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Expertise

Voluntary disclosure proceedings and foreign assets

Have you filed incorrect tax returns in the past? Dutch tax law provides for the option of rectifying incorrect tax returns, thus avoiding considerable penalties and criminal prosecution. Such a voluntary disclosure may appear to be an easy option, but it’s often a fairly complex matter. For example, it not only means subsequently filing a correct tax return, it also means that the Tax Inspector will want to receive a significant amount of additional information. Our attorneys have ample experience assisting taxpayers in this procedure.

The voluntary disclosure scheme

The voluntary disclosure scheme applies to taxpayers who spontaneously and voluntarily file tax returns, in writing and in full, declaring previously non-declared income and assets, or provide full information about such income or assets. In the event of voluntary disclosure within two years, no penalty will be imposed. As for the other years, voluntary disclosure will be regarded as a punishment-reducing circumstance. However, on 1 January 2018 and 1 January 2020, the scheme was considerably restricted.

Changes since 1 January 2018

Effective 1 January 2018, the voluntary disclosure scheme no longer applies to corrections to Box-3 assets held abroad. This means that the 2-year penalty-free period will lapse and that criminal prosecution will be possible.

A transitional scheme having been included, the consequences of voluntarily disclosing Box-3 assets held abroad will remain limited for now. This transitional scheme provides that the voluntary disclosure of foreign Box-3 income will remain possible for tax returns that were or should have been filed prior to 1 January 2018.

Further restriction of voluntary disclosure scheme effective 1 January 2020

On 1 January 2020, the voluntary disclosure scheme was further curtailed. Voluntary disclosure is now also no longer possible for Box-2 income and domestic Box-3 income. This means that voluntary disclosure is still possible for Box-1 income only, and for gift tax and inheritance duties, for example.

It’s remarkable that no transitional law has been provided in relation to the change effective 1 January 2020. As a consequence, criminal prosecution is possible to the extent that voluntary corrections to a tax return pertain to Box-2 income, domestic Box-3 income and foreign Box-3 income (effective 2018).

The absence of transitional law can be criticised in several ways, first and foremost because such absence is inconsistent with the transitional law provided in relation to the curtailing of the voluntary disclosure scheme in 2018. In addition, it may be argued that the absence of transitional law is contrary to the principle of legality and causes a non-level playing field, because, in relation to foreign Box-3 assets, voluntary disclosure {[i]}is{/[i]} possible for income tax returns pertaining to the years before 2017.

Principles underlying penalty mitigation

Although the voluntary disclosure scheme has been considerably restricted, voluntary disclosure remains a punishment-reducing circumstance in all cases, which is considered when determining the penalty and deciding whether criminal law will be applied. The penalty's statutory maximum percentage is 300% for undisclosed Box-3 income and 100% for undisclosed Box-2 income. The penalty is levied with respect to the income tax assessed additionally.

However, the tax authorities have formulated general principles in relation to the amount of the penalty, which apply to voluntary corrections. It’s important to be aware of the fact that these are general principles. The Tax Inspector has the discretionary power to (further) mitigate or increase the penalty in specific cases.

In principle, the penalty for undisclosed Box-3 income in tax returns filed before 1 January 2018 will be mitigated to 120%. If undisclosed Box-3 income in tax returns filed after 1 January 2018 is voluntarily disclosed, the penalty will, in principle, be mitigated to 135%.

Different percentage rates apply to undisclosed Box-2 income. In principle, voluntary disclosure in relation to tax returns filed before 1 January 2020 will result in mitigation of the penalty to 30%. In the event that a tax return with undisclosed Box-2 income is filed after 1 January 2020, the penalty will, in principle, be mitigated to 45%.

When mitigating the penalties' percentage rates upon voluntary disclosure, the tax authorities appear to apply transitional law of their own, in order to avoid any violations of the principle of legality.

Cryptocurrencies

Cryptocurrencies, such as Bitcoin, Litecoin, Ripple and Ethereum, are currently the focus of the tax authorities' attention, following next in line after the foreign account in a country with banking secrecy, the foreign structure as is now known from the Panama Paper and the Paradise Papers. Since the tax authorities qualify such cryptocurrencies as ‘Other assets’ in Box 3, the voluntary disclosure scheme also applies to them. More information about cryptocurrencies can be found here.

Receipt of a letter containing questions from the tax authorities
Voluntary disclosure is possible only before you know or should suspect that the tax authorities are or will become aware of your earlier incorrect or incomplete tax return concealing income or assets. When a taxpayer is already on the tax authorities' ‘radar’, it’s no longer possible to make voluntary corrections. Over the past years, the tax authorities have received information from foreign tax authorities, informants or transaction processors, or through the media, e.g. on the basis of group applications in respect of Switzerland (UBS/Credit Suisse), the debit and credit cards project, the Panama Papers, the Paradise Papers and information of the IRS regarding American Express card holders. Following the introduction of FATCA and CRS, over 50 countries will also regularly disclose bank data to the Dutch tax authorities.

What’s the wise course to take?

The question whether voluntary disclosure is the best option for you cannot be answered in any unequivocal way. If you’re asking yourself whether it’s wise, in your situation, to voluntarily disclose information or if you’ve received a letter about foreign assets from the tax authorities, then please feel free to contact Anke Feenstra or Angelique Perdaems.

Publications (in Dutch)

We also regularly publish in professional journals on developments in the field of foreign assets, such as the voluntary disclosure scheme. Our publications are in Dutch. If you are interested in receiving an English translation of a particular subject, please let us know.

De jacht op buitenlands vermogen, dated 2018, a Dutch publication by A.J.C. Perdaems and A.A. Feenstra in WFR 2019/7

Inkeer moet blijven, a Dutch publication by R.W.J. Kerckhoffs and A.J.C. Perdaems in TFB 2017-4

Belastingplan 2018-inkeerregeling by A.J.C. Perdaems in NLF 2017-0578

Inkeerboeten voor 2010 in strijd met legaliteitsbeginsel de twee stromingen in Hertoghs Beschouwt of November 2017

Bij inkeer altijd de laagst mogelijke straf in Hertoghs Beschouwt of August 2017

In a nutshell

Voluntary disclosure

The voluntary disclosure scheme

Changes since 1 January 2018

Further restriction of voluntary disclosure scheme effective 1 January 2020

Principles underlying penalty mitigation

Cryptocurrencies

What’s the wise course to take?

Knowledge articles on this topic (in Dutch)

De rechtsgeldigheid van een inkeermelding bij groepsverzoeken: terecht of onterecht een discussiepunt? TFB 2021, nr 4

Tot wanneer kan rechtsgeldig worden ingekeerd na een groepsverzoek? In de afgelopen jaren heeft de Belastingdienst aan meerdere…

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#208 Van wit naar zwart of toch niet?

Over de strafvervolging van witwassen na een rechtsgeldige inkeer Dat het strafrecht meer een ‘optimum remedium’ is geworden…

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Rechter moet redenen voor geheimhouding identiteit tipgever kunnen toetsen. Annotatie NLF 2018/2669

De tipgeversaffaire. Wederom. Ditmaal de geheimhoudingskamer van Hof Den Bosch. Weloverwogen en goed gemotiveerd oordeelt het Hof in…

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Boekbespreking: mr. I.J. Krukkert, Individuele straftoemeting in het fiscale bestuurlijke boeterecht. Een interne theoretische rechtsvergelijking tussen het fiscale bestuurlijke boeterecht en het strafrecht. TBS&H 2018, nr 4

Op 26 maart 2018 heeft mr. I.J. Krukkert, werkzaam als vaktechnisch coördinator formeel recht bij de Belastingdienst, zijn…

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Fiscus treedt harder op tegen adviseurs. Accountant.nl

Naar aanleiding van het boek ‘De jacht op buitenlands vermogen’ gaan Anke Feenstra en Angelique Perdaems in een…

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Nieuwe inkeerregeling in strijd met legaliteitsbeginsel. Annotatie NTFR 2018/1611

Rechtbank Den Haag heeft zich uitgelaten over de verenigbaarheid van het legaliteitsbeginsel met het opleggen van boetes aan…

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