The Tax Division

Tax Section breakdown

To illustrate the work of the tax section on the uniformity of law, the formation of law and legal protection during 2025, some themes are highlighted below from the cases in which a decision was rendered in 2025.

Payment of legal costs and the principle of equality

In 2025, the Tax Division rendered its first decisions in cases concerning the Reassessment of Legal Costs for Valuation of Immovable Property and Private Motor Vehicle Tax Act, which entered into force in 2024. That act was intended to end overcompensation of legal costs in proceedings on the valuation of immovable property and imported (used) cars. The reduction of the payment of legal costs in those cases affected the business model of agencies that conducted large-scale automated no cure no pay objection and appeal proceedings in property tax and motor vehicle tax cases. According to the legislature, their business model resulted in an unreasonable reliance on payment of legal costs and judicial capacity. The agencies concerned argued in these cases that said act violated the discrimination prohibition because the payment of legal costs in cases other than those related to property and motor vehicle taxes had not been reduced. According to Advocate General Wattel, however, the cases were not the same: in property and motor vehicle tax cases, the market was dominated by no cure no pay representatives. Their business model and its undesirable consequences did not occur with other taxes. Moreover, the act also gives the court leeway to award the normal payment of legal costs in realistic ('special') cases (ECLI:NL:PHR:2024:1140).
The Supreme Court held that the scope of the act must be deemed to be limited by its purpose and purport to business models characterised by (i) no cure no pay, (ii) the compulsory surrender of the payment of legal costs to the representative, and (iii) litigation by the representative in such a way that the payments far exceed the legal costs reasonably incurred. Property and motor vehicle tax cases of representatives without such a business model are 'special' cases in which the normal level of the payment of legal costs continues to apply (ECLI:NL:HR:2025:46). In a motor vehicle tax case, the Supreme Court added that if the taxpayer has to pay a non-symbolic entry fee for each imported car (in that case, EUR 750 excluding turnover tax), there is no question of no cure no pay and therefore the normal payment of legal costs will continue to apply (ECLI:NL:HR:2025:1382).

Classical appeals to the principle of equality

The aforementioned no cure no pay cases are atypical because it was not the taxpayer but the representative who felt discriminated against. Two more classical appeals to the principle of equality concerned the water treatment levy of two-person households and the deduction of IVF costs by two persons of the same sex.
In the first case, two cohabitants considered themselves discriminated against because all multi-person households, regardless of their size, are charged for 3 pollution units (p.u.[1]) in the water treatment levy, and single-person households are charged for 1 pollution unit. Two-person households are therefore structurally disadvantaged compared to one and three-person households and even more so compared to households of more than three people, which are structurally favoured.
 Advocate General Wattel found that two-person households are indeed structurally disadvantaged; he did not see a convincing justification for this because the water boards have access to the population records, but because it concerned an Act of Parliament (the Water Boards Act) and a mere EUR 58 disadvantage per year per two-person household, he did not consider there to be a 'victim' of discrimination as referred to in Article 14 ECHR (ECLI:NL:PHR:2024:1235).
The Supreme Court did not consider the legislature's choice to base its policy only on one and three-person households to be manifestly unreasonable, given its broad discretion, its aim of easy enforceability and the insignificant financial interest involved. The fact that water boards can see the population records does not make this different, as levy differentiation by household size complicates the levy by requiring more frequent time-proportional revision in case of interim changes in that size (ECLI:NL:HR:2025:416).
In the IVF case, two same-sex individuals with a desire to have children had participated in an egg donation and surrogacy programme resulting in a daughter of one of them, adopted by the partner. The interested party sought deduction of IVF expenses of USD 38,077 as specific healthcare expenses. The Inspector refused because the expenses had not been incurred due to illness or disability of the interested party or the partner, as required by law. The interested party considered that requirement discriminatory because IVF treatment in heterosexual couples is in fact deductible if 12 months of unprotected intercourse does not result in pregnancy, even if no illness has been diagnosed.
Following Advocate General Wattel (ECLI:NL:PHR:2023:632), the Supreme Court held that the distinction between sick and healthy persons did not violate the prohibition of discrimination. Based on the state of medical science, same-sex and opposite-sex couples are not comparable on this point because in same-sex couples, sustained failure to get pregnant does not indicate reduced fertility, while in opposite-sex couples it does. The 'illness or disability' criterion is consistent with the legislature's legitimate aim of granting deductions only in cases of illness or disability. Comparability would exist, however, if reduced fertility were found in (one of) the partners of the same-sex couple (ECLI:NL:HR:2025:184).

Unwanted use, improper use and abuse

The case ECLI:NL:HR:2025:1732 concerned an issue relevant in the property world: turnover tax on the transfer by a developer of its property project to an investor shortly after delivery and after the developer has already started letting out the property. If the leased property is a "totality of assets" (a business), then its transfer is not subject to turnover tax (Article 37d Turnover Tax Act, which transposes Article 19 of the EU VAT Directive into national law). This rule facilitates the transfer of businesses. Property developers and property investors take advantage: the purchasing property investor has an interest in VAT-free transfer because residential rental is exempt from VAT and the purchase VAT then cannot be reclaimed. If the transfer falls under Article 37d, they will also not be liable to pay transfer tax.
The Inspector refused to apply Article 37d because, in his opinion, no totality of assets had been transferred; after all, the developer did not transfer its development business, but only an apartment complex which, moreover, it had only let out in order to make the sale subject to Article 37d.
Advocate General Ettema considered the Inspector's position to be incorrect: the property rental in question is an independent economic activity and its transfer therefore does constitute a transfer of a totality of assets if the purchaser continues the letting out.
However, the Supreme Court doubted the applicability of Article 19 VAT Directive because a purchaser letting out the property exempt from VAT cannot in any case reclaim the VAT charged on the purchase, so Article 19 seems irrelevant. However, a possible review of VAT does lead to a different outcome depending on whether or not Article 19 VAT Directive applies. The Supreme Court therefore referred questions to the Court of Justice of the European Union for a preliminary ruling on the applicability of Article 19 VAT Directive and the relevance of the property being let out only to claim the exemption. The Court of Justice has not yet rendered a decision.

In the cases ECLI:NL:HR:2025:1327 and ECLI:NL:HR:2025:1328 , an attempt to improperly use the 'yippee gift' (the now-abolished exemption for gifts of (over) one hundred thousand euros to finance a private home) failed. That exemption could be applied multiple times, but only once between the same donor and donee. By 'cross-gifting' (to each other's child), two parent couples wanted to give the yippee gift twice tax-free; once directly to their own child, and once to the other couple's child. Advocate General Koopman concluded that the civil-law qualification of the agreements between the parent pairs usually already necessitates the conclusion that in such a case, the gift is essentially made to one's own child; if that is not the case, the exemption can still be refused on grounds of evasion of the law if the overriding motive for the cross-gifting is to favour one's own child (ECLI:NL:PHR:2024:1056). The Supreme Court ruled that indeed, civil law is in principle decisive for the questions of whether it concerns a gift and who the donor is, and that if under civil law no gift from the parent to one's own child can be established, it is indeed possible to nevertheless assume there to be a gift to one's own child in the context of law evasion, i.e. if the cross-gifts are so coordinated that they are to be seen as a combination. Subject to evidence to the contrary, this is the case if the gifted amounts correspond (almost) in full and the gifts are made simultaneously or shortly after each other.

2025 was also the year of new rounds of appeals in cassation in some high-profile cases on interest deduction constructions of private equity funds and international groups of companies converting shareholders' equity into loans to erode the profits in the Netherlands by deducting interest paid to an affiliated debtor in a tax haven (profit drainage). In the case ECLI:NL:HR:2025:1250, the Supreme Court ruled, in accordance with Advocate General Wattel's advisory opinion (ECLI:NL:PHR:2024:85), that even if the criteria of Article 10a Corporate Income Tax Act 1969 on profit drainage (because the shareholders' equity available for the acquisition of a Dutch target was not diverted and converted at non-arm's-length within the group structure as referred to in Article 10a VPB Act), interest deduction can still be refused if there are contrivances outside that Article 10a structure that frustrate corporate income tax as a whole. This is the case if, by bringing together the profits of the target and artificially created interest charges, the levy is arbitrarily and continuously foiled by juridical acts unnecessary for the acquisition and traceable only to the overriding tax motive. The "pivotal role" judgment (ECLI:NL:HR:2023:330) does not prevent deduction denial if the affiliated foreign debtor does not play a pivotal financial role in a group of companies, but is merely a conduit for affiliated assets. In the case ECLI:NL:HR:2025:1960, the Supreme Court confirmed that the fact that an act was not contrary to the aim and purport of Article 10a VPB Act does not entail that it cannot still constitute fraus legis, and ruled in accordance with Advocate General Wattel's advisory opinion (ECLI:NL:PHR:2024:182) that (i) if the affiliate loan is non-arm's-length and the interest must therefore already be adjusted downwards to a large extent, deduction of that much lower interest is in principle no longer law evasion, and that (ii) no profit drain occurs insofar as the affiliate loan pays off existing, non-suspicious, debts of affiliated companies.

Electronic communication

The case ECLI:NL:HR:2025:1728 concerned a taxpayer's opposition to the declaration of inadmissibility of his appeal against the rejection of his objection to an additional assessment for parking tax on account of the expiry of the time limit. He believed that the rejection had not been properly disclosed to him because it had only been sent by e-mail. However, according to the District Court, by stating his e-mail address on the digital objection form he had indicated to the municipality that he could be reached by e-mail and he had not made a plausible case that he had not received the e-mail containing the decision on his objection. In accordance with Advocate General Pauwels (ECLI:NL:PHR:2025:277), who pointed out that after the Electronic Administrative Communications (Modernization) Act, Article 2:8 of the Dutch General Administrative Law Act requires from 2026 that the addressee 'explicitly' indicate to the administrative body that they can be reached electronically, the Supreme Court ruled that the interested party could not be deemed to have indicated his ability to be reached electronically. The mention of his e-mail address on the objection form is insufficient for that purpose, as that form could not be submitted without specifying an e-mail address and did not state that the submitter, by indicating an e-mail address, agreed to the administrative body sending objection correspondence to that e-mail address. Thus, the decision on the objection had not been correctly notified. The appeal period therefore commenced only after the interested party received a copy of it.

[1] One pollution unit represents 54.8 kg of oxygen needed to treat the average waste water produced by one person in one year.