Too low additional assessment was not reasonably knowable | Deloitte Netherlands


Too low additional assessment was not reasonably knowable

The Supreme Court confirms the opinion of the court of appeal to which the case is referred back that not including the corrections resulting from a tax audit in the first additional assessment must continue to be for the account of the inspector.

20 January 2021

Additional assessment

If insufficient tax has been levied, a subsequent additional assessment is subject to all sorts of conditions. The main rule is that a tax inspector may only impose an additional assessment if a new fact has emerged. If the tax inspector has made an error of judgment when determining the tax assessment, this will in principle continue to be for their account. However, this does not apply if a taxpayer has acted in bad faith in the sense that he has intentionally submitted an incorrect tax return or, following a request for information from the tax inspector, has intentionally provided incorrect information.

Knowable error

A second important exception to the new fact requirement is the knowable error. If a taxpayer could have reasonably understood that an error was made when the tax assessment was established, the tax inspector may correct this error within two years. This extension of the power to impose an additional assessment was included in article 16(2)(c) of the State Taxes Act on 1 January 2010, on the back of case law that had revealed that errors resulting from the automated assessment process continued to be for the account of the Tax Administration. Recently, the scope of this provision was clarified once again.

Tax audit

The case involved a taxpayer at whom a tax audit was started in June 2009, into the acceptability of the personal income tax returns for the years 2005 through 2007. Subsequently, the 2007 assessment for personal income tax/national insurance contributions was imposed on 5 February 2010, without taking into account the results of this tax audit or a voluntary improvement with regard to foreign assets. The latter improvement had been made in the meantime. Subsequently, on 23 October 2010, a first additional assessment was imposed which included the foreign capital gains, followed by a second assessment on 2 December 2011. This included the results of the tax audit. The dispute is about whether imposing the latter additional assessment was even permitted at all.

In 2018, the Supreme Court ruled that the inspector's failure to block the assessment in the Tax Administration’s systems during the tax audit is an error that, in principle, can be rectified by applying article 16(2)(c) of the State Taxes Act. This does mean, though, that the error must be reasonably knowable. The case was referred to the Arnhem-Leeuwarden Court of Appeal to have it assess whether this was indeed the case. This Court of Appeal ruled that the returns included a reasonably arguable position with respect to the income components included in the second additional assessment. Moreover, the corrections resulting from the tax audit were not announced until after the final assessment had been imposed. For the sake of completeness, the Court of Appeal considers that the corrections when imposing the first additional assessment had not been omitted without any conceivable reason. This was due to a discussion about the question in which year the corrections should be applied. According to the Court of Appeal, a knowable error has not occurred. The Supreme Court recently confirmed the court's ruling. The opinion of the Court of Appeal neither shows any error of law, nor is it incomprehensible or insufficiently substantiated.

Source: HR 18 December 2020, 20/01566, ECLI:NL:HR:2020:2040

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