Conflict with the tax authorities: what now?
The Tax and Customs Administration is currently under fire more than ever. With the allowance affair, which continues to fester and has not yet been settled, fresh in the collective memory and a declaration from the Ministry of Finance that has been submitted to the Public Prosecution Service, the government body is in a historically bad position.
It is therefore not so surprising that many Dutch people get involved in a conflict with the tax authorities from time to time. Very annoying, because the Tax and Customs Administration is a large, cumbersome organization with which it is difficult to get into a conversation. That makes resolving a dispute not so easy. Moreover, the conflicts are of course always about money, so when such a dispute arises you will immediately be hit in your wallet. How you deal with a conflict with the tax authorities once it has arisen depends first of all on whether it concerns a business or a private matter.
Private versus business conflict
The allowance affair is an example of private individuals who have come into conflict with the tax authorities. Chargebacks on allowances have been issued, which subsequently turned out to be unjustified. It concerns hundreds of victims, each with losses of tens of thousands, sometimes even more than a hundred thousand euros.
What is much less in the publicity, is also a lot entrepreneurs come into conflict with the tax authorities. Self-employed workers in particular have been relatively often the losers lately. In a large number of cases this is due to the increased legislation and regulations for self-employed persons. Such a business conflict is very annoying, because you want to spend your time doing business and not figuring out tax laws. In addition, the Tax and Customs Administration is relatively strict on entrepreneurs compared to private individuals: they do not warn in case of errors, but fines are immediately issued. Failure to pay such a fine is often the cause of a conflict.
Causes of conflicts between entrepreneurs and the tax authorities
The Netherlands has a complicated tax system, especially for entrepreneurs. Many entrepreneurs hire a tax adviser or lawyer to arrange tax matters, but not every entrepreneur has a budget for this. Self-employed people in particular often do their tax affairs themselves. However, this is no mean feat without specialist knowledge of tax law.
A small mistake is easily made and the rules for errors in, for example, your tax return are not tender. Such a misunderstanding is often the reason for a dispute with the tax authorities. Specifically for self-employed persons, a common cause for disputes is a difference of opinion about the status of self-employed persons. As soon as the Tax and Customs Administration believes that you are not (or no longer) self-employed, but that you have in fact started working for a client, this often marks the start of a conflict.
The status as a self-employed person is one of the hot topics about which there is much to do, also in the political field. The law Deregulation Assessment of Employment Relations (DBA Act) must ensure that the client and the self-employed are jointly responsible for the tax consequences of their employment relationship. Model agreements are available for this, in which that relationship is recorded. However, there is a lot of uncertainty about the enforcement of the DBA Act and the Tax and Customs Administration foresees major problems with regard to verifiability. This means that disputes arise about these employment relationships relatively often, with all the associated tax consequences – usually to the detriment of the self-employed person.
A conflict with the tax authorities – now what?
Despite the fact that they have studied the parts of our tax system that are relevant to them and despite that they have tried to arrange everything accurately, many entrepreneurs in the Netherlands regularly encounter disagreements with the tax authorities. What do you do in such a case? Do you even stand a chance of being right against such a huge organization?
It is first of all important to realize that the tax authorities are not always right – see the allowance affair. Now that is an extreme example, but small mistakes are also made in abundance at the tax authorities. It is and remains human work. If you have carefully done your preliminary work, there is in principle no reason to assume that the cause of your conflict with the tax authorities lies with you.
The second important realization is that a good relationship with the tax authorities is beneficial. So try to maintain a friendly tone and maintain a good relationship with the tax authorities, even if there is a difference of opinion. You rarely come to a solution with your heels in the sand.
What options do you then have to be right? There are three options available:
- First, there is the possibility to objection to register against an attack. Please note that this is only possible with final, and not with provisional assessments.
- A notice of objection will be issued to the tax inspector. He has once again looked into the matter carefully and will make a well-considered decision. Does this judgment turn out differently than you think it is? Then you can go against this statement profession go to court. Please note: going to court will cost you extra money if you are wrong! So don't just take this step, but first seek advice from a lawyer.
- If you want to avoid going to court, in many cases – especially long-running files or complicated issues – it is also possible to tax compromise to come. You hereby offer the Tax Authorities to pay a certain amount and thereby end the entire matter. The Tax and Customs Administration will only agree to this if it is indeed a long-term or complex issue and if both parties would have any chance in court. Even if you are considering this option, it is therefore advisable to have a professional look at your case first.
Enlist professional help
A professional – read: a tax lawyer – looks at your business objectively and knows exactly which options have a chance of success for you. This saves you time, and more importantly: unsuccessful procedures.
'Take an arguable position'
“It is very important that an appeal to a decision of the tax inspector is arguable,” explains Mark Hendriks, tax lawyer. FT Lawyers from Nijmegen. “As long as you take an arguable standpoint, you cannot in principle be fined or otherwise punished, even if you are ultimately unsuccessful. Many entrepreneurs are afraid to 'make things worse' and therefore agree to tax assessments, even if they may be unjustified. A lawyer is perfectly capable of assessing your options and chances and can therefore help with an arguable point of view, with which you run relatively little risk and still make an attempt to prove yourself right in court.”