During a court case, a man agrees with the tax inspector that his actual return in Box 3 amounts to €855. A few months later, the Supreme Court rules that costs must not be taken into account when determining the actual return. The tax inspector then seeks to renege on the settlement, but the Court of Appeal holds him to the agreement. Anyone who enters into a settlement accepts the risk that subsequent case law may turn out differently.
Agreement reached at the hearing
The 2018 income tax and social security contributions assessment states a Box 3 income of €147,253. The tax inspector later reduces this amount to €63,621. The man disagrees with this and lodges an appeal. During the hearing at the court, they reach an agreement. They set the actual return at €855. The court reduces the tax assessment accordingly and orders the tax inspector to pay statutory interest.
Inspector wants to revisit the agreement
The inspector is lodging an appeal. He argues that the agreed amount of €855 was calculated inclusive of bank charges. On 6 June 2024, however, the Supreme Court ruled that costs must not be taken into account when determining the actual return. According to the tax inspector, the actual return must therefore be €1,738 instead of €855.
The agreement remains in force
The court holds the inspector to the agreement. The man and the inspector wished to settle the dispute and avoid uncertainty. In doing so, they entered into a binding agreement. The inspector has not argued that this agreement is void or voidable. By agreeing to it, he also accepted the risk that subsequent case law might turn out differently.
No interest paid
The inspector is, however, correct on one point. The court had ruled that he was required to pay statutory interest for the period between payment and the refund. The Court of Appeal has set aside this part of the judgment. According to the Supreme Court, the tax reduction already provides sufficient redress, even without interest. An exception applies only if the interest exceeds the reduction. That is not the case here.
A compromise is a compromise
This ruling confirms that a compromise is binding, even if subsequent case law leads to a more favourable outcome. This applies to both parties. Anyone who buys certainty accepts the risk that things might have turned out differently in hindsight.