You often hear the argument: “The tax authorities aren’t losing out on anything, are they?”. But that is no reason not to impose a fine alongside the additional assessment for VAT that was wrongly not paid.
Not deducted
This confirms the Zeeland-West Brabant District Court in a case where a financial holding company “passes on” management fees to affiliated companies. The holding company does not pay VAT on the amounts received. When the tax authorities discover this, additional VAT assessments are issued. These assessments are increased by a late payment penalty and tax interest. The holding company lodges an objection and an appeal against both.
Default penalty
No intent or gross negligence is required for the imposition of a late payment penalty. In other words, it is irrelevant whether the holding company deliberately failed to pay the VAT. The mere fact that the VAT was not paid, or was not paid on time, is sufficient to impose the late payment penalty.
Only the absence of any fault (avas) constitutes grounds for waiving a late payment penalty. Avas applies only where the holding company bears no blame whatsoever for the failure to pay VAT. However, the holding company has not fulfilled its obligation to prove that this is the case.
Even by blaming its (former) accountant, the holding company cannot avoid the fine. The court is of the view that the holding company itself is primarily responsible for ensuring that VAT is paid correctly.
The tax authorities are not short of anything
The holding company is contesting both the late payment penalty and the tax interest in court, arguing that the Tax and Customs Administration has not suffered any loss. This is because the fee due in respect of the management fee was not deducted by the payer.
With regard to the late payment penalty, we have already seen that the mere fact that VAT has not been paid is sufficient to justify this penalty. It is interesting to consider whether the argument that the Tax and Customs Administration has not suffered any loss might be a reason to reduce the penalty. This is not at issue in the present case. The court does, however, ultimately reduce the penalty of its own motion. The proceedings have taken too long (so-called ‘undue delay’).
With regard to tax interest, the court ruled that even if, for the sake of argument, one were to accept the premise that the tax authorities are not incurring any loss, there is no basis in law for waiving tax interest. Furthermore, by charging tax interest, the Tax and Customs Administration is not acting in breach of any principle of good governance.