Professional liability of a tax adviser: the duty to inform in international tax structures
International DJ pays USD 17 million after missed US tax residency
An internationally renowned DJ and music producer had, in 2008, substantially revised his tax structure together with his adviser. The starting point was that he would not be regarded as a tax resident in any country. To prevent him from being taxed in the United States on his worldwide income, one crucial limitation applied: the number of days spent in the US had to remain below the threshold of the Substantial Presence Test (SPT). Greenberg Traurig LLP, an international law firm, acted as coordinating tax adviser.
In 2012 the DJ exceeded the SPT limit. As a result, he became a US tax resident as of 1 January 2012. The consequence was far-reaching: the Safe From Harm Trust, a Guernsey trust of which he was both settlor and beneficiary, qualified as a grantor trust under US tax law. This meant that the trust's income — and the subpart F income of its subsidiaries attributed to the trust — was directly taxable to the DJ in the US. That income went unreported for years.
It was not until 2018 that a newly engaged law firm identified the omission. Through the Streamlined Domestic Offshore Procedures (SDOP) voluntary disclosure scheme, amended returns were filed for 2016 and 2017. For those years the DJ paid USD 10,217,269 in additional federal income tax. A further USD 1,212,765 followed for 2018. On top of that, the US tax authority imposed a penalty of USD 5,558,918.70. The total: almost USD 17 million.
The Amsterdam District Court did find that Greenberg Traurig had committed professional negligence, but dismissed the tax damage claimed. It held that it was insufficiently plausible that the DJ would have adjusted his conduct had he been correctly advised.
Court of appeal: with USD 4.2 million in additional tax per year, a client adjusts his touring schedule
The Amsterdam Court of Appeal took a different view and set aside the judgment on the point of causation. The test: it must be plausible that, in the hypothetical situation without the professional error, the DJ would have made different choices. Sound advice would in any event have included that exceeding the SPT limit resulted in an additional tax claim of approximately USD 4.2 million per year.
The court considered it sufficiently plausible that the DJ would have followed that advice. His entire tax structure had been set up precisely to avoid taxation of his worldwide income. The DJ had no fixed residence or place of abode in the US, had a booking agent who arranged his performances, and did not depend on physical presence in the US for commercial contacts. Of the performances that had taken place in December 2012 and that caused the SPT limit to be exceeded, several had only been booked after May 2012 — precisely the moment at which Greenberg Traurig should have acted. That an adjusted touring schedule was commercially feasible was also borne out in practice: in 2018 and 2019 the DJ performed more than sixty shows per year in the US without exceeding the SPT limit, using Vancouver and Mexico as a base.
Greenberg Traurig then raised several defences. On the point of contributory negligence, it argued that the DJ had caused the damage himself by placing commercial gain above fiscal prudence. The court rejected this: precisely because Greenberg Traurig had failed to inform him properly, the DJ could not make an informed choice. A party that insufficiently informs its client cannot subsequently hold against him that he failed to mitigate his loss. The argument that [company] and the later advisers of [name 2] were the actual causers was also rejected: even if others are jointly liable, Greenberg Traurig is jointly and severally liable for the entire loss.
The reliance on set-off of benefits (Section 6:100 DCC) also failed. Greenberg argued that the DJ had enjoyed a tax benefit over 2012–2015 because he had paid no tax in those years. But in the hypothetical situation without the professional error he would likewise not have owed any tax over those same years — he would, after all, have stayed below the SPT limit. There was nothing to set off.
With regard to the reversal rule, the court held that it did not apply. The breached norm was intended to enable the DJ to make a well-informed decision, not to protect him against the specific risk of US taxation.
What does this mean for clients who depend on coordinating tax advice?
In international tax structures, the coordinating tax adviser has a far-reaching duty to inform. Cursory email information from a local adviser does not suffice. A coordinating tax adviser is expected to ensure a reasoned, written advice from someone with sufficient expertise in the applicable foreign tax law — certainly where exceeding a limit such as the SPT comes into view.
Where the adviser operates under a firm's umbrella, the firm is liable for his conduct for as long as the engagement with the client continues. The fact that the adviser subsequently left and continued his work elsewhere does not affect the liability of the original firm. This judgment adds an important nuance: engaging other advisers afterwards, or the liable firm warning those advisers, does not release that firm from liability towards the aggrieved client.
The court places the duty to inform with the coordinating firm: cursory email information from a local adviser does not suffice. More on liability proceedings in commercial relationships can be found on the commercial litigation page.
Frequently asked questions
Can a law firm be liable for errors of an adviser who has since left?
Yes. The conduct of a partner or employee is attributed to the firm for as long as the engagement between that firm and the client existed. The fact that the adviser worked elsewhere after leaving and continued the collaboration with the client does not release the original firm from liability for the errors made during that period.
How does the court assess causation in the professional liability of a tax specialist?
The court compares the actual situation with the hypothetical situation without the professional error. It must be plausible that the client would have made different choices in that case and that those choices would have led to a better financial position. Certainty is not required; plausibility suffices. The reversal rule does not apply to a breach of a purely informational duty.
Can a tax benefit enjoyed before the loss period be set off against the damages?
Not automatically. Set-off under Section 6:100 DCC requires that the benefit results from the same event as the loss. In this judgment there was no benefit: even in the hypothetical situation without the professional error, the DJ would not have paid any tax over the years 2012–2015. There was therefore nothing to set off.
Amsterdam Court of Appeal, 12 May 2026, ECLI:NL:GHAMS:2026:1289.
Cited case law
Supreme Court: ECLI:NL:HR:2007:AZ4564
Courts of Appeal: ECLI:NL:GHAMS:2026:1289