Supreme Court once again rules on application of extended additional tax assessment period
Recently, rulings were once again pronounced in which the core issue was whether the inspector had been sufficiently expeditious in imposing additional tax assessments as regards non-disclosed foreign bank deposits.
18 October 2017
Extended additional tax assessment period
The compatibility with EU law of the extended additional tax assessment period for foreign income and assets was a much debated issue in recent years. On the back of submitting preliminary rulings on this issue, the Supreme Court has ruled that the limitation of the free movement of capital as a result of applying the extended additional tax assessment period in EU situations is acceptable provided the following condition is met. Once evidence has emerged about a failure to disclose foreign income/deposits, additional tax assessment should be imposed taking into account the time required to:
(i) obtain information needed to determine the tax due; and
(ii) prepare and determine an assessment with reasonable expeditiousness, using the information obtained.
A raft of case law has been published since, in which the key question was whether the inspector had been sufficiently expeditious in imposing the related additional tax assessments. Recently, the Supreme Court once again shed its light on this.
Requirement of expeditiousness (1)
The inspector in the first case imposed additional income tax and net wealth tax assessments on the interested party and his spouse, dated 31 December 2007, because of non-disclosed foreign bank deposits. On 8 December 2008, the inspector stated that the spouse’s notice of objection against these additional tax assessments was unfounded.
On 28 January 2009, the inspector announced a second series of additional tax assessments and offense penalties. This announcement was not followed up, though, until 28 July 2009. The dispute was about whether the inspector had been sufficiently expeditious. According to the principle of due care, the Court of Appeal of The Hague ruled, the inspector was permitted to wait for the outcome of the objection proceedings against the first series of additional tax assessments.
On the priority given to additional tax assessments of which the period threatens to expire, in its considerations in the appeal procedure the Supreme Court found this not, in itself, to be contrary to the requirement of expeditiousness. Waiting for the outcome of the spouse’s objection proceedings, though, had not been justified. Once the substantiation of his notice of objection had been received, on 17 April 2008, it had not been ascertained that the inspector could reasonably assume additional information would be forthcoming that would be relevant to imposing the second series of additional tax assessments. Hence, the second series of additional tax assessments, dated 28 July 2009, had not been imposed with the expeditiousness required.
Requirement of expeditiousness (2)
In the second case, too, the inspector imposed an initial series of additional tax assessments relating to non-disclosed foreign bank deposits, in late 2007. The interested party had substantiated the objections against these additional tax assessments in April 2008, denying he was an account holder. The inspector subsequently announced a second series of additional tax assessments, in October 2008. They were ultimately imposed on 31 December 2008. As in the first case, the dispute is about whether the inspector had acted with sufficient expeditiousness.
The Court of Appeal in The Hague ruled this to be the case, because on the back of the interested party’s denial the inspector had officially verified whether the interested party was, indeed, an account holder. What’s more, the court documents show that the Tax Administration had selected the interested party’s file for preliminary relief proceedings under civil law, in the summer of 2018. According to the Court of Appeal this justified the delay in imposing the second series of additional tax assessments.
In the appeal, the Supreme Court confirmed the judgment by the Court of Appeal. The reason to do so was because the considerations of the Court of Appeal show that during the procedure followed by the inspector there had been no inexplicable delay in excess of six months. Hence, the second series of additional tax assessments had been imposed on time.
- HR 13 October 2017, 17/00228, ECLI:NL:HR:2017:2602
- HR 13 October 2017, 17/00233, ECLI:NL:HR:2017:2599