This post is also available in: Nederlands (Dutch)
Individual objections to income equity tax assessments 2017 will be treated as one ‘mass’ objection. As of the tax year 2017 the calculation method of the deemed interest has changed. This new method has lead to criticism.
This new deemed interest method is a fiction based upon a fiction. Deemed are both the sort of investments made as well as the interest made on these investments.
If you have objected, or if you are planning to object to the personal income tax assessment 2017, the following will be of importance. The State Secretary of Finance has decided that all individual objections to income equity tax assessments 2017 will be treated as one ‘mass’ objection. This will save individual tax payers from a lot of work and court / advisory fees.
Already objections against the 2017 equity tax deemed interest method have been processed by the tax office and will come before tax court. the final outcome of these procedures will be leading for the outcome of all individual objections against the 2017 income tax assessments.
However there are some conditions for your objection to fall under this ‘mass’ objection procedure. Your objection should contain the following legal question:
In the fiscal year 2017, are the flat-rate elements of the system, in conjunction with the tax exempted threshold and the tax rate of 30%, in violation of:
1. Article 1 of the First Protocol to the European Convention for the Protection of Human Rights and Fundamental Freedoms (hereinafter: ECHR), without assessing the violation of the “fair balance” at the level of the individual taxpayer; or
2. the prohibition of discrimination under Article 14 ECHR?
The Dutch legal language version you can find in the link below to the actual Decision of the State Secretary of Finance.
If in the end of the test procedures, the deemed interest system is indeed in breach with EU law, it is expected that counterproof is most likely allowed on individual basis.
If following this counterproof that deemed interest is e.g. at least 10% higher than the actual realised result in 2017, this lower actual interest will be the taxable value. Tax court will develop such a method in case there is a breach with EU law.
Please be aware that despite this ‘mass’ objection procedure, individual tax payers are still held to object on time (within six weeks after the date of the final personal income tax assessment 2017).
Till date, although many procedures have been before tax court, still the deemed interest method (applicable till 2017) active since the year 2001 is not in breach with the legal freedom the Dutch legislator has to impose tax law.
It is difficult to predict the outcome of these test procedures although regarding another valuation method (value of rented out real estate) containing fiction upon fiction, counterproof was allowed by tax court.
In case the test case leads to the conclusion that there is no breach with EU law, you could still consider the following solution: Hold your equity through your own personal limited liability company!
Decision State Secretary of Finance: Mass objection equity tax 2017