It does happen more often than you think that someone starts a company, does register the company with the Dutch Chambers of Commerce and then basically takes no action to the Dutch tax office.
The Chambers of Commerce has informed the Dutch tax office that a company has been registered, hence the Dutch tax office issues a VAT number and in case of a BV company a corporate income tax number as well. The tax office knows you exist and expects you to respond.
No administration and taxation
This case is about a one man company, actually a one woman company, and not a BV company. The one woman company had filed her 2009 income tax return. The Dutch tax office apparently had questions about the administration. This could be due to the fact that the VAT position known to the Dutch tax office was not inline with what was reported in the income tax return. The one woman company was not able to answer any of the questions of the Dutch tax office as simply no bookkeeping was being kept.
Proof of administration turned around (omkering bewijslast)
This fact made it possible for the Dutch tax office to turn around the proof of administration. What does this imply? Under normal circumstances a company keeps the books. If the Dutch tax office disagrees with certain aspects, the Dutch tax office has to make a point and proof that point in order to make it stick.
However, if no administration was being processed, the Dutch tax office is entitled to make the stand point none of what is being presented is correct. The entrepreneur needs to proof everything provided. I hope you understand that the position that you have kept the books implies you can lean back and have the Dutch tax office proof it is not correct.
In case of omkering bewijslast the Dutch tax office does not need to proof anything, they can simply state certain turnover is made, no costs and the result is that the turnover equals the profit. That is most of the time done. Then the entrepreneur needs to proof every invoice and every costs receipt to come to the correct amount. In the end you come more or less to the same result, but with an enormous effort of the entrepreneur and the entrepreneur can expect penalties for not complying with the rules.
Dutch tax rates may go down, the penalties always go up.
In this case the one woman company had no administration and the Dutch tax office took the standpoint that the turnover was EUR 80.000. Based on that amount the income tax was being calculated and based on that amount the Dutch tax office send a VAT assessment for 21% VAT never declared with a penalty which could very well be a 100% penalty.
A so called No information statement
The lady appealed against the income tax assessment and the VAT assessment. The high court recently decided the following. She could not appeal against the income tax assessment as she had not provided any information the profit was not the correct profit.
However, the Dutch tax office had overlooked one technicality in the VAT assessment. In order to be able to come to this VAT assessment. In the situation no administration was being kept, the Dutch tax inspector should have issued a information statement (informatie beschikking). This is the rule since July 1, 2011.
As this 2009 financial year was under discussing during a period after July 1, 2011, this new rule applied. A information statement is a statement made by the Dutch tax inspector that the tax payer was not able or did not provide the requested information which is an obligation based on the general tax legislation. Against this statement the Dutch tax payer can appeal within six weeks after the date it has been issued. And only if that six week period was formalized, the VAT assessment could be imposed.
As non of this was done, because the Dutch tax inspector apparently was under the opinion that these new rules starting from July 1, 2011 did not apply to the year 2009, no VAT assessment could be issued. The Dutch High Court ruled that these rules apply also to previous years, if the discussion was on going after July 1, 2011. No transition legislation was made between the old rules and new rules.
This decision does not imply the lady does not need to pay VAT, but the VAT assessment needs to be reassessed in a new process. Maybe this time the entrepreneur does provide details which explains a lower assessment would be plausible
The above article might provide you with a time line how long your lack of maintaining an administration can follow you, but even more, how much it can cost you. No only you pay penalties for not complying with the rules, but processing at the court and high court cannot be done without a fiscal lawyer. You think civil right lawyers are expensive, wait till you experience the invoice of a fiscal lawyer.
In other words, if you decide to become an entrepreneur you need to act like one. That implies you need to inform yourself about the rules and regulations. If you prefer not to be bothered with that, contact for your fiscal and administrative needs Orange Tax Services. We will be glad to assist you and we do our utmost to prevent you being fined by the Dutch tax office. At the same time we will have you benefit from the exemptions possible under the current rules. Feel free to contact us now.