Reversal of loss set-off limits calculation of interest on tax | Deloitte Nederland

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Reversal of loss set-off limits calculation of interest on tax

The Supreme Court has ruled that in situations where a loss set-off is reversed, it is not permitted to charge interest on tax for the period when the Tax Administration had already received the related tax amount payable.

10 januari 2023

Loss set-off and interest on tax

The legislator has stipulated that although no interest on tax is reimbursed in case of a refund resulting from a carry-back of losses, the legislative text states that interest on tax is payable if this refund is reversed at a later stage.

On 18 November 2022 though, the Supreme Court ruled that if a taxpayer has paid an assessment and the Tax Administration already had already received the amount of tax due, charging interest on tax is not permitted. A judgment delivered on 23 December 2022 shows that this is no different in a situation where loss set-off is reversed.

Assessment process

The case dealt with income tax/national insurance contributions due for the 2012 tax year and the related interest on tax charged. The assessment process was as follows:

  • On 4 July 2017, the interested party filed a 2015 income tax/national insurance contribution return to a negative taxable income from work and home (Box 1) of EUR 89,126.
  • On 17 August 2018, the Tax Inspector imposed the final 2015 income tax assessment. In accordance with the filed return, the related loss from work and home (Box 1) was set at EUR 89,126.
  • On 25 August 2018, the Tax Inspector issued a decision to set off the assessed loss against the 2012 income from work and home, thus reducing the 2012 income tax assessment by EUR 43,710. This amount was refunded to the interested party.
  • On 21 August 2018, the interested party filed a new 2015 income tax/national insurance contribution return (which had been revised). This return included an income from work and home of EUR 107,081.
  • In response to this, the Tax Inspector issued a decision granting a reduction and revised the assessed 2015 Box 1 loss to nil.
  • On 2 January 2019, a 2012 additional income tax/national insurance contributions assessment was imposed to an amount payable of EUR 43,170. This included interest on tax of EUR 9,438 for the period of 1 July 2013 to 2 February 2019.

Reasonable application of the law

The dispute regards whether interest on tax was rightly charged to the interested party, following the earlier payment of the 2012 income tax/national insurance contributions assessment. In early 2022, the Den Bosch Court of Appeal ruled that the legislator had failed to anticipate the combined effect of not reimbursing interest on tax on a refund resulting from loss set-off and charging interest on tax on the reversal of that loss set-off. This leads to an unbalanced result. According to reasonable application of the law, the calculation of interest on tax should thus be limited to the period in which the Tax Administration suffered a loss of interest. The Court set the interest on tax due at EUR 809, calculated over the period from 25 August 2018 (the date on which the decision on the loss set-off was taken) to 13 February 2019 (the date when the additional assessment was paid). This represents the period when the taxpayer actually had the disposal of the EUR 43,170 refund. The State Secretary appealed against this judgment to the Supreme Court.

Supreme Court judgment

Following on from the judgment of 18 November 2022, the Supreme Court ruled that it is not possible to charge interest on tax over the period in which the Tax Administration already disposed of the amount of tax due, following a payment made by the taxpayer. This likewise applies to situations in which a loss set-off is reversed.

The Supreme Court further considered that although the law explicitly provides that no interest on tax is paid in case of a refund based on a carry back of losses, this does not mean that the legislator would have accepted interest on tax to be charged over a period when the Tax Administration already had the tax amount at its disposal due to the earlier payment of a provisional or final assessment.


Source: HR 23 December 2022, 22/00700, ECLI:NL:HR:2022:1918

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