Building Company Wins Tax Deduction Despite Trust Principle Violation

• A construction company hired other construction companies for work.
• The hired companies did not declare or pay the VAT charged to the construction company.
• A third-party investigation in 2014 concluded that the VAT invoiced to the construction company could be deducted.
• In 2017, an audit was conducted on the construction company for the years 2012 to 2016.
• The audit resulted in assessments for 2012, 2013, and the first half of 2014, along with a penalty.
• The inspector argued that the construction company should have applied the reverse charge mechanism and was not entitled to deduct the VAT.
• The construction company relied on the principle of legitimate expectations, citing the 2014 report that accepted the deduction.
• The inspector argued that allowing the deduction would violate the Dutch VAT Act and that EU law would prevent such reliance.
• The Hague District Court disagreed, finding that the inspector, by accepting the deduction in the 2014 report, created a legitimate expectation that the reverse charge mechanism would not apply to amounts invoiced by subcontractors to the construction company up to the date of the report.

Source: fiscount.nl

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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