The Tax Division

Tax Section breakdown

A number of cases are pointed up below to illustrate the work of the Tax Section.

The case ECLI:NL:HR:2024:239 concerns the question of whether the conclusion of a prenuptial agreement upon or during marriage when one of the two spouses is already seriously ill and passes away a month and a half after the conclusion of the prenuptial agreement can constitute a (taxed) gift. According to the Supreme Court it does not, except in exceptional cases of evasion of the law. Contrary to the Court of Appeal and Advocate General IJzerman (ECLI:NL:PHR:2023:188), the Supreme Court did not find any impermissible evasion of inheritance and gift tax in the case in question, where a 50-50 community of property between spouses who had been in a relationship for 30 years was changed into a 90-10 ratio to the detriment of the ill spouse. According to the Supreme Court, the criterion is not whether the mortality probabilities are more or less equal at the time the marriage agreement is concluded, but whether it is already virtually certain at that time that the spouse who will become entitled to the smallest portion of the joint assets will be the first to pass away and that the assets will shift from one spouse to the other as a result. Only then must it be assumed that the shift in assets under the marriage agreement could have no other practical meaning than the avoidance of inheritance tax. In that case, there is acquisition under the law of inheritance on which, in principle, inheritance tax is due.

In a number of cases, including ECLI:NL:HR:2024:704 and ECLI:NL:HR:2024:705, the Supreme Court ruled in 2024 on the Box 3 Legal Redress Act (the Redress Act), which was introduced following the Supreme Court's decision of 24 December 2021 (ECLI:NL:HR:2021:1963). That Act is intended to retroactively bring the assessment of income tax in box 3 for the years 2017 to 2022 into line with that decision of 24 December 2021. However, the Redress Act also assumes a fixed return rather than the actual return. However, the legislature’s intention with the Redress Act was to get closer to the actual return than had previously been the case. The aforementioned cases examined whether the Redress Act removes the treaty infringement established by the Supreme Court in its decision of 24 December 2021. Following the advisory opinions of Advocates General Wattel (ECLI:NL:PHR:2023:655) and Pauwels (ECLI:NL:PHR:2024:133), the Supreme Court found that this was not the case. The Redress Act still violates the prohibition on discrimination under treaty law and the fundamental right to property in the cases where the fixed return is higher than the actual return. This also applies to the Box 3 Bridging Act (Overbruggingswet box 3), which entered into force on 1 January 2023. This Act is in line with the Redress Act and supersedes it to bridge the period until a new system has been implemented in box 3 based on the actual asset return. In those cases, the Supreme Court, in line with Advocate General Pauwels, provided further rules for calculating that actual return, in particular return from assets, and for the redress that must be offered in cases where treaty law has been violated.

Based on the Inheritance Tax Act (Successiewet), a child who inherits from a father with whom that child has a family relationship (the "legal father"), is subject to a lower tax rate and a higher exemption than a child who inherits from their biological father who is not their legal father. In the case ECLI:NL:HR:2024:1130, the Supreme Court held, following Advocate General Ettema (ECLI:NL:PHR:2023:1201), that this regulation discriminates against that child if the child has a family life with their biological father as referred to in Article 8 of the European Convention on Human Rights (ECHR). Contrary to the Advocate General’s recommendation, the Supreme Court leaves it up to the legislature for the time being to offer redress for this treaty violation, because removing the difference between biological and legal children requires choices to be made that go beyond the court's tasks in the development of law. Societal developments regarding multi-parentage, multi-parenting and surrogacy require choices of a legal-political nature, including with regard to the family law position of children conceived out of wedlock. Any amendment to the tax rules regarding the definition of the term "child" must be considered with that in mind.

The case ECLI:NL:HR:2024:1135 is important for administrative law as a whole. A mixed Supreme Court panel ruled on whether a taxpayer who is examined with a view to imposing an administrative penalty on them (Article 5:10a of the Dutch General Administrative Law Act) (Algemene wet bestuursrecht, “Awb”) must not only be informed of their right to remain silent prior to that examination but also of their right to legal assistance, and what consequences any failure to do so should have for the imposition of the fine. In addition to members of the Tax Division, the panel consisted of a member of the Supreme Court's Criminal Division and a justice extraordinary at the Supreme Court who is a councillor at the Administrative Jurisdiction Division of the Council of State. In line with the advisory opinion of Advocate General Wattel (ECLI:NL:PHR:2024:457), the Supreme Court held that the right to legal assistance is a fundamental part of due process in punitive cases. Any government failure to inform the party concerned off this is therefore, in principle, not legitimate. Given the fundamental interest served by this right, it cannot be limited to cases that, under national law, come under criminal law. The right to assistance by a lawyer and the right to be informed about this without any delay therefore also apply to examinations with a view to imposing an administrative fine. The party concerned must be informed of their right to legal assistance before they are examined for the first time with a view to imposing a fine. However, if they are not, that does not automatically mean they have been denied due process. Whether that is the case must be assessed based on the entire course of events based on all the circumstances of the case. One important factor in this regard is whether and to what extent the party concerned did actually receive legal assistance despite the failure to inform them. Such legal assistance need not be provided by a lawyer. Assistance given by someone who can provide it effectively in the punitive case, such as a competent tax adviser or accountant, is sufficient. Statements made by or on behalf of the party concerned during an examination must be excluded from evidence in proceedings to impose an administrative fine if it turns out that using those statements against that party during those proceedings would constitute a denial of due process.

The case ECLI:NL:HR:2024:1178 concerns the commuter tax in the Municipality of Gulpen-Wittem. Commuter tax is levied in order to have persons who reside more than 90 days of the year in a municipality but are not registered there, contribute to municipal facilities. The Municipality of Gulpen-Wittem implemented a substantial increase in commuter tax rates in 2020 in order to regulate the housing market, put first-time buyers in a better position and combat unlawful occupancy. The question was whether that tax increase, which affected only around 70 non-residents, was contrary to the principles of good governance. The Court of Appeal found that the Municipal Council had not considered the negative consequences of the tax increase for owners of second homes. Advocate General Wattel (ECLI:NL:PHR:2023:1209) found the rate increase to be unsuitable for and disproportionate to its stated objects and exceeding the municipal authority to levy commuter tax for the use of municipal facilities. He therefore considered the rate increase to be détournement de pouvoir and contrary to the principles of proportionality and equality as well as the principles of careful preparation and reasoning. The Supreme Court’s assessment of the municipal ordinance tax rate rule was more reticent. It held that, given the Court of Appeal's findings, the ordinance that increased the commuter tax rate had not been prepared with due care and that it was inadequately reasoned. That carelessness and inadequacy were such that it could not be assessed whether the rate provision was contrary to the principle of proportionality. Consequently, the rate increase was struck down.