Interest on corporate income tax assessment disproportionally high

Background

The dispute before the Court, concerned a provisional corporate income tax assessment for 2021. In this provisional assessment, 8% interest was calculated. The taxpayer considered that the percentage was disproportionately high in relation to the objectives of the rule.

The interest on tax is an interest payment that is levied by the Dutch Tax Authorities if the (provisional or final) assessment is higher than the taxpayer has estimated or filed in a timely manner. From 2022, the minimum interest rate for corporate income tax has been 8%, while from 2024 it has even been 10%. For all other taxes, this percentage was 4% in 2022 and is now 7.5%.

The Court decision

The Court assessed the interest on tax rules (the Tax and Recovery Interest Decree) in the light of the principle of proportionality. Accordingly, the Court assessed whether the regulator could reasonably have arrived at the rule in question when considered the interest on tax involved.

The Court declared the interest on tax rules as non-binding and reduced the interest rate in this case to 4%, as previously agreed by the parties.

Consequences

Because the Court has declared the interest on tax rules as non-binding, it is possible to object to the interest that has been levied to your company’s corporate income tax assessment from 1 January 2022  and file a request for reduction of that interest.

If the interest on tax has been levied on a final corporate income tax assessment, it is important to file objection within six weeks starting from  the date of the final assessment. If the interest on tax has been levied on a provisional corporate income tax assessment, it is important to submit a request for revision of the provisional assessment within six weeks starting from the date of the final assessment.

However, it is important to mentioned that it is not a final court decision and it is expected that this procedure will continue with the appeal. As a result, the ruling of the Court could be reversed. In order to be able to claim a possible reduction of interest on tax, it is important to file objection now.

In addition, it is important to note that the court has ruled on the interest on tax rule as it applied in 2022. From 2024, the amount of the interest for corporate income tax purposes is no longer based on the statutory interest rate for commercial transactions. In addition, the interest rate for other taxes is now 7.5%. It is therefore unclear how the court views the interest from 1 January 2024.

Do you have any questions about the consequences of this court decision for your company? Please contact your Forvis Mazars tax advisor.

Source: District Court of Noord-Nederland, 7 November 2024, no. 23/5244, ECLI:NL:RBNNE:2024:4361.