The Court of Appeal rendered their decision - turning down all appeals that we made. The legal team has appealed the decision with the Dutch Supreme Court this March. We now wait (which can take several months). More information about the Court of Appeal’s ruling can be found below.
##
SUMMARY
In brief the Court of Appeal’s ruling in 3 of their 6 rulings may be summarized as follows:
No ‘special circumstances’ which the legislator failed to make part of his considerations for the legislative change - The Court of Appeal rules that in parliamentary history the legislator did explicitly also take into consideration the reduction of the duration of the 30% ruling for existing cases and this has even resulted in the introduction of limited transitional rules. On this basis the Court of Appeal does not agree there are any special circumstances which the legislator failed to make part of his considerations for the legislative change.
No conflict with the Article 1 First Protocol of the ECHR and the requirement that taxation should be ‘lawful’, serve a ‘legitimate aim’ and strike a ‘fair balance’ between the general interest and protection of individual rights
The Court of Appeal rules that only in specific circumstances a ‘legitimate expectation’ can constitute a ‘possession’ as meant in Article 1 First Protocol of the ECHR.
However, the expectation that the taxpayer could also rely on the 30% ruling in future years (as per the period mentioned in the 30% ruling), neither constitutes an existing ‘possession’ (as this expectation applies with respect to future (net) income), nor constitutes a ‘legitimate expectation’ which may benefit from Article 1 First Protocol of the ECHR, already because the 30% ruling is issued with an explicit caveat that it may be subject to legislative changes.
This is also not different in light of the fact that in relation to an earlier legislative change - which earlier change shortened the maximum duration of the 30% ruling from 10 to 8 years - the legislator did provide for ‘full’ (instead of only limited) transitional rules.
In general terms, when it comes to taxation, the legislator has a ‘wide margin of appreciation’ which should in principle be respected by the Courts. The legislative change at hand - limiting the duration of the 30% ruling also for existing cases with limited transitional rules - is within the scope of the legislator’s wide margin of appreciation. The legislator’s considerations in parliamentary history cannot be concluded to lack any reasonable grounds. In its ruling the Court of Appeal has taken into consideration that the legislator did not limit the possibility to reimburse extra-territorial costs on a tax-free basis as such. The legislative change focuses only on a limitation of the maximum duration of the 30% ruling, based on which ruling such extra-territorial costs can - in short - by fiction be deemed to amount to 30% of the wage sum.
No conflict with the principles of equality and non-discrimination ex Article 14 of the European Convention on Human Rights (“ECHR”) and Article 26 of the International Convenant on Civil and Political Rights (“IVBPR”).
The Court of Appeal rules that no discrimination can exist in case of a change in tax legislation applicable as of a certain date (as in the case at hand), which merely has as result that certain taxpayers can benefit less long from a specific rule or taxbenefit than others in respect of which that rule or tax benefit applied earlier. We assume that in this specific part of the ruling the Court of Appeal is agreeing with the earlier ruling of the Lower Court, i.e. that also the Court of Appeal does not consider it disproportional that the reduction in duration of the 30% ruling increases in proportion to the effective start date of the 30% ruling being closer to the effective date of the new regime (1 January 20219).