Avoid interest on tax due: request a provisional assessment on time!

Publication date 15 April 2013

As of January 1, 2013, the new rules for interest on tax due took effect. The changes relate in particular to personal and corporate income tax returns. By and large, the charges will apply to tax returns from 2012 onward. Under the new rules, it is important that a provisional assessment be requested on time (before the first day of the fifth month after the end of the tax period: i.e. May 1) and that the tax return is filed on time (before the first day of the fourth month after the end of the tax period: i.e. April 1).

Interest on tax due possible even though tax return filed on time
Interest can be charged even if the 2012 personal or corporate income tax return was filed before April 1, 2013. Under the new rules, interest on tax due cannot be charged if, after a request for a provisional assessment filed before May 1, or a tax return filed before April 1, a provisional assessment is imposed that is the same as the amount stated in the request or reported in the tax return. However, if, after receiving the tax return, the tax inspector chooses to impose a final assessment and refrains from imposing a provisional assessment, interest on tax due will be charged, although the interest charged will be limited. In that case, the interest will be calculated over the period July 1 through August 13, 2013. Under the new rules, the interest on tax due is limited to 19 weeks after the tax return was filed, if the tax assessment is imposed for the same amount as reported in the tax return. Furthermore, no interest on tax due will be charged over the first six months after the end of the tax period.

Request a provisional assessment on time
This is especially relevant to personal income tax returns, as the interest on tax due can be avoided if a provisional assessment is requested on time. It is advisable to request a provisional assessment before May 1, if you filed a personal income tax return before April 1 which reported an amount of tax due.

Similarly, it is also important to provide the tax authorities with an accurate estimate of the corporate income tax to be paid over 2012 before May 1 (if the financial year is the same as the calendar year). This will avoid interest of 3% having to be paid at a later date.