Business owners must keep accounts. These accounts must be kept in such a way that the rights and obligations arising from taxation can be determined at any time. The specific structure of the accounts depends on the nature and size of the business.
Reversal of burden of proof
An entrepreneur who keeps accounts that do not meet the legal requirements may face a reversal of the burden of proof. The general rule is that the tax authorities must prove that the profit has been under-declared. However, if the record-keeping obligation has not been met, this is reversed: the business owner must then prove that the profit determined by the tax authorities is too high. With records that do not meet the legal requirements, this is often not possible.
Information Decision
Naturally, this severe measure is only imposed in cases of serious breaches of the record-keeping and retention obligations. Before the burden of proof is reversed, the Tax and Customs Administration must issue what is known as an ‘information decision’. In that decision, the Tax and Customs Administration requests the missing information and grants the business owner a period of time in which to provide it. Only if the requested information is not provided may the Tax and Customs Administration reverse the burden of proof.
Serious defects
Naturally, an information decision is subject to objection and appeal. The Court of Appeal in The Hague recently ruled on information decisions issued by the Tax and Customs Administration to hospitality sector business owners. In both cases, the information decisions were upheld.
In one case This concerns a hospitality business that operates as a café/restaurant until 8.00 pm and as a bar/nightclub thereafter. During an audit, the Tax and Customs Administration found that the work schedules were not being kept in the (payroll) records and that there was no record of which member of staff used which magnetic card and wallet on which day. The Court of Appeal considered these to be sufficiently serious shortcomings to reverse the burden of proof.
The other one case This probably concerns the same catering business, but this time in relation to VAT. The business uses a certified till system. However, the detailed records of orders and payments are deleted after 14 days. The Court is of the opinion that the failure to make backups of this data constitutes such a serious deficiency in the records that a reversal of the burden of proof is justified.
A factor in both proceedings is that a settlement agreement drawn up following a previous audit of the business’s accounts has not been fully implemented.