When the tax inspector was given the legal means in 2009 to impose tax fines on co-perpetrators, this caused quite the commotion among tax advisors. Initially the professional literature reassured them it would not be such a big deal. After all, according to the prevailing case-law, the required proof of (conditional) intent was not easily met. Besides, the right to impose a fine came with a safeguard: prior permission by the ministry is mandatory (section 2.6 BBBB). Until then, however, case law also showed all too often that the minimum rules of evidence for conditional intent were not justly applied by investigative authorities and the tax authorities. More than a decade has now passed. Were the soothing words (un)justified?
The case law that has now appeared shows that fines for tax advisors are mainly an issue in disputes on whether a foreign located company actually has its place of effective management (POEM) in the Netherlands and therefore is subject to Dutch corporate income tax. Whether this is the case is not always clear; these types of cases are very casuistic. It is remarkable that the inspector often concludes in one go that if the company is subject to Dutch corporate income tax, it probably has acted in bad faith and should be fined, besides the management or shareholder(s) of the company. The idea seems to be that where there is smoke (taxation), there is also fire (conduct liable to penalty).
But this is all too short sighted.
Recently, the Amsterdam Court of Appeal ruled that the tax inspector had correctly concluded that the effective management of the Malta-based company was in the Netherlands. However, the Court of Appeal considers this does not automatically mean that the tax advisor was also aware of this. On the contrary, the Court of Appeal assumes the good intentions of the tax consultant: “The Court of Appeal rather considers it plausible that if the interested party had realized this, she would have pointed out to the other parties involved that the required substance was threatened and that another course of action was required.” The Court of Appeal ruled that the proof of intent was not convincingly demonstrated by the tax inspector. This also applies to the claim that the tax advisor would have acted grossly negligent. It is also not up to the tax advisor to prove his innocence. That burden of proof lies with the inspector.
The Court of Appeal ruled that the advisor could have been expected to take action with respect to the domicile of the company. The Court of Appeal considered: “The failure of the interested party is culpable. More adequate action could have been expected from her.” However, according to the Court of Appeal, this failure to act does not justify the conclusion that there is serious fault: “This culpability, the failure to intervene or distance oneself where this could have been expected of her, is not so serious that it borders on intent in reprehensibility. There is therefore no question of gross negligence either.” The court adds that in this case, even if intent or gross negligence could be assumed, the required complicity could still not be proven. The contribution of the tax advisor was simply of insufficient weight.
In our opinion an entirely correct decision.
The judgment provides lessons to both tax advisors and the tax administration. For potential new cases it would be wise to assume the good intentions of the involved consultant, as the Court of Appeal does in this case, while analyzing whether there is proof of (conditional) intent. In our opinion only cases in which there is concrete evidence that the tax advisor realized that the effective management of a company was in the Netherlands but nevertheless the advisor consciously took no action, should be eligible for a penalty. If there is no such evidence during the request for permission, then imposing a penalty is disproportionate.
And to answer the question from the introduction: although this case may not be over yet, the soothing words for advisers so fare have proven to be correct. However, it is a long-term procedure with a lot of negative effects for both the personal as the professional life of the tax advisor involved.
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