Court rules: tax interest too high

Court ruling

On 7 November 2024, the District Court of Northern Netherlands ruled that the 8% interest rate applied to corporate income tax assessments is unjustifiably higher than the 4% rate used for other types of taxes. This discrepancy has been deemed disproportionate and therefore unlawful. The court determined that the tax authorities’ decision, to align the interest rate on CIT with the statutory interest for commercial transactions, was insufficiently justified. The difference in interest rates between CIT and other taxes thus violated the principle of proportionality. As a result, the court ruled that the interest rate on CIT should be calculated at the same rate used for other types of taxes, effectively lowering the interest tax burden for affected taxpayers.

As this judgment was issued by the court, we expect that the case may proceed to the Court of Appeal or go directly to the Supreme Court. Therefore, the exact implications and timing of this judgment are still unclear.

Recommended action

This ruling is relevant for interest payments calculated from 1 January 2022 onwards. We advise filing an objection to the CIT assessment to preserve the right to request a reduction of interest on tax if the outcome of this procedure remains favorable. For provisional assessments, a request for a revision of these assessments should be submitted. For final assessments, an objection must be filed within six weeks from the date of the assessment.

Questions?

If you have questions about this ruling, please contact your corporate tax reporting specialist or your tax advisor. We are happy to assist.

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