The Amsterdam tax court ruled previously that X Ltd, a company incorporated under British law, was actually considered to be Dutch resident. A held a substantial interest in the share capital and has also been performing work for X Ltd., the tax inspector was right in imposing an additional wage tax assessment to X Ltd. for a deemed fictional wage (‘gebruikelijk loon’) on behalf of A.
C was engaged into a tax advisory practice until 2003. Due to a conflict with the landlord of his business premises, C got involved in a series of legal procedures. This resulted into a debt of approximately € 450,000. Appellant, X Ltd. was established mid-2003. The shares of X Ltd. were held by Z Trust.
X Ltd. is the managing partner of B cv, an open partnership, located in the Netherlands. B cv provides tax and legal services in the Netherlands. A is the spouse of C, the statutory director and current account holder of X Ltd. The activities of B cv were carried out by C. Following a tax audit, the tax inspector imposes an additional wage withholding tax assessment to X Ltd for a deemed fictional wage on behalf of A. According to the inspector, X Ltd. should be considered a withholding agent (‘inhoudingsplichtige’) for Dutch wage tax purposes.
The Court of Amsterdam first established that in the year concerned X Ltd. was actually located in the Netherlands for tax purposes. According to the court the management of X Ltd was exclusively provided by A. Since A lived in the Netherlands, the actual seat or residence of X Ltd. is allocated to the Netherlands. Since A was considered to have a deemed fictitious employment, X Ltd. was required to withhold Dutch wage tax and remit this to the Dutch tax authorities. The court hereby considered that A was a registered director of X Ltd., and that she was actually engaged in the operation of the business. The court did not find any evidence that X Ltd. was run by someone else than A.
Since A held a substantial interest in X Ltd and she also performed work for this company the tax inspector was right in taking into account a deemed fictional wage of € 40,000 in the year concerned. According to the court it is justified to maintain that A indirectly through Z, held the shares of X Ltd.
Decision Supreme Court
The appeal against the decision by the Amsterdam court was briefly dismissed by the Dutch Supreme Court on the grounds of Article 81 (1) of the Dutch Judicial Organization Act. If the Supreme Court finds that an appeal cannot lead to cassation and does not require a response to legal issues needing to be addressed in the interests of legal unity or the development of the law, he may limit himself to the judgment in the grounds of his decision providing no further justification.
Please refer to the deeplink below for the full text of the decisions.
Hoge Raad, 23 juni 2017, ECLI:NL:HR:2017:1140
Hof Amsterdam, 4 August 2016, ECLI:NL:GHAMS:2016:3277