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Can you out clever the tax office?

That depends on the situation. If you are clever based on the available rules and regulations, yes you can. If you think you can out clever the tax office by simply not complying with the rules, you lose.

Can you chose your fiscal residency?

In a court case a person claimed to be a fiscal resident of the United Kingdom, whereas the Dutch tax office had strong indications he was actually a Dutch tax resident. I have to refer to ‘a person’ as the conflict at hand prevented to sticker this person as a UK resident or Dutch resident.

The fiscal residency is determined based on article 4 of the applicable tax treaty. Basically it comes down at your central point of life based on facts and circumstances. Not based on formalities. For instance, you have yourself registered in the United Kingdom, but you and your wife live in the Netherlands, but you simply did not register yourself in the Netherlands with city hall. That does not help you having become a Dutch tax resident.

Can you be forced to file an Dutch income tax return?

The Dutch tax office send tax returns to the above mentioned person. This person stated not to be a resident or non resident tax payer in the Netherlands, hence no tax return was filed by him. The Dutch tax office disagreed with his position and demanded to provide information from which it became clear he was indeed a UK tax resident. This person refused to provide this information and went to court. The court agreed with the tax office that he needed to provide the information. He refused again, as he had the opinion that this information would not only be used for his tax position, but also for a criminal charge claim against him by the same tax office.  The higher court informed this person that his rights have been set by the EVRM (European Human Rights legislation).  The outcome was that this person had to provide the demanded information.

turst and orangetax

If you are bankrupt abroad, are you then bankrupt in the Netherlands as well?

Now the moment had come he provided the information and the Dutch tax office was indeed correct in allocating this person as being a Dutch resident tax payer, he was charged with the outstanding income tax amounts. This person then claimed to have been called bankrupt in the United Kingdom and therefore all he tax assessments dated before November 28, 2012 were erased. He made this claim also in the Netherlands. His assets were put in a Trust and he no longer had access to that. So in the United Kingdom you can be bankrupt and have assets?

The Dutch tax office had determined that a UK bankruptcy is not a Dutch bankruptcy and that the Trust was sufficient enough to settle the Dutch tax returns. Hence the tax office insisted on the outstanding Dutch tax returns to be paid.

Then this person stated not to be able to instruct the trust to pay for these tax assessments as he was not in charge of the trust. The court asked for the trust contracts to show who was in charge of the trust, only to receive the reply that this person would not know as he had no contracts or whatever about the trust. The court did not believe this and demanded to have the information provided, so the debt could be settled.

Orange Tax Services

The above person falls in the category of the dog ate my administration, or in the old days, the dog ate my homework. If he was indeed bankrupt in the United Kingdom, had his assets safely in a trust. And a trust is recognized by the United Kingdom, not by the Netherlands, then this person should have used the services of a tax advisor. Any tax advisor would have informed him that he should prevent everything to become a tax resident abroad, for instance the Netherlands. This is easily done by not having your central point of live in the Netherlands. Apparently such advise was never given. The Dutch tax office always wins situations that are based on anything but rules or legislation.

This does not imply Orange Tax Services can assist you in avoiding taxation because you simply do not want to pay tax. This implies that Orange Tax Services can assist you in determining where is your tax residency and what consequences this information has for your tax returns to be filed. That is part of our core business. If you like to meet us, contact us.

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