The Dutch Supreme Court has held that late-payment interest can be charged for a maximum of three months after a tax return is filed because a longer term for charging such interest would violate the principle of due care.
The case involved a taxpayer who filed his personal income tax return for 2003 on June 30, 2004. The tax inspector did not impose an assessment in conformity with the return until April 15, 2005, and the assessment included late-payment interest of EUR 160 for the period from January 1, 2004, through April 15, 2005. This was in accordance with the statutory law applicable at the time. When imposing an assessment or provisional assessment, late-payment interest is charged from the end of the relevant tax year until the date the assessment (or provisional assessment) is imposed. The taxpayer, however, disagreed, asserting that the tax inspector had waited too long to impose the assessment, causing the taxpayer to be overcharged late-payment interest. The case was ultimately appealed to the Dutch Supreme Court.
Pledge in Parliamentary history
The Supreme Court found in the taxpayer's favor, citing the Deputy Minister of Finances pledge to Parliament in the debate on the late-payment interest regime to the effect that the regime was premised on an assessment (or at least a provisional assessment) being imposed within three months of a return being filed. In the case at hand, the period for which late-payment interest would be owed would therefore have run no longer than from January 1, 2004, through September 30, 2004. According to the Supreme Court, charging for a longer period of time would, in light of the pledge to Parliament, violate the principle of due care. A longer term would only be possible if the taxpayer is to blame for the three-month term being exceeded, which was not the situation in the case at hand.
Currently, the law prescribes that late-payment interest for personal and corporate income tax is owed from the middle of the calendar year (July 1) until the date the assessment (or provisional assessment) is imposed. The decision of the Supreme Court will have far-reaching consequences because it effectively nullifies part of the statutory rules. Taxpayers can cite this decision as grounds for objecting to late-payment interest charged on assessments for which the objection term has not yet elapsed if that late-payment interest is calculated for a period that exceeds that prescribed by the Supreme Court.
Moreover, the Tax Plan 2010 proposes returning with effect from the 2010 tax year to the old system, under which the commencement date for charging late-payment interest would shift from July 1 of the current tax year, to January 1 of the next tax year.