Supreme Court: tax interest of 8% for corporate income tax non-binding

Background
As of January 1, 2022, the tax interest rate for corporate income tax was increased to the statutory commercial interest rate, with a minimum of 8%. For other taxes, the interest rate remained significantly lower (4% at that time). This interest rate increase led to a large number of objections to the tax interest rate. The State Secretary classified these objections as mass objections, so they were dealt with together. The District Court of Northern Netherlands previously declared the regulation to be non-binding, after which the Supreme Court has now ruled.

Supreme Court ruling
The Supreme Court ruled last week that:

• the decision-maker remained within its delegated regulatory authority in setting the tax interest rates;
• the regulation has been sufficiently carefully prepared and justified;
• However, that the increase in tax interest for corporate income tax does not substantively pass the test of the principles of proportionality and equality.

Substantiation
The Supreme Court was unable to find any motive for the interest rate increase other than a budgetary purpose. An increase in burden that is placed exclusively on one group of taxpayers (such as those subject to corporate income tax) without proper justification is disproportionate. Nor has the Supreme Court been able to find any justification for a higher interest rate for Vpb taxpayers compared to taxpayers for other taxes.

Consequently, the Supreme Court ruled that the increase in tax interest for Vpb taxpayers only violates both the principle of proportionality and the principle of equality.

Consequences for corporate income tax

• For the years 2022 and 2023, Vpb tax interest should be calculated at the general rate, which was 4% from January 1, 2022 to June 30, 2023 and 6% from July 1, 2023 to December 31, 2023.
• There is no certainty yet about the consequences for years after 2024. It is possible that even then the structurally lower tax interest rate that applies to other taxes will be adhered to.
• It is still unclear how the Tax Office will deal with corporate tax assessments imposed after the date of the ruling.
• Below we outline the percentages, noting that for 2024 and later years there is still uncertainty:

Period% (general) (Vpb)

From January 1, 2022 through June 30, 2023: 4%8%

From July 1, 2023 to December 31, 2023: 6%8%

About 2024: 7,5%*10%

About 2025: 6,5%*9%

As of 2026: 5%*7,5%

What does this mean if you have filed an objection?

• Objections to the higher Vpb tax interest rate that have been designated as mass objections and fall in the appropriate period should be honored.
• Objectors will receive back the difference between the higher rate charged (e.g., 8%) and the applicable lower general rate (e.g., 4%) retroactively.
• Those who have already filed objections need not do anything; the Tax Office will apply the ruling when handling the objection.
• The Tax Administration aims to issue a single collective ruling on the objections covered by the mass objection procedure by February 26, 2026.
• Subsequently, the inspector must adjust all assessments numerically within six months after the collective ruling is shared. Taxpayers who objected will receive a letter about this.
• It is still unclear whether objections over other periods or other tax resources (such as income tax) will be honored.

What if you have not yet filed an objection?

• Up to six weeks after the date of the (final or post-tax) assessment, an objection can be filed, or a request can be made to review the provisional assessment for the period, depending on which assessment(s) the interest was charged. After this period has expired, it is still possible in certain cases to file a request for an ex officio reduction. However, it is currently uncertain how the Tax Administration will respond to such requests.

Naturally, we can assess with you which possibilities are still open in your specific situation so that we can take targeted action.

Consequences for other taxes
From this judgment for corporate tax, no final judgment can yet be derived on the legality of tax interest for other taxes (including income tax, inheritance and gift tax, payroll tax and sales tax), although it seems likely that these tax rates will remain in place. However, in order to preserve rights, it is still possible to object to these assessments as well.

Financial impact
The budgetary impact on the State is significant. The refund of excess tax interest levied on Vpb was estimated by then State Secretary Tjebbe van Oostenbruggen to be at least €1.3 billion. As a result of the many objections that were later filed, this amount may increase even further.

Conclusion
The Supreme Court draws a clear line: a selective increase of tax interest that is primarily budget motivated is not allowed. For corporate income tax, this means for the contested years a reconciliation with the general tax interest rate. For other periods and taxes, there is no definitive (legal) certainty on this yet. It is possible that the collective ruling on the mass objection, which is expected by February 26, 2026, will provide more clarity.

In the meantime, the Tax Office has issued a collective ruling in the mass objection proceedings, which means that some of the information in this news item is no longer current. For an update, please refer to our recent news release.

Have you received an assessment on which tax interest has been charged? We can of course support you in identifying the possibilities in your specific situation and possibly taking targeted action. Please contact your account manager or call our general number 040 2 504 504.

(See also our earlier news article on the Advocate General's opinion. The Supreme Court ruling is a follow-up to this conclusion: https://www.govers.nl/en/nieuws/belastingrente-van-8-mogelijk-onterecht-ag-adviseert-verlaging/)