Your income tax return has been submitted and three months later you will receive a tax assessment. The amounts to be paid on that assessment all correspond to what was stated in the tax return, except that there may be an extra amount, which you cannot place directly: tax interest…
What is tax interest?
Tax interest is a fee that you pay to the tax authorities over your debt (the tax owed). You have to pay this when the tax authorities impose an assessment with an amount to be paid. For sole proprietorship the tax rate for all taxes is currently 4%.
Why does tax interest exist?
The tax you have to pay can be seen as a debt. This is the case because you have access to an amount of money, while it’s not in the possession of the tax authorities yet. By charging tax interest, the tax authorities receive compensation for this.
When do you pay tax interest?
When the Tax and Customs Administration charges you tax interest depends on the type of tax. As said, you owe your tax from the moment the tax year or period is finished. When exactly the interest meter starts running can vary.
- For income tax, ZVW (health insurance act) and corporate tax, tax interest is charged from July 1st after the year concerning your declaration. When you file your declaration before May 1st (June 1st for the VPB, no tax interest is charged.
- For VAT and pay roll tax, tax interest is charged immediately from January 1st of the year following the concerning tax year. If you correct before April 1st you prevent being charged tax interest.
Tax interest will also be charged if you filed your declaration but didn’t pay.
How to prevent being charged tax interest?
So you won’t be charged tax interest if you file your declaration before a certain date. Unfortunately that’s not always possible. A provisional assessment is another way to prevent being charged tax interest. This means you pay your taxes during the year itself, based on an estimate of your profit (or other income). You can either choose to pay this amount at once at the start of the year (which will get you a discount) or in monthly instalments. The amount you’ve paid using your provisional assessment will eventually be settled with the amount you’ll really owe in income tax. Depending how accurate your estimate was, there will be probably be a small amount left to pay and the tax interest for that amount will be negligible.