With effect from 1 July 2022, the rate of recovery interest will be increased from 0.01% to 1%.
Coronacrisis
This means that people who have been granted a deferral of payment for tax due will once again have to pay interest. At the rate of 0.01%, which has been in force since 23 March 2020 in connection with the coronavirus crisis (0% was not technically possible), the interest due is, after all, (virtually) nil.
The rate is now set to rise rapidly to the “standard” rate of 4%. From 1 January 2023, it will be 2%, with effect from 1 July 2023: 3% and with effect from 1 January 2024: 4%. Interest on arrears is calculated on all tax debts outstanding after the last payment date, including “coronavirus-related debts” (see below).
Prevention
How can you avoid having to pay collection interest to the Tax and Customs Administration? The answer is simple: pay the tax due on time. After all, collection interest is calculated from the day following the last day of the payment period until the day of payment.
Whether it is advantageous to make use of a deferral of payment naturally depends on the return generated on the funds required. Without a payment deferral, paying late is generally not advisable because the tax authorities will then charge not only collection interest but also collection and service costs, which can quickly mount up considerably.
Deferred payment
The relaxed rules on payment deferrals in connection with the coronavirus crisis came to an end on 1 April 2022. The standard rules have been relaxed slightly. You can read more about this in our article Deferral of payment for business owners.
For tax debts that have accrued under the special deferral scheme, also referred to as “coronavirus debts”, the repayment period will begin in October 2022. These debts must be repaid in 60 monthly instalments. The first instalment must be paid by 31 October 2022 at the latest. The Tax and Customs Administration will provide further information on the amount of the coronavirus debt and the repayment scheme.
If, in order to avoid paying collection interest, you wish to make repayments on your COVID-19 debts before 1 October 2022, it is important to do so on a tax assessment-by-assessment basis, using the payment reference number associated with that specific assessment. If you do not do this, the Tax and Customs Administration’s system will not be able to link your payment to your tax liability.