No tax proceedings if VAT number is cancelled
The Supreme Court’s judgement about cancellation of the VAT identification number not being based on a decision that is open to objection, means there is no possibility to commence tax proceedings. Even without a VAT identification number, though, a refund claim can be submitted.
17 April 2018
Closed system of legal protection
Unlike general administrative law, tax law has a closed system of legal protection. It means objections and appeals can only be filed against tax assessments or decisions that are open to objections, such as a decision on imposing a fine or a decision on determining a loss. The Supreme Court was recently asked to rule on the question as to whether the cancellation of a VAT identification number is likewise open to commencing tax proceedings.
Cancellation VAT identification number
The inspector in this specific case had informed the interested party, on 10 March 2014, about cancellation of his VAT identification number. Responding to the interested party’s notice of objection, the inspector stated there was no possibility to commence tax proceedings. Nevertheless, he did discuss the contents of the objections brought forward. On appeal, the interested party stated that cancellation of the VAT identification number means he could no longer file tax returns. He could no longer request for refunds of VAT either. The Zeeland-West Brabant District Court nevertheless ruled that cancellation of a VAT identification number is not based on a decision that is open to objection. Without any possibility to commence tax proceedings, the appeal must be declared inadmissible. Following the objection, the District Court maintained its judgment and considers that the notification about no VAT identification number being granted cannot be put on a par with a refusal to grant a refund of VAT.
Contrary to Union law?
Appealing against this, the interested party challenged this judgment. He added that the absence of a possibility to appeal against cancellation of the VAT identification number is contrary to Union law. The Supreme Court first and foremost states that the VAT identification system primarily serves to enforce the rules governing the levy of VAT in respect of intra-Community transactions. National tax authorities need VAT identification numbers for audit purposes. The problem is the lack of legal provisions on assigning the power to issue or cancel such numbers. Considering the relationship with the levy of VAT, according to the Supreme Court it should be assumed that the inspector is the competent administrative body. Hence, cancellation would constitute a decision taken in accordance with tax law. Still, it does not involve a decision that is open to objection, or a similar decision.
As an aside, the Supreme Court also notes that a request for a refund of VAT is definitely possible, even without a VAT identification number. One can do so under art. 31(2) and (3) Turnover Tax Act 1968, as an inspector has the obligation to invite anyone to file tax returns if they request this. Likewise, commencing tax proceedings against cancellation of a VAT identification number is not impossible because interested parties can turn to the civil courts.
Ex officio grounds for appeal
Finally, the Supreme Court considers that the interested party could reasonably assume the inspector’s response to be a decision on an objection. The District Court should thus have declared the interested party’s appeal to be admissible. The interested party does not benefit from this in the end, though. Fact remains that there is no possibility to commence tax proceedings against cancellation of a VAT identification number. The Supreme Court therefore does what the District Court should have done: it declares the appeal to be unfounded.
Source: HR 13 April 2018, 16/02939, ECLI:NL:HR:2018:505