Two of the bills submitted to the Lower House on September 16, 2011, The Tax Plan 2012 and Other tax measures 2012, include a number of procedural law proposals. One of these proposals is a new set of rules for the calculation and reimbursement of interest by the Dutch Revenue.
Interest on tax due (‘belastingrente’)
The current interest on tax due rule (‘heffingsrente’) will be significantly changed for the personal income tax and the corporate income tax. The new rules for interest on tax due (‘belastingrente’) for purposes of personal income tax and the corporate income tax is included in a number of extremely detailed provisions of the General Taxes Act (“GTA”). In short it means that, on balance, taxpayers who have submitted their tax return shortly after the end of the tax year or who have ensured that they have paid the tax due by requesting a provisional assessment, will have little to do with interest on tax due.
Payable interest on tax due
The main rule is that the interest on tax due is payable when a final or a provisional assessment is imposed for a payable amount, after the six-month period following the period to which the tax applies (“the tax year”) has passed. The interest will be calculated on the amount of tax due. The interest period commences after the six-month period following the tax year has passed - in a calendar year this would be July 1 of the following year - and ends on the date the provisional or final assessment is payable, i.e. six weeks after the date of the assessment. No interest is payable if the provisional assessment has been imposed in accordance with a request for a provisional assessment received before the first day of the fifth month after the tax year has ended - in a calendar year this would be before May 1 of the following year -, or in accordance with a tax return received before the first day of the fourth month after the tax year has ended, i.e. before April 1 of the following year.
If, after the expiration of the six-month period, a provisional assessment is imposed or revised in accordance with a request for imposing a provisional assessment or a request for revision of the provisional assessment, the interest on tax due will be calculated on the amount payable as from the day following the six-month period up until fourteen weeks after receipt of that request. If the final assessment is imposed in accordance with the tax return submitted, then the period for which interest on tax due is calculated on any remaining amount still payable, is limited to nineteen weeks after the tax return was submitted. In that case, the interest period will commence on the date the six-month period has ended and ends nineteen weeks after receipt of the tax return by the Dutch Revenue.
When an additional assessment is imposed, the interest will, in principle, be payable for the period from the first day after the six-month period up to one day before the date the additional assessment is payable, which is one month after the date on the assessment. The interest calculation is limited when a taxpayer has submitted a request for an additional assessment, whereby the assessment imposed is in accordance with the request. In that case, the interest period will end twelve weeks after receipt of that request.
Reimbursement of interest on tax due
In principle, a taxpayer will only be reimbursed interest of tax due if the taxpayer requested a provisional assessment, or if the taxpayer submitted the tax return, whereby the provisional or final assessment is in line with the request or tax return in question. If the taxpayer is to be eligible for reimbursement of interest, he will need to submit either a request for the imposition of a provisional assessment or a request for the revision of a provisional assessment, as required by the tax inspector, in which case the forms designated for that purpose must be used.
In that case the Dutch Revenue will only pay interest after the six-month period has ended and if an (provisional) assessment with a payable amount is imposed after an eight-week period after the request for provisional assessment has passed, or a thirteen-week period after the tax return was filed.
In cases whereby no provisional assessment was imposed and the assessment is imposed in accordance with the tax return the interest period will commence three months after receipt of the assessment. The period cannot commence before the six-month period after the tax year has passed and ends six weeks after the date on the tax assessment.
Under the current rules, the taxpayer is reimbursed interest when an assessment is reduced after having filed an objection or appeal. This is about to change. The new rules state that no interest on taxes due is reimbursed when an assessment is reduced as a result of an objection or appeal procedure.
Inheritance tax
The interest on taxes due for inheritance tax purposes is calculated on the amount of inheritance tax liability indicated on the tax assessment. The interest period commences eight months after the passing of the testator and ends on the date the assessment is collectible (six weeks after the date of the assessment). Also in the case of the inheritance tax, it is possible to limit the the interest period by requesting a final or provisional assessment or by filing a tax return.
When the tax return is imposed in accordance with the assessment or request, the interest period will end nineteen weeks after filing the tax return, or fourteen weeks after receipt of the request. No interest is reimbursed on inheritance tax.
Payroll taxes, VAT, real estate transfer tax, Motorcycle Registration Tax (“BPM”), excise duties and environmental taxes
Little changes for the taxes indicated in the title of this paragraph, with regard to interest on tax due. Interest on tax due will be calculated on the payable amount on additional assessments issued in respect of any of these taxes after the calendar or financial year has ended. The interest is calculated as from the first day after the calender or financial year up to two weeks after the date of the additional assessment. No interest is calculated where the additional assessment is the result of a voluntary improvement of the tax return made within three months after the calender or financial year has ended. Interest will also be calculated in cases whereby the payment is overdue, but is made before an additional assessment is imposed. The interest is calculated on the overdue amount for the period that commences the first day after the calendar or financial year has ended and ends the date the payment is made.
Interest on tax due is reimbursed for these taxes in cases where a refund decision is not issued within eight weeks after the refund request was made. The interest will be reimbursed for the period that commences the first day after the eight-week period and ends the fourteenth day after the date on the decision. This period always commences three months after the end of the calender or financial year.
Late payment interest
The rules for the interest the tax collector calculates and pays in respect of ‘late payment interest’(‘invorderingsrente’), will also change. Little changes for the calculation of late payment interest, but the payment of interest will be limited drastically. After the new rules have taken effect the tax collector will only reimburse interest when he fails to pay or settle the assessment within six weeks after the date on the assessment.
When an appeal or notice of objection against the assessment is made whereby the taxpayer does not request deferral of payment and pays the assessment, he will not be eligible to receive late payment interest on the amount the tax collector must reimburse should the proceedings be decided in favor of the taxpayer. However, late payment interest is payable when the taxpayer has requested and received postponement of payment, whereby proceedings have proven unsuccessful for the taxpayer and the assessment must be paid.
In the event that the assessment is reduced, the tax collector will only reimburse late payment interest when a previous request for deferral of payment was denied.
Percentage
The statutory interest rate will apply to both the interest on tax due and the late payment interest. This percentage exceeds the quarterly interest on tax due and late payment interest. The statutory interest is currently 4%, whereas the interest on tax due and late payment amounts to 3%.
Effective date transitional rules
These rules will take effect as of January 1, 2013, and will apply to tax periods commencing after January 1, 2012. For the inheritance tax, the new rules will apply to tax debts which have arisen after January 1, 2013.
The interest rate of the statutory interest will apply to the interest periods as of January 1, 2013. This percentage will also apply to late payment interest in assessments whereby the former interest on tax due rules still apply.
Conclusion
The new rules give taxpayers more control on how to limit the interest by requesting a provisional assessment in time or by filing a tax return within three months after the tax year has ended. The introduction of the new rules also means that the Dutch Revenue will significantly decrease the amount of interest it reimburses. Interest will only be reimbursed in cases whereby the assessment is imposed in accordance with the tax return or a request for a provisional assessment, and the Dutch Revenue takes too long to respond to a request for a provisional assessment or the tax collector fails to refund taxes within the six-week period. When a taxpayer brings proceedings against the Dutch Revenue, interest will no longer be reimbursed should the proceedings be decided in the taxpayer's favor and an amount in tax be reimbursed.