Dutch Supreme Court clarifies when an interest in bringing proceedings exists
Notices of objection or appeal are admissible when the use of such a legal remedy may result in a determination of a lower assessment or a higher loss.
31 May 2017
Interest in bringing proceedings
Taxpayers that disagree with the amount of an assessment raised or the loss determined for a certain fiscal year may object to the Tax Administration. If the Tax Inspector rejects their objection, they can subsequently appeal to the District Court, the Court of Appeal and – finally – the Supreme Court. However, exercising a legal remedy requires precision. The law, for instance, prescribes the required contents of notices of objection or appeal (name and address details, date, description of the contested decision and substantiation) and the deadline for filing. Failure to comply with these statutory requirements may lead to a statement of non-admissibility. It means the substance of the respective objection or appeal will not be dealt with. The same consequence occurs when taxpayers have no interest in a decision on their objection or appeal. The Dutch Supreme Court recently clarified when such a situation occurs.
Revoking a filed tax return
A housing corporation declared a substantial loss in its 2010 corporate income tax return, which resulted from a write-down on rental homes it owns. In line with this tax return, the Tax Inspector raised a nil tax assessment and the loss for FY 2010 was set at around EUR 7.9m. On second thought, the housing corporation wished to reverse the write-down as it was unsure whether the loss determined could be set off against future profits within the statutory period. However, for lack of a financial interest the Tax Inspector disallowed the notice of objection. The Gelderland District Court agreed with this and decided that allowing the objections raised would result in a less favorable position for the housing corporation with regard to FY 2010, since the loss established would have to be reversed.
More favorable position
However, the Dutch Supreme Court ruled that the District Court used the wrong test. It should have judged in the abstract whether objecting against the amount of the loss determined by the Tax Inspector could have improved the interested party’s position, which definitely is the case. As the Supreme Court already indicated, the housing corporation could have adduced other arguments in a later stage of the objection proceedings which could well have resulted in determination of a higher loss. So the fact that these arguments had not been put forward in the notice of objection does not affect the admissibility of the objection.
This decision is expected to hardly make any difference for the housing corporation eventually. After all, the Supreme Court subtly pointed out that the legal remedies of objection and appeal only serve to reduce the amount of the contested assessment or to increase the loss determined by the Tax Inspector. And that is precisely what the housing corporation does not want: it wishes to revert the write-down on the rented houses reported in 2010 and form a corresponding reinvestment reserve. In the end, this would mean that the loss determined would have to be reversed in full. The Supreme Court ruling clarifies that this result cannot be achieved, at least not in proceedings against a decision determining the loss for FY 2010.
Source: Dutch Supreme Court HR May 12, 2017, 15/05579, ECLI:NL:HR:2017:844