In 2020, a brother and his sister each owned half of the shares in a private limited company. The sister carried out work for the company through her sole trader business. The brother was a director and major shareholder and carried out his work for the company partly as an employee and partly through his sole trader business. On 24 December 2022, the tax inspector issues the sister with a supplementary income tax assessment for 2020, but does not include any notional salary in it.
Usual wage
The inspector then carried out audits of the private limited company’s accounts relating to payroll taxes (LB) for 2019 and 2020. These audits revealed that the customary remuneration for both the sister and the brother had not been correctly determined. In the case of the sister, the inspector concludes that her customary wage amounts to €34,125. In the case of the brother, he concludes that his wage must be increased by €23,333 to €46,000. The private limited company is required to make a correction. As it fails to comply, the inspector issues a supplementary income tax assessment to the company on 23 February 2023.
Official negligence in the case of my sister
In the sister’s case, the Court of Appeal found that the tax inspector had committed an administrative error by failing to include the customary wage in the 2020 income tax additional assessment. From that point onwards, the inspector is no longer authorised to claim this customary wage from the sister by way of a supplementary assessment. The supplementary income tax assessment subsequently imposed by the inspector on the private limited company constitutes an attempt to rectify this retrospectively. The Court of Appeal ruled that the law prevents the Tax and Customs Administration from rectifying, by indirect means, an administrative omission in the income tax assessment – which renders further recovery impossible – by subsequently imposing a supplementary corporate tax assessment on the withholding agent, the private limited company.
Correction regarding my brother
In the brother’s case, the Court of Appeal ruled that the tax inspector is indeed authorised to issue a supplementary tax assessment for the additional notional salary. According to the court of appeal, the fact that the notional salary was not adjusted in the brother’s tax assessment does not automatically constitute an administrative omission. The tax inspector may assume the accuracy of the tax return unless there is reasonable doubt as to its accuracy. This is not the case here.