When do you need to pay interest on tax?

Exactly when the Dutch Tax and Customs Administration will charge interest on tax depends on the tax method. As mentioned, you owe the tax after the end of the tax year or period. The moment at which the tax meter starts to run can vary.

• In the case of income tax, ZVW (Healthcare Insurance Premium) and corporate tax, you’ll be charged interest on tax from the 1^st of July of the year after the one to which the return relates. If you submit your return before 1 May (or 1 June for VPB / corporate income tax), no tax on interest will be charged.
• In the case of turnover and wage tax, the tax on interest is charged immediately on the 1^st of January following the related financial year. If you make the correct adjustment or correction before 1 April, you avoid the interest on tax.

You’ll also be charged with interest on tax if you’ve filed a tax return but haven’t paid.

How to avoid interest on tax?

As we explained, you don’t pay tax on interest if you submit your return before a certain date. However, this might not always be possible. Another way to avoid paying interest on tax is by requesting a provisional assessment. This means that you pay taxes in advance throughout the year, based on an estimate of your profit (and other forms of income). You can choose to pay the full amount all at once at the beginning of the year (you’ll receive a discount if you do) or monthly. The amount you’ve paid through your provisional assessment will eventually be set off against the actual amount in income tax payable. Depending on how accurate your estimate was, this will leave a small amount to settle and the interest on tax on this amount will therefore be negligible.

Do keep in mind that when you request a provisional assessment, you’ll also receive one in the following year. In general, you will automatically receive a provisional assessment from the Dutch Tax and Customs Administration after working as an entrepreneur for 3 years. For this, your profit is estimated based on an old tax return. It’s always possible to change a provisional assessment if the amount that’s been imposed is either too high or too low.

If you apply for a retroactive provisional assessment at the end of the year, you always need to pay the total amount at once and you won’t be able to pay in instalments.