Dutch Supreme Court aligns CIT interest with statutory non‑commercial interest rate

Background

The dispute before the Dutch Supreme Court concerned a provisional 2021 CIT assessment and the correlating tax interest charged over the years 2022 and 2023. This provisional CIT assessment included 8% tax interest. The taxpayer considered this percentage to be disproportionately high in relation to the objectives for calculating tax interest. Since 1 October 2020, the percentage of CIT interest has been determined on the basis of the Tax and Collection Interest Decree and varies per period: 
 

Different percentages apply to tax interest for other taxes
 

Supreme Court decision

The Supreme Court has declared the CIT interest rate set from 1 October 2020 (on the basis of the Tax and Collection Interest Decree) to be non-binding. In doing so, the Supreme Court assessed this decision against legal principles, such as the principle of proportionality. In addition, the Supreme Court indicated that the percentage of CIT interest, from 1 October 2020, should be aligned with the statutory interest rate for non-commercial transactions (pursuant to Section 6:119 of the Civil Code). This means that the CIT interest rate from 2020 onwards will be as follows:
 

 
Consequences

In practice, objections have been filed against CIT interest charged from 1 October 2020 onwards. These objections have been selected as so-called 'mass objections'. This means that within six weeks of the Supreme Court's decision, the Dutch tax authorities should decide collectively on all objections where the same legal question has been brought forward. The mass objection procedure will then take place for these objections and the CIT interest will be reduced in accordance with the Supreme Court decision. For CIT assessments where tax interest has been calculated from 1 January 2022 onwards, a positive ruling on the objection is expected, resulting in a reduction in CIT interest. The Dutch tax authorities will have six months (after publication of the collective decision) to issue the reduced assessments.

It remains important to continue to object to the amount of interest charged on CIT assessments, as long as the Dutch tax authorities continue to apply the old rates that have been declared too high by the Dutch Supreme Court. If tax interest has been charged on a final CIT assessment, it is important to file an objection within six weeks of the date of the final CIT assessment. If tax interest has been charged on a provisional CIT assessment, it is important to submit a request for reconsideration of the provisional assessment within six weeks of the date of the final assessment.