THE NETHERLANDS: non-resident golf player is allowed to withdraw filed tax return during Court case

Netherlands: non-resident golf player is allowed to withdraw filed tax return during Court case

A UK resident professional golf player had ? between 2002 and 2006 – won a price during the KLM Dutch Open. He received a gross amount of EUR 200.200, on which an amount of EUR 40.040 was withheld as wage tax. The golf player attempted to become entitled to deduction of the costs he made in relation to the participation in the Dutch Open, under continued application of the 20% wage tax rate.

In the year at hand the Netherlands legislation contained the possibility to ask upfront for a cost determination, which could be used by the organiser for reducing the basis for withholding. The tax inspector did not co-operate in allowing the cost determination afterwards. The inspector thus refused to rectify the withholding on the basis of the net result of the golf player.

The golf player then voluntarily filed an income tax return, in which he claimed deduction of costs and application of the 20% tax rate. The tax inspector did allow for the deduction of costs, however refused application of the 20% tax rate and instead applied the regular progressive income tax rate schedule. During the Court proceeding the golf player requested that if the Court would disagree with his position, he would be allowed to withdraw the filed income tax return 9and the withheld wage tax would still be deemed final).

The Court did agree with the tax inspector that in this case the progressive rate schedule would be applicable. The Court did however, allow the golf player to indeed withdraw his income tax return. The reason given by the Court for this permission was that there was no obligation for the non-resident golf player to file an income tax return in the Netherlands, and also that there was no reason for the tax inspector to suspect that the golf player would be subject to Netherlands income tax. In addition the Court mentioned the argument that a reasonable application of the law would also support the view that an income tax assessment on the basis of the non-resident tax liability (based on Article 9.4 of the 2001 Income Tax Act) requires that the assessment is not imposed if the income tax exceeds the withheld wage tax and the taxpayer therefore asks to merely withhold wage tax.

COMMENT (RB): Under Netherlands tax law it is quite unusual that a tax return can be withdrawn if the outcome is unfavourable to the taxpayer. In this case the Court allowed such withdrawal because filing an income tax return was not obligatory and the Court also pointed at a reasonable application of the law regarding the taxation of non-resident sportsmen and artists. It is however necessary for the taxpayer or his advisor to ask for the withdrawal, it appears that if the request is not made the Court (or the tax authorities) will not automatically take care of such withdrawal.