Collective complaints procedure against high rate of interest on tax

When is interest on tax due?

The interest on tax scheme basically means the Tax Inspector charging interest on tax if the issuing of a tax assessment with an amount to be paid by the taxpayer is delayed due to actions on the part of the taxpayer. Conversely, the Tax Inspector reimburses interest on tax if they take too long to determine a refund. The interest on tax scheme is therefore based on the so-called notion of default (verzuimgedachte).

The basic principle for return-based taxes is that the Tax Inspector makes a (provisional) assessment with an amount to be paid within eight weeks after a request to that effect has been submitted, or within thirteen weeks after a tax return has been filed. Taking into account a payment term of six weeks, calculation of interest on tax then ends after fourteen or nineteen weeks, provided that the (provisional) assessment is made in accordance with the request or the tax return.

In income tax and corporate income tax, interest calculation always starts six months after the end of the (financial) year. What’s more, no interest will be charged if a provisional assessment is based on a request received before the first day of the fifth month after the end of the tax period or if a tax return has been filed within the regular term. Once again, this is subject to the condition that the provisional assessment is made in accordance with the tax return.

Rate of interest on tax

The rate of interest on tax was initially intended to be in line with the statutory interest rate on non commercial transactions for all types of tax. However, in 2014 the legislator already decided to differentiate between corporate income tax and other taxes, as the estimated budgetary revenue from the scheme was not being achieved. From then on, the statutory interest rate on commercial transactions with a minimum of 8% applied to corporate income tax, while the statutory interest rate on non-commercial transactions with a minimum of 4% was used for other taxes.

A temporarily lower interest rate of only 0.01% applied during the corona crisis from June 2020 through 30 September 2020. In order to be able to respond more flexibly to changing circumstances, a decision was made to determine the rates of interest on tax by order in council as of 1 October 2020. In the period from 1 October 2020 through 31 December 2021, this was 4% for all taxes. As from 1 January 2022, the rates of interest on tax reverted to the original levels and a minimum rate of 8% once again applied to corporate income tax and withholding tax.

Since 1 January 2024, the ECB interest rate on main refinancing operations has been taken as a basis, increased by a surcharge. This surcharge was set at 5.5%, which is also the minimum rate for corporate income tax, withholding tax, minimum tax and a number of other taxes. For other levies, a 3% surcharge applies and a minimum rate of 4.5%. On the basis of this calculation, the high interest rate will reach 10% in 2024 and 9% in 2025, while the regular interest rate will be 7.5% (2024) and 6.5% (2025).

Court of North Netherlands judgment

On 7 November 2024, however, the Court of North Netherlands ruled that the distinction made (once again) since 1 January 2022 violates the principle of proportionality. In contrast to Acts of Parliament, subordinate legislation - including orders in council - may be tested against general principles of law. To do so, the Court applied an assessment framework developed by the Supreme Court, stating first and foremost that the judiciary should be cautious in assessing the interests weighed up by the legislature when introducing the regulation. However, the consequences of a regulation that are disadvantageous to taxpayers should not be disproportionate to the goal it is intended to serve. The question to be asked by the Court was whether the legislature could reasonably have arrived at the regulation in question.

Violation of the principle of proportionality

In the case under consideration, the Court answered that question in the negative. The arguments to justify alignment with the statutory interest rate on commercial transactions, with a minimum of 8%, for corporate income tax were considered weak. Moreover, the position that corporate income tax payable is comparable to a trade receivable was dismissed. The Court further argued that comparison with the default interest scheme in the General Administrative Law Act (Algemene wet bestuursrecht) is also flawed and that the purpose of the distinction in interest rates remains unclear. The adverse consequences of the higher interest rate for corporate income taxpayers, on the other hand, are evident. The Court therefore concluded that the principle of proportionality had been violated and ruled that the high interest rate specified in Article 1(b) of the Interest on Tax Decree (Besluit belasting- en invorderingsrente) (text 2022) is nonbinding. The parties agreed that the interest on tax should be calculated at a rate of 4% and the Court reduced the interest charged accordingly.

Collective complaints procedure

This Court ruling produced a host of notices of objection filed against the high rate of interest on tax. On 14 February 2025, the State Secretary for Finance therefore decided to initiate the collective complaints procedure. The Supreme Court will be requested to rule whether the high interest rate effectively violates higher legislation, such as the right to the peaceful enjoyment of property (Art. 1 FP ECHR), the prohibition of discrimination (Art. 14 ECHR), the general principles of law or principles of proper administration (the principles of proportionality, equality, and due care, and the duty to give reasons).

Meanwhile, a leapfrogging appeal to the Supreme Court was lodged against this decision of the Court of North Netherlands. Some other cases will likely be taken all the way to the highest Court of the Netherlands too. In the collective complaints procedure, all other notices of objection will be deferred. After the Supreme Court has ruled, the Tax Administration will issue a collective decision on the objections. This decision is not open to appeal, but the Tax Inspector will reduce the charged interest on tax within six months of the collective decision if the Supreme Court rules in favour of taxpayers.

Scope

It is striking that the collective complaints designation not only relates to the high interest rate applicable in the period from 1 January 2022 through 31 December 2023, which the Court has declared non-binding (8%). The collective complaints designation also covers objections against the new method of calculating the high interest rate that applies from 2024, as well as against the interest rate (4%) that applied in the period from 1 October 2020 through 31 December 2021. In summary, the designation applies to the high rate of interest on corporate income tax and withholding tax assessments (since 1 October 2020), the solidarity contribution (year 2022), the minimum tax (since 1 January 2024) and the profit share (since 1 January 2025). However, objections against the rate of interest on tax charged on other levies are not part of the collective complaints procedure. The Tax Inspector will rule on these objections individually, and appeal against these decisions can be lodged with the Tax Court.

Lodging objection is still necessary

Despite the collective complaints designation, it is still necessary to lodge an objection against the charged rate of interest on tax. Only objections submitted in due time will be included in the collective objection. Objections not submitted in due time will be declared inadmissible. Insofar as interest on tax has been charged on provisional corporate income tax assessments, a request for review will also have to be submitted first. Then, objection must be lodged against rejection of a request.

Sources:

• Rechtbank Noord-Nederland 7 November 2024, 23/5244, ECLI:NL:RBNNE:2024:1422
• Aanwijzing massaal bezwaar (Collective objection designation) (Staatscourant 2025, 5793)