The VATable person at hand was a Dutch VAT group. The VAT group carried out construction services for consideration to third parties. During an audit from the Dutch tax authorities at the side of (one of) the third parties, it came to light that the third party at hand paid cash to a shareholder of one of the parts of the VAT group at hand. The latter did not administer these cash amounts. After a criminal investigation, the Dutch tax authorities claimed that the cash amounts at hand were payments for VATable activities rendered by the VAT group and, as a result, they imposed an additional VAT assessment right before the assessment period should have expired. As a result, the VAT group was left with little opportunity to defend itself against this assessment, and thus claimed a violation of its right of a proper defence.
The Dutch Supreme Court emphasizes the fact that the right of a proper defence is a core right within the legal system of the European Union and can be exercised by (VAT) taxable persons when tax authorities make decisions within the meaning of the legal system of the European Union, for example in cases regarding VAT. Even if the decision is based on national legislation, but that legislation is an implementation of European legislation, the right of defence should be respected. The Dutch Supreme Court comes to the conclusion that this right of defence should be respected even if a VATable person is suspected of VAT fraud or is declared bankrupt. The Dutch tax authorities cannot ignore this right only on the basis that the time limit for imposing an additional VAT assessment would otherwise have been expired.