Anyone deducting home interest must prove that conditions attached to it have been met.
Burden of proof
At Zeeland-West Brabant District Court a case been addressed, where an amount of over €19,000 of deductible owner-occupied home interest is claimed in the 2017 income tax return. This concerns €17,000 in interest on a loan from a Curaçao NV and €700 on a flexible loan with ABN Amro Bank. The Court starts by noting that the burden of proof, that there is owner-occupied home interest, rests entirely on the taxpayer. The Supreme Court has already ruled that this burden of proof must be able to be met every year for the entire term of the owner-occupied home loan.
Entered into for own home
One of the conditions of an owner-occupied home loan is that the borrowed funds have been spent on the owner-occupied home. This can be for the purchase of the home, but also for maintenance or improvement of the home. The deduction of interest on the flexible loan is stranded on this condition. A feature of such a credit is that amounts can be withdrawn from and deposited into the account at will. If the flexible loan is (partly) repaid in the interim, newly withdrawn amounts must be reassessed as to whether they were spent on the owner-occupied home. Because the interested party does not disclose the account's movements, the court concluded that it cannot be determined whether the amount borrowed was spent on the owner-occupied home. The interest paid on the flexible loan is therefore not deductible as owner-occupied home interest.
Interest paid
Another condition to the deduction of owner-occupied home interest is that the interest was actually paid (or interest-bearing debt). This is where part of the deduction of the interest paid on the loan to the SA is stranded. Interested party does not provide proof of payment showing any payment to the SA. Therefore, the Court only allows the deduction of the amount of interest received from the interested party according to the NV's annual accounts (approximately €8,500 of the claimed €17,000).