Anyone who fails to meet their tax obligations, or fails to do so on time or in full, will be penalised by the Tax and Customs Administration, usually in the form of an administrative fine.
Mitigating circumstances
When imposing a penalty, the Tax and Customs Administration must assess whether it is proportionate to the offence committed. Where there are mitigating circumstances, the fine must be set at a lower level than the prescribed standards. The imposition of administrative fines is one of the processes within the Tax and Customs Administration that is highly automated. This means that the fines are imposed by the Tax and Customs Administration’s computers. These do not always take sufficient account of mitigating circumstances.
Taxpayers who are fined therefore often have to take action themselves to ensure that mitigating circumstances are taken into account when determining the amount of the fine. This often requires lodging an appeal against the fine imposed.
Supreme Court
In a recent ruling In the Supreme Court case, mitigating circumstances were at issue. A private limited company is experiencing liquidity problems and, as a result, is recording invoices at a later date in order to be able to pay the VAT later. The deliberate failure to pay VAT on time naturally gives rise to the imposition of administrative fines. These fines amount to 50% of the VAT paid late.
The Tax and Customs Administration has already reduced the fine to 30%. This is because the private limited company paid the correct amounts of VAT on an annual basis. This constitutes a mitigating circumstance, on the basis of which the Tax and Customs Administration has reduced the fine.
The Supreme Court is of the opinion that the fine should be reduced even further. This is because the private limited company has outstanding tax debts amounting to over €100,000. Partly as a result of this, the private limited company’s financial position is weak, and this constitutes a mitigating circumstance that has not yet been taken into account. The final amount of the fine in this case must be determined by the Court of Appeal for Arnhem-Leeuwarden. The Supreme Court has referred the case to that Court.