Every country has different rules regarding tax penalties. With its global network of member firms, KPMG is uniquely positioned to provide comprehensive advice and insights for each jurisdiction. In the Netherlands, for example, your rights and obligations significantly change once the Dutch tax authorities have announced an intention to impose a penalty. You are not obliged to provide information without due cause, and you have the right to know the factual and legal grounds for the penalty. The KPMG Meijburg & Co team will monitor your rights and ensure that the Dutch tax authorities follow these rules and act in a fair, appropriate manner as prescribed by law.
When is your organization at risk of a tax penalty?
Your organization may face tax penalties in several situations. Common risks include submitting inaccurate or incomplete tax returns, or administrative non-compliance, such as late filing or late payment. For multinational companies, errors in transfer pricing documentation or failing to adhere to transfer pricing rules can also result in hefty penalties. Additionally, a lack of transparency in your organization's tax position may lead to distrust on the part of the tax authorities, greater audit frequency, and subsequently larger potential penalties.
How severe can tax penalties be?
Tax penalties vary based on the type and seriousness of the non-compliance. For instance, whereas late filing penalties may be a fixed amount or a percentage of the tax due and underpayment penalties usually a percentage of unpaid taxes, fraud penalties are much higher, sometimes up to 75% of the underreported tax. Interest charges accrue on any unpaid taxes over time.
Intent-based penalties, such as those for fraud, are imposed because the tax authorities determined that the non-compliance with tax regulations was intentional or due to negligence. This type of penalty is typically more severe than penalties for inadvertent errors, as it reflects the deliberate nature of the non-compliance. Intent-based penalties can include higher fines, increased interest rates on unpaid taxes, and potentially legal action against the responsible parties. The severity of the penalty often depends on the extent of the intent or negligence and the impact on tax liabilities.
What are your rights and obligations when objecting to tax penalties?
Taxpayers faced with a penalty have the right to inspect all relevant information used in the penalty assessment, the right to a fair hearing to present their case, and the option to obtain representation by a tax advisor or legal professional. However, objections must be submitted within the specified time frame, usually within a number of days after receiving the penalty notice. You must provide clear evidence to support your objection and continue complying with all other tax obligations, such as filing returns and paying undisputed taxes. We manage the entire the objection process, from drafting the formal submission to evidence collection and discussion/negotiation with the tax authorities in order to help you effectively navigate the objection process and improve the likelihood of achieving a favorable outcome.
How can Meijburg help you?
Our approach to tax penalties is two-fold: (1) proactive risk management to limit the risk of grounds for tax penalties ever arising and (2) the provision of responsive penalty defense services in the event a penalty is actually imposed. Risk management entails timely and accurate tax filings, strict adherence to relevant tax regulations, and transparency in tax reporting. By taking these steps, you can significantly reduce the likelihood of incurring high tax penalties and safeguard your organization’s financial health and reputation. If the Dutch tax authorities announce an intention to impose a penalty, we are ready with the knowledge and experience to defend you and your organization at every stage, protecting against unfair or unlawful requests and utilizing tested litigation strategies to get the best result for you and your organization.
