WOZ value assessment,
tenant/landlord, who is the interested party
The determination of the value of immovable property based on the WOZ Act – the Dutch Valuation of Immovable Property Act – is not just relevant for the levy of municipal property tax. The determination of that ‘WOZ value’ is also relevant to schemes that are unrelated to tax. The broader use of the WOZ value does sometimes result in uncertainty.
The issue in this case was the determination of the value of a subsidised rental home. The tenant disagreed with the decision determining the WOZ value, which decision was addressed and sent to him. Specifically, the WOZ value also affects the maximum amount of rent to be paid.
In tax cases, only the person to whom the WOZ value assessment is addressed can object to that assessment and then lodge an appeal with the tax court. In the case of a subsidised rental home, the Dutch Residential Tenancies Rents Implementation Act applies. In such a case, the owner/landlord may also have an interest in the tenant’s proceedings regarding the WOZ value set out in an assessment addressed to the tenant due to the possible influence that decision may have on the amount of rent to be paid. The owner/landlord himself may also initiate proceedings regarding the WOZ value. In that case, the tenant may also have an interest in the outcome of those proceedings, for example in connection with the maximum rent. In these situations, the owner/landlord and the tenant have opposing interests.
In the case in question, in which the tenant wanted the WOZ value lowered, the District Court and the Court of Appeal offered the owner/landlord the opportunity to participate in these proceedings, apparently by applying Article 8:26(1) of the Dutch General Administrative Law Act. This statute provides that an administrative court may, either on its own motion or in response to a request by a party, afford interested parties the opportunity to participate in such proceedings. This provision has not been declared applicable to tax matters in cassation before the Supreme Court. That would mean that the owner/landlord in this case would not be afforded the opportunity to advance his interests in this case by asserting why he believed the tenant’s appeal in cassation to be unfounded.
The Supreme Court ruled as follows in its judgment. The Dutch Residential Tenancies Rents Implementation Decree provides, among other things, that the determination of a WOZ value may also be relevant to establishing the maximum amount of rent. When the legislature implemented the Decree, it did not address the consequences proceedings instituted by a tenant could have for an owner/landlord and vice versa. The Supreme Court considered this sufficient reason to allow the owner/landlord in the case in question to participate in the proceedings in cassation and in so doing to fill this gap in the law.
Deduction of contributions
paid under the Invalidity Insurance for Self-Employed Persons Act
The Dutch Invalidity Insurance for Self-Employed Persons Act (WAZ Act) was repealed with effect from 2004. Pursuant to the Income Tax Act 2001, contributions paid under the WAZ Act were deductible. A year later, with effect from 2005, that deduction option was repealed ‘since there is no longer any obligation to pay contributions under the WAZ Act’. That deduction option was still available in 2004, given that WAZ contributions that pertained to previous years were still being paid after 1 January 2004. The problem that arose was that contributions that pertained to previous years were still being paid after 1 January 2005, as was the case when the tax collector finally collected the contributions by means of an attachment in 2014. The Supreme Court ruled that the legislature must have realised that the payment of WAZ contributions would result in the deduction of that payment when the tax base for income purposes was calculated, even in cases in which the WAZ contribution was paid after the WAZ Act was repealed. The legislature apparently presumed that no WAZ contributions would be paid or collected after 31 December 2004. Given that that presumption was obviously incorrect, the Supreme Court ruled that it must be assumed that the legislature intended those contributions to remain deductible even after 31 December 2004.
Notional return in Box 3
The tax on imputed return on investment scheme laid down in the Income Tax Act 2001 (Box 3, income from savings and investments) is based on a notional return of 4% on assets that are held as savings or investments. When determining that percentage, the legislature took the position around the year 2000 that that 4% would remain feasible for a long series of years without taxpayers having to run an excessive risk. In June 2019 the Supreme Court held that that assumption was no longer valid for the years 2013 and 2014, and thus that a return of 4% was no longer feasible in those years unless the taxpayers were to run an excessive risk.
That was not to say that there was a violation of Article 1 of the First Protocol to the ECHR, the right to peaceful enjoyment of one’s possessions, which was invoked in this case. Such a violation would only exist if the taxpayers had been confronted with an excessively heavy expense for the years 2013 and 2014. The tax rate (30%) also had to be taken into consideration in this regard. The Supreme Court ruled that taxpayers, in the current tax system, face an excessively heavy expense if the tax burden in Box 3 for 2013 or 2014 were to exceed the average return that could be achieved without running an excessive risk.
This means that the levy in Box 3 for 2013 and 2014 in the current tax system constitutes a violation of Article 1 of the First Protocol, if the nominal return in Box 3 were lower than 1.2% (4% of 30%) on average. In principle, the Supreme Court cannot offer a solution should such a violation occur in the current tax system, as that requires changes to be made to the current tax system which cannot be sufficiently deduced from the system of statutory law. In the relationship with the legislature, courts should thus exercise restraint when offering solutions at system level.