According to a recent bill, the Dutch Revenue Service may issue a supplemental assessment in an increased number of situations. The bill still does provide Dutch corporate taxpayers with more legal certainty by shortening the statutory period within which a supplemental assessment could be made.
A Dutch corporate taxpayer is generally required to file a corporate income tax return with the Dutch Revenue Service annually and, in turn, receives a final assessment stating its corporate income tax liability. Following the final assessment, the Dutch Revenue Service is authorised to issue a supplemental assessment in cases where the amount of the corporate income tax liability exceeds the amount of the final assessment issued. For example, if the taxable profit for a certain year of a corporate taxpayer turns out to be higher than originally assessed because of previously undiscovered information, and the Dutch Revenue Service becomes aware of that information after issuing the final assessment, a supplemental assessment may be issued.
Supplemental assessment period
The supplemental assessment may be issued at any time within the statutory supplemental assessment period. The supplemental assessment may be issued only after the final assessment of corporate income tax has been issued, and only in cases where the Dutch Revenue Service is allowed to demonstrate that the corporate income tax liability of a Dutch corporate taxpayer exceeds the amount of that final assessment. A general summary of those cases where the Dutch Revenue Service is allowed to issue a supplemental assessment is provided below.
Under the current rules, the supplemental assessment period for Dutch corporate income tax due on profit earned from domestic sources is five years, while the supplemental assessment period is 12 years for the tax due on profit earned from foreign sources. The supplemental assessment period increases with the period of time which a Dutch corporate taxpayer has requested and obtained an extension in filing its corporate income tax return. Currently, the supplemental assessment period starts after the relevant fiscal year has elapsed. For Dutch corporate income taxpayers, the length of the supplemental assessment period entails, to a certain extent, legal uncertainty for a Dutch corporate income taxpayer. This is because the Dutch Revenue Service may still review a corporate income tax return filed by a corporate taxpayer even after a number of years have passed since the underlying facts occurred.
Under the new rules, the supplemental assessment period for Dutch corporate income tax due on profit from both domestic and foreign sources is generally reduced to only three years. However, the starting point for this period is no longer fixed. Instead of having this assessment period start at the end of any fiscal year, as is currently the case, the new rules place the starting point of that assessment period on the day the corporate income tax return is filed. In doing so, the bill changes the starting point of the supplemental assessment period from being determined in advance to being determinable, as many Dutch corporate taxpayers cannot predict the precise day when their tax returns will be filed. Moreover, the bill provides that the Dutch Revenue Service may confirm the date the corporate income tax return is filed only at the Dutch corporate taxpayer's request.
Authority to issue supplemental assessments
A supplemental assessment is relevant only in those limited circumstances where the Dutch Revenue Service is authorised to issue this assessment. Broadly speaking, the Dutch Revenue Service may issue a supplemental assessment when:
- information becomes known to the Dutch Revenue Service that was previously unknown
- a taxpayer has intentionally filed an incomplete tax return or has intentionally withheld information
Under the new rules, the Dutch Revenue Service may also issue a supplemental assessment when a Dutch corporate taxpayer knows, or may be considered to know, that too little tax was levied in the final assessment. This means in this case that the information forming the basis for the supplemental assessment does not need to be "new" for the Dutch Revenue Service to rely on that information in issuing a supplemental assessment.
The bill does not expand on the particular circumstances that have to be taken into account or the particular criteria that have to be met before the Dutch corporate taxpayer may be considered to know that too little corporate income tax has been assessed. Instead, the bill suggests that the taxpayer's requisite knowledge should be determined on a case-by-case basis and with reference to the size of the correction and the complexity of the legislation involved. The bill does mention that knowledge of a third party, for example, a tax advisor, may be attributed to the taxpayer as well.
Although the bill expands the number of cases where the Dutch Revenue Service may issue a supplemental assessment, it still provides Dutch corporate taxpayers with more legal certainty by generally reducing the statutory period within which a supplemental assessment of Dutch corporate income tax may be issued.
We recommend that Dutch corporate taxpayers confirm the date on which they file their corporate income tax return. The bill, if enacted, does not require the Dutch Revenue Service to automatically confirm that filing date. A Dutch corporate taxpayer would further enhance legal certainty by requesting confirmation.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
