Dutch Tax Changes Set Up 120 Percent Penalty on Undeclared Assets

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By Linda A. Thompson

Taxpayers who voluntarily declare previously undisclosed income or assets will face a 120 percent fine on those owed taxes, under a 2018 tax plan sent to the Dutch parliament.

The tax proposal accompanying the 2018 Dutch budget, sent to the House of Representatives Sept. 19 by Finance Secretary Eric Wiebes, includes several measures likely to affect high-net worth individuals, in addition to small changes to Dutch VAT laws applicable to drugs and farming activities. The measures will have to be ratified by the House before Dec. 31, as they would introduce changes to tax rules that enter into force Jan. 1.

Among the most striking changes would be a plan by lawmakers to scrap the country’s voluntary disclosure scheme, under which repentant taxpayers who notify tax officials that they have filed an incorrect or incomplete tax return were exempted from paying a fine when they alerted tax authorities within two years of filing the return.

Under the new scheme, which will take effect Jan. 1, 2018, taxpayers who declare hidden assets would have to pay a fine that can go up to 120 percent of the sum of the undeclared assets, even if they notify tax officials they have submitted incorrect tax returns. If the tax administration officials themselves discover taxpayers have filed incorrect returns, the fine can go up to 300 percent.

’No Clemency’

At a Sept. 19 news conference, Wiebes said the outgoing cabinet decided to abolish the country’s “lenient” tax amnesty scheme because it no longer fits the times. Dutch tax officials are now better able to identify hidden assets, while banks around the world are exchanging financial account information, he said in response to a question from Bloomberg BNA. “There’s just no room any more for the really large discount we used to give” on fines levied on repentant taxpayers, he said. “We no longer think that’s appropriate.”

Still, Mark Hendriks, a partner at law firm Jaegers & Soons,cq described the measure as “unwise,” in a statement sent to Bloomberg BNA Sept. 19, noting that Dutch citizens who are voluntarily attempting to solve their “tax mishaps” will receive no clemency whatsoever in the future. Instead, they will be met with “large fines and possibly even criminal prosecution.”

Hendriks added that the measure demonstrated its usefulness by “raising” roughly 2.2 billion euros ($2.6 billion). Counting from 2002 onward, taxpayers declared 2 billion euros in hidden assets to the Dutch Tax Administration according to a 2010 statement from the Finance Ministry. In addition, he said, “it is also to be expected that those people who were intent on declaring will probably go deeper underground.”

VAT on Farmers

The plan also would subject farmers to the country’s 21 percent value-added tax rate from Jan. 1, 2018, onward. The change would mean that farmers, currently VAT-exempt, also could recoup VAT on services and goods they purchase—which isn’t currently possible, a situation that a Sept. 19 news release from the Finance Ministry described as “unappealing for farmers who make a lot of investments.”

The 2018 Tax Plan also would levy a new tax on waste placed in landfills or incinerated outside the Netherlands. Waste companies that incinerate or landfill waste in the Netherlands currently already pay a levy, the size of which depends on the amount of waste.

Another key measure would overhaul the country’s VAT regime for drugs. Under the new rules, only “certified” drugswould fall under the country’s reduced 6 percent VAT rate. Products not certified as drugs, such as toothpaste, sun screens and anti-dandruff shampoo, will fall under the country’s standard 21 percent VAT rate.

To contact the reporter responsible for this story: Linda A. Thompson in Brussels at correspondents@bna.com

To contact the editor responsible for this story: Penny Sukhraj at psukhraj@bna.com

Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.

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