Verbal tax agreement is valid
Dutch Supreme Court argues that the written record required in the Tax Administrative Law Decree does not affect the validity of a verbal tax agreement.
14 June 2018
The Dutch Supreme Court recently opined on the legal validity of verbal settlement agreements. The common denominator of such agreements is that they aim to solve any existing uncertainty or dispute between the parties, or to avoid an impending uncertainty or dispute. In tax law, too, this type of agreements - also referred to as compromises - is abundant. The major benefit compared with tax law proceedings is that a single agreement can embody agreements about various types of tax and periods. On top of that, it rapidly provides legal certainty for the parties involved.
However, the downside is that both the taxpayer and the inspector are bound to the contents of the tax agreement, even if its effects turn out to be unfavourable. That is different if the agreement has come about through vitiated consent, for instance because the inspector put unlawful pressure on the taxpayer to agree with a compromise. Also, the assumptions based on which one of the parties or both of them concluded the agreement may have been incorrect. In that case, the question is who should pay the price. Finally, the contents of the agreement as a whole may be contrary to the law to such an extent that parties may not count on compliance of the agreement. Yet case law shows this is not easily assumed.
Verbal agreement is valid
In the case under consideration, the Tax Administration imposed an additional VAT assessment and an offense penalty on a private limited liability company following a tax audit. Then telephone consultations took place between the majority shareholder-director and the Inspector. The latter argued that a compromise had been reached during these consultations that the penalties would be set at EUR 10,000. However, the majority shareholder-director did not sign the letter of 17 August 2011 that reflected the agreements made, nor did he return it to the Inspector.
The Arnhem Leeuwarden Court of Appeal nevertheless considered it plausible that a tax agreement had come about. In this respect, the Court of Appeal also referred to an email by the majority shareholder-director of 22 February 2012, in which he referred to the agreements made and indicated that the Inspector processed them incorrectly.
The majority shareholder-director argued before the Supreme Court that no valid tax agreement had come about, since the Tax Administrative Law Degree (Besluit fiscaal bestuursrecht) requires signed written records of agreements made. However, the Supreme Court rejected this plea with the argument that the procedure described in the abovementioned Decree does not place additional demands on legally valid conclusion of the agreements. The mere purpose of the requirements is to rule out disputes on the contents of the agreements afterwards. The Supreme Court also rejected the interested party’s plea that he had not been given reasonable time for reflection, i.e., at least one week. The reason for rejecting this plea is that it was first submitted in the cassation proceedings, which do not leave room for investigating the facts.
Source: HR 8 June 2018, 16/04239, ECLI:NL:HR:2018:865