Supreme Court clarifies additional assessment due to reasonably recognisable mistake
The early imposition of the additional tax assessment could be ascribed to the failure to record a tax audit in the automated system of the Tax Administration on time. This classifies as a reasonably recognisable mistake.
25 July 2018
A host of provisions govern the imposition of an additional assessment if insufficient tax has been levied. As a rule, inspectors can only do so if new facts have arisen. Technically, any mistakes inspectors make when performing the assessment continues to be their responsibility. This does not apply, though, if taxpayers act in bad faith. One such situation occurs when they deliberately file an incorrect tax return.
A second major exception to the requirement of the new fact is the recognisable mistake. If taxpayers could have reasonably understood that a mistake has been made when performing a tax assessment, inspectors have two years to correct it. This extension of the possibility to impose an additional tax assessment was written into in the State Taxes Act in 2010. It came on the back of case law that showed that mistakes resulting from the automated process for settling assessments continued to be the responsibility of the Tax Administration. After the Supreme Court had first expressed its views on the scope of this provision in 2014, it once again seized the opportunity to clarify application of this authority in a recent ruling.
The case involved a taxpayer with whom a tax audit had been started in June 2009, into the acceptability of the personal income tax returns over the years 2005 through 2007. The assessment for the income tax and the national insurance contributions for the year 2007 was imposed on 5 February 2010, without considering the results of this tax audit. The income from foreign assets, which had been reported voluntarily by then, had not been included either. A first additional tax assessment had ultimately been imposed on 23 October 2010. It included the foreign income from assets. This was followed by a second assessment on 2 December 2011, in which the results of the tax audit had been processed. The dispute regarded the question whether imposing the latter additional tax assessment was permitted.
The Den Bosch Court of Appeal has ruled that the course of events had been triggered by the choice of the Tax Administration to have two have different units perform the two processes (tax audit and voluntary correction). According to the court, it was this circumstance - coupled with the inspector’s failure to block the automatic settlement of tax returns - that has led to a culpably incorrect insight into the facts. This prevents an additional assessment. The Supreme Court has a different view. It can be inferred from legislative history that the concept of “mistake” encompasses all errors occurring when the assessment is settled, except for misjudgments. According to the Supreme Court, the failure to block the settlement of the assessment in the systems of the Tax Administration during the tax audit does not classify as a misjudgment. This is not altered by the first additional tax assessment (dated 23 October 2010) having been imposed manually, following the voluntary correction.
Source: HR 13 July 2018, 17/05454, ECLI:NL:HR:2018:1203