Principle of legitimate expectations prevents additional VAT assessment of contractors

• The Court of Appeal of The Hague ruled that X BV had a legitimate expectation, based on a 2014 audit report, that no additional VAT assessments would be imposed as long as X BV was unaware of its subcontractors’ (CV 1 and Ltd 1) non-payment of VAT.
• Despite a 2017 audit leading to additional assessments and a fine for X BV, the Court of Appeal found that the inspector failed to prove X BV’s knowledge of the subcontractors’ VAT non-payment, thus upholding the principle of legitimate expectations for the period up to March 27, 2014.
• However, the court also determined that after March 27, 2014, the audit report no longer permitted further VAT deduction, allowing for a retrospective levy of €3270, and rejected the possibility of internal compensation due to its interference with the principle of legitimate expectations.

Source Taxlive

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