Value-added tax fraud
Any past involvement in value-added tax fraud within a supply or service chain – be it knowingly or presumptively – will result in the relevant business owner forfeiting his entitlement to input tax relief or rebate of the value-added tax concerned, as well as barring him from reliance on the “doctrine of legitimate expectation” where it has been established that he knew, or should have known, that the operations in question involved value-added tax fraud. This effectively clears the way for the inspector of value-added taxes to levy additional value-added tax charges where the information provided by the business owner had originally resulted in the latter being allowed tax relief. It makes no difference in this context whether or not the business owner himself has benefited from the value-added tax fraud.
The Hague Court of Appeal was found to have been wide of the mark when it quashed certain additional value-added tax assessments levied against a business owner for earlier rebates having resulted from the business owner’s application of the reverse-charge mechanism, which mechanism the business owner had also applied to certain services he had sourced, on presentation in his own value-added tax returns as input tax of the value-added tax his suppliers had charged on to him. The suppliers for their part had refrained from settling up the value added tax with the Tax and Customs Administration, however. The conclusion of the subsequent tax investigation was that these goings-on had indeed been fraudulent. According to the Court of Appeal, the sequence of events involving the tax rebate had justified the business owner’s expectation that the inspector of taxes would not be levying additional assessments, the business owner at the pre-rebate stage having provided the tax inspector with information which had neither been inaccurate nor incomplete. The Supreme Court by contrast decided that the Court of Appeal had based its decision on an incorrect interpretation of the law or, alternatively, had failed properly to substantiate the ruling it had handed down.
Dutch version: Omzetbelastingfraude verhindert toepassing vertrouwensbeginsel