The tax authorities are going further and further in collecting information

Yes, in principle, you are obliged to provide the Tax and Customs Administration with the information necessary for proper tax assessment. This applies to your own tax return, but increasingly also when the tax authorities wish to obtain information about a third party through you, for example regarding a client. If you refuse without good reason, the inspector may issue an information order. However, the duty is not unlimited: a duty of confidentiality, privacy regulations (GDPR), and due care towards your clients can certainly be taken into account. The key is to know exactly which data you must provide and how far that duty extends.

What is the tax information obligation?

The Tax and Customs Administration has broad statutory powers to request information. You are obliged to provide data, books, and records that may be relevant to your tax assessment. If you fail to provide these, or provide them incompletely or late, the inspector may issue an information order . If that order becomes irrevocable, this may lead to a reversal and increase of the burden of proof: you must then demonstrate yourself that an assessment is incorrect, instead of the tax authorities substantiating their position. This is a substantially disadvantageous position.

It is important to note that this duty to provide information does not apply solely to your own tax situation. The tax authorities can also turn to third parties to obtain information about a taxpayer. It is precisely on this point that the Tax Administration has increasingly been pushing the boundaries in recent years.

The tax authorities are increasingly collecting information via third parties

If the tax authorities receive insufficient information directly from a taxpayer, they look to parties that something about that person: subscribers, service providers, banks, and other organizations. In this way, the Tax Administration can build a picture of where someone lives, resides, and spends money. In this playing field, the tax interest and the privacy interest of the person concerned frequently clash.

Stichting Museumkaart had to release usage data

A striking example is a case in which the tax authorities investigated a taxpayer who claimed to live abroad, but whom the inspector suspected was actually residing in the Netherlands. The Tax and Customs Administration asked Stichting Museumkaart for data regarding the use of the museum card: on which dates and at which locations was the card used? The foundation refused, arguing that a museum visit should be able to take place freely and anonymously.

The Amsterdam Court of Appeal ruled on 5 November 2019 that the foundation was required to provide the requested data after all (ECLI:NL:GHAMS:2019:3967). In principle, third parties may not refuse to provide information about taxpayers. The court ruled that the interest in proper tax assessment outweighed the interest in keeping the data private in this case. The lesson is clear: subscriptions, museum cards, and transport tickets can also bring a person into the picture for tax purposes.

The limits of the duty of confidentiality

Not everyone is required to simply hand over data to the tax authorities. Certain professionals with a statutory privilege against self-incrimination, such as lawyers, doctors, notaries, and clergy, can invoke their duty of confidentiality. However, this protection is not absolute, and here too, the tax authorities are pushing the boundaries. The line often cuts right through the types of data: not everything held by a person entitled to privilege automatically falls under that privilege.

Financial data does not always fall under legal privilege

For example, there was a case in which the Tax Authorities requested information from a lawyer with a tax debt regarding outstanding bills of his clients, with a view to a possible third-party attachment. The lawyer invoked his duty of confidentiality. The judge ruled that purely financial data did not fall under legal privilege in that case and therefore had to be provided, whereas other, substantive client data were indeed protected by it.

In a case involving a doctor, too, a plea of ​​confidentiality did not hold up. A taxpayer had claimed a deduction in connection with a diet; the inspector subsequently requested information from the general practitioner regarding the issued diet statement. The judge did not see this as an unlawful infringement. Both examples show that a plea of ​​confidentiality does not hold up in all situations.

Companies are caught between two fires

If the tax authorities request information from you regarding a customer, supplier, or business partner, you find yourself in a difficult dilemma. On the one hand, you may not simply ignore the tax information obligation: doing so can lead to an information order and, ultimately, a reversal of the burden of proof in your own file. On the other hand, you may not simply disclose your customers' personal data. Under privacy regulations (GDPR), you must handle that data carefully and on a valid legal basis.

If, in hindsight, you provide data unlawfully, the customer concerned can hold you accountable, and you run the risk of damage claims and reputational harm. If you provide too little, you will face the tax authorities. The solution does not lie in a reflexive shift in one direction or the other, but in a careful assessment on a case-by-case basis.

What can you do if the tax authorities ask for customer data?

• Request the application in writing and specifically. Have the inspector specify exactly which data he requires and on what basis.
• Assess whether you are actually required to provide the information. Not every request has the same far-reaching scope; relevance to the levy is the determining factor.
• Limit yourself to what is strictly necessary. Do not deliver more than is requested and justified.
• Document the consideration. Record why you do or do not provide the information; this helps you both with the tax authorities and with your client.
• Seek legal advice in a timely manner in case of doubt or an impending information decision.

Furthermore, ensure that your privacy statement and general terms and conditions align with situations in which government agencies request data. Those who arrange this properly in advance are in a stronger position when the tax authorities come knocking. If you are unsure about your position, you can have it assessed by a lawyer.

Frequently asked questions about the tax information obligation

Do I always have to cooperate if the Tax and Customs Administration requests information?

In principle yes, insofar as the requested information may be relevant for tax purposes. However, you may assess whether the request is specific and relevant and whether you can invoke an exception, such as a statutory privilege.

What is an information decision?

An information decision is a formal decision by the inspector stating that you have not (fully) complied with your duty to provide information. If such a decision becomes irrevocable, this may lead to a reversal and increase of the burden of proof to your disadvantage. You may lodge an objection against an information decision.

Am I allowed to provide customer data to the tax authorities without violating the GDPR?

A legal obligation can be a valid basis for providing personal data. However, you must assess whether the obligation actually applies and limit yourself to the data that is necessary. Do not routinely provide more than is requested.

Does my advisor's duty of confidentiality also apply to the tax authorities?

For professionals with statutory privilege, that protection in principle also applies to the Tax and Customs Administration. However, case law shows that purely financial or administrative data do not always fall under this. The boundary depends on the nature of the data.

May I wait to provide it until I have sought legal advice?

It is advisable not to respond under pressure in case of doubt, but to inform the inspector that you are assessing the request and seeking advice. Do not ignore a request without a response: inaction can be interpreted as refusal and increase the risk of an information order. Where possible, request a reasonable timeframe.

What risks do I run if I share a customer's data incorrectly?

If you provide personal data without a valid legal basis, the data subject can hold you accountable, and you run the risk of damage claims and reputational harm, in addition to potential consequences under privacy legislation. Careful consideration beforehand is therefore important.

Need help with a request from the Tax and Customs Administration?

Has the tax authorities requested information about your company or one of your clients, and are you unsure how far your obligations extend? The specialists at MKB Juristen help you strike the right balance between your tax obligations and your duty of care towards clients. View our expertise in tax law or schedule an intake directly to discuss your situation.