The rules governing tax interest feel somewhat unfair. That is why they are regularly the subject of court cases. We have previously discussed tax interest in the context of the income– and corporation tax. However, this issue also arises in the context of VAT.
The wrong rate was applied by mistake
In 2014, a private limited company (BV) discovered that, between 2009 and 2012 inclusive, it had mistakenly applied the reduced VAT rate. As a result, the company underpaid VAT. Following the submission of supplementary returns, the tax authorities naturally issue additional tax assessments.
The fines imposed are set aside following an appeal. However, the Tax and Customs Administration upholds the substantial amounts of tax interest. Amsterdam Court of Appeal This is certainly justified.
No disadvantage
The private limited company argued that the charging of tax interest is contrary to the principle of proportionality. After all, the Tax and Customs Administration has, on balance, never suffered any loss. The VAT paid by the company is, in fact, deducted in full by its customers. The State suffers no loss. After all, the VAT that was paid late was deducted just as late by the customers. For the sake of completeness: the customers do not receive any tax interest from the Tax and Customs Administration on the VAT they subsequently deducted.
The Court does not agree with this. The private limited company can only avoid having to pay tax interest by paying the tax on time. Tax interest is waived only where this is not possible due to the fault of the Tax and Customs Administration. The fact that the private limited company did not have the funds at its disposal is irrelevant.
Appeal to the Court of Cassation
The private limited company is not taking this lying down and has now lodged an appeal in cassation with the Supreme Court. We do not expect much from this appeal. The Court of Appeal considers that the legislative history shows that the legislature made a deliberate choice in favour of the current scheme.