Supreme Court sets higher standards of proof of a finable offence | Deloitte Nederland


Supreme Court sets higher standards of proof of a finable offence

Article 6 of the European Convention on Human Rights shows that a person is innocent until proven guilty. A penalty may only be imposed if there is convincing evidence of a finable offence.

14 April 2022

Offence penalty

If a taxpayer is culpable of not paying a self-assessment tax debt, or not doing so on time, the Tax Inspector can impose an offence penalty of up to 100% of the tax levied in an additional tax assessment. The same applies if a taxpayer intentionally submits an incorrect tax return. Intentional acts are considered to be conscious, or at least the conscious acceptance of a significant risk of underpayment of tax. Recently, the Supreme Court ruled that a penalty may only be imposed if the facts and circumstances on which it is based have been established beyond reasonable doubt.

Double invoices

This case concerned a company (X bv) established in 2010, which provided administrative services in applying for and renewing visas and work permits for cooks from China. The company also mediated in the transfer of cooks from restaurants in EU Member States. The company also purchased services itself and paid invoices to a Dutch company and a Chinese company (X Ltd.).

The Tax Inspectorate investigated the corporate income tax return of X bv for the extended financial year 2010/2011. The Tax Inspector concluded that double invoices were involved and imposed an additional tax assessment. This was because expenses had been included in the return for which no services had been provided. Moreover, a EUR 214,794 penalty was imposed on X bv for deliberately claiming excessive deduction of costs. The company filed a notice of objection and a small part of the amounts paid to the Chinese company was still allowed as deduction, while the penalty was reduced to EUR 85,917. X bv appealed against this. However, the Court upheld the additional assessment and considered a penalty of EUR 50,000 to be appropriate. But because the proceedings had taken too long, the penalty was reduced to EUR 45,000.

X bv subsequently lodged an appeal. The Court of Appeal considered it plausible that there was double invoicing and even doubted the existence of the Chinese company. The burden of proof should therefore be reversed and increased. The Court of Appeal also considered it plausible that intent was involved, so that the penalty was justified. However, due to the long duration of the proceedings, the penalty was reduced by another EUR 5,000 to an amount of EUR 40,000. X bv appealed against this judgment in cassation.

Supreme Court

The Supreme Court upheld the additional tax assessment, but found that the penalty was insufficiently substantiated. After all, article 6 ECHR states that a person is innocent until proven guilty. This means that facts underlying a penalty must be established beyond reasonable doubt. That they are plausible is not sufficient. The inspector must convincingly demonstrate that the taxpayer has committed a finable act. The Supreme Court declared X bv's appeal in cassation to be well founded and referred the case to the Arnhem-Leeuwarden Court of Appeal to have it reassess whether there had been intentional conduct.


• Court of Den Bosch 23 July 2020 ECLI:NL:GHSHE:2020:2352

• Supreme Court 8 April 2022, ECLI:NL:HR:2022:526

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