Zeeland-West Brabant District Court ruled that the burden of proof for the remission profit exemption was not met.
The case concerns an entrepreneur who operates a bookstore in a sole proprietorship in the form of a franchise formula. In 2019, the entrepreneur terminates the operation of the bookstore. In connection with this, a debt (current account) of €67,200 remains to the franchisor. This debt is converted into a cash loan and subsequently waived. In the tax return, the entrepreneur claims the remission exemption for the amount of the debt release.
Who has to prove?
As in many cases, the Court starts by determining which party bears the burden of proof: the entrepreneur must make it plausible that the claim is not susceptible to realisation from the point of view of the franchisor/creditor by objective standards. The entrepreneur's arguments for this are that the franchisor is an independent third party and that the company's financial data show that the claim is not susceptible to realisation.
Independent third parties
The Court ruled that the circumstance, that the franchisor/creditor is an independent third party, does not automatically mean that the claim is not actionable. The argument that a transaction was concluded between independent parties (with opposing interests) often works when the arm's length nature of a transaction is at issue. The Court considered that there may well be arm's length arguments underlying the waiver.
The court further considered that it had not become clear what attempts the creditor had made to collect its claim. At the time of the cessation, the company's balance sheet showed liquid assets of almost €34,000 and the debt could also still be recovered from the entrepreneur's private assets. The results achieved with the company in previous years give no reason to assume that this recovery would be prospectless from the outset.