s legal position, representing clients in court, and advising on initiating, conducting or avoiding legal proceedings.


Disclosure of offense penalties

The government argues that both society and the Tax Administration should be able to trust that legal professionals act in accordance with legislation and regulations. To underline this, the State Secretary proposes to disclose any penalties imposed on these professional practitioners. Note that the conditions for potential disclosure and the way in which this will be done are yet to be determined. An Internet Consultation on this issue will be published later this year.


Combat against structures to avoid collection

Three measures have been proposed to counter abuse of the right to collect taxes. Firstly, the State Secretary proposes to expand the possibilities to hold liable any third parties who are donees or recipients of a tax debtor’s capital for unpaid tax debts of that natural person or legal entity. On top of that, the obligation will be cancelled to reopen the liquidation of a wound-up legal entity before third parties can be held liable for any unpaid tax debts. Finally, a statutory duty to provide information will be introduced for potentially liable natural persons or legal entities in respect of data that are relevant for tax collection, such as information on income and capital.


Finally

The measures announced in the letter of January 17, 2017 are quite far-reaching. The government obviously aims to intensify the combat against different forms of tax evasion. The precise shape and proposed effective date of the various measures are yet unclear. We will keep you informed of relevant developments.


Source: Letter State Secretary for Finance January 17, 2017, 2017-0000009651

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