When an assessment or provisional assessment is imposed, the interest on tax due is calculated from the end of the tax year to the moment the provisional assessment is imposed. From recent case law, it appears that the Dutch Revenue must exercise due care to ensure that taxpayers’ interest on tax due remains limited.
In a case before the Den Bosch Court of Appeals, the taxpayer had requested a provisional assessment, via an assessment diskette, on July 12, 2007. On June 1, 2007, she had received a substantial payment and wanted to pay any personal income tax due as quickly as possible, to avoid paying more interest. In 2007, the interest was in fact calculated from July 1, and not from the end of the tax year. The provisional assessment was imposed more than five months after the request was submitted, on December 27, 2007. The Court of Appeals ruled that this contravenes the principle of due care. The taxpayer and her advisor had had repeated telephone contact with the Dutch Revenue, and had urged them to expedite the processing. The Dutch Revenue held that they could not process a provisional assessment any faster. The Court of Appeals found this unacceptable, and ruled that the inspector must give more consideration to the taxpayer’s interests. The Court limited the period for calculating interest to six weeks after the request. According to the Court of Appeals, that is a reasonable processing term.
The Supreme Court had already restricted the period for calculating interest
This judgment is consistent with a Supreme Court decision from September 2009, which confirmed that interest on tax due can only be calculated up to a maximum of three months after a return is submitted. In this case, the Supreme Court limited the period for calculating the interest on tax due. Legislative history affirmed that a provisional assessment must be imposed within three months of the return being submitted.
The Dutch Revenue must exercise due care
This case law demonstrates that the Dutch Revenue must consider the taxpayer’s interests when processing returns and requests for provisional assessment. In doing so, the inspector must avoid causing the taxpayer having to pay too much interest on tax due. If the Dutch Revenue does not comply, then it risks contravening the principle of due care in its processing. The Court can then limit the interest on tax due owed.