Legal protection and double taxation

Tax treaties should prevent double taxation. If a taxpayer in the Netherlands still faces double taxation despite a tax treaty, that taxpayer can ask the Dutch government to resolve this in consultation with the relevant foreign country. This consultation between the Netherlands and the other country is called a “mutual agreement procedure.” But what if a taxpayer requests such a mutual agreement procedure and that request is denied? The rules in the Netherlands provide for a so-called “closed system” of legal protection for tax matters. That means that only decisions that the law says can be objected to or appealed can be appealed. A decision on the rejection of a request to initiate a mutual agreement procedure under a tax treaty is not a decision based on the tax law. This means that a taxpayer cannot turn to the tax court. Fortunately, this is where the general administrative courts comes into the picture. Unless the tax law provides otherwise, the general administrative courts have jurisdiction. On Feb. 3, 2021, the Administrative Law Division of the Council of State ruled in two cases that the State Secretary of Finance’s refusal to initiate a mutual agreement procedure under a tax treaty is a decision that can be objected to and, if rejected, an appeal can be lodged with the administrative courts. It is to be applauded that the Administrative Law Division of the Council of State has taken this decision. For taxpayers, however, this is a very confusing system that does not enhance legal protection. Time for an open system of legal protection in tax law where taxpayers can go to the tax courts for all government decisions relating to taxes. Our legislators cannot make taxation any more fun, but they can make it easier.