Supplementary VAT return through corporate income tax return | Deloitte Nederland

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Supplementary VAT return through corporate income tax return

Advocate General IJzerman argues that, although the interested party acted incorrectly, arguments can be made for the latter’s position that by including VAT debts in the corporate income tax return they have complied with the obligation to file a supplementary return.

24 February 2022

Obligation to file supplementary return

Entrepreneurs who notice that they have submitted incorrect or incomplete VAT returns for a period in any of the previous five years, have the obligation to as yet provide the Dutch Tax Administration with the correct and complete information. In other words, they have an obligation to file supplementary returns. Violation of this obligation is considered an offence and can lead to the imposition of a negligence penalty. This obligation is being hotly debated.

One example is the Supreme Court’s judgment last year, which argued that the information obtained may only be used in the area of taxation, and not as evidence for imposing a fine or initiating criminal proceedings for failure to pay VAT or not doing so on time. A failure to comply with the obligation to file supplementary returns, though, can be subject to a penalty.

Material approach

The Supreme Court faces a new case right now, focusing on the question of how a taxpayer can meet their obligation to file a supplementary return. The company in question had reported VAT liabilities for the years 2014 and 2015 in its corporate tax returns. The Tax Inspector responded by performing a tax audit in 2018, on the back of which additional tax assessments were imposed. The Tax Inspector likewise imposed negligence penalties of 50% for failure to pay VAT due (on time) and for breaching the obligation to file a supplementary return.

The Court of Appeal in The Hague annulled the latter penalty. It was established in court that reporting the VAT debts in the 2014 and 2015 corporation tax returns was the reason for the tax audit. In these returns, the entrepreneur reported precise figures that unmistakably showed there to still be VAT payable for those years. The Court of Appeal argues that this means the obligation to file a supplementary return had been fulfilled. On behalf of the State Secretary, the judgment has been appealed with the Supreme Court.

Conclusion Advocate General (A-G)

Recently, A-G IJzerman delivered an opinion. He argued that the Court of Appeal has applied a substantive approach, ensuing from a reasonable application of the law. The A-G argued that because the legislative history of the regulation states that reporting a VAT debt in the corporate income tax return does not qualify as filing a supplementary return, this argues against the Court of Appeal’s approach. A supplementary return must be filed in a manner prescribed by the Tax Inspector. It has been mandatory to do so electronically since 2018. Before that time, a digital form could be downloaded from the Tax Administration’s website. The A-G nevertheless argued that the substantive approach advocated by the entrepreneur, and followed by the Court of Appeal, is arguable, and that no penalty should be imposed. Should the Supreme Court reject this view, the A G argued that the penalty is disproportionate. Considering the circumstances of the case, the penalty should be reduced to approximately 10%. It is now a matter of waiting for the Supreme Court’s judgment.


Source: Conclusion A-G 27 January 2022, 20/04198, ECLI:NL:PHR:2022:66

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