Avoid tax interest, adjust preliminary corporate tax assessment on time
The current changes to corporate tax interest rates have kept quite a stir. What will it be 8% or 10.5%? Bottom line: make sure you assess your preliminary corporate tax assessment realistically. And it's not set in stone. Our tax consultant Jos Reulings explains how you can be flexible with the provisional assessment.
Tax interest changes
The rate of tax interest on late payment of corporate taxes has gone through quite a few changes in recent years. From 3% in 2014, it rose to 8% in 2022 with some interim fluctuations. The rationale behind it was to keep the interest rate in line with the statutory interest rate for commercial transactions. The main purpose of the levy was to encourage timely filing. During corona, the rate was lowered to 4% to accommodate business owners. The latest plan was an increase to 10.4% by March 1, 2023. There has been a lot of unrest among business owners about that, so the cabinet decided to revisit the tax rate at the end of spring. That means we are assuming 8% for now.
Fine disproportionately high
Jos: "The difference between the current market interest rate and the tax interest rate is so high that we cannot really see the current tax interest rate as anything other than a penalty for late payment. Conversely, it doesn't help us much either. Because if you have paid too much tax, you will not be compensated as in the days of tax interest. "Saving with the Tax Authorities" is no longer in the cards. Hopefully we won't still go to the 10.5%, with that entrepreneurs would be disproportionately affected which could even be detrimental to business operations."
"Nevertheless, it is wise to pay taxes in time. This will prevent a lot of trouble. If you have the means, you can pay the provisional corporate tax assessment in 1 lump sum. Most entrepreneurs opt for periodic payments. It is difficult to estimate what your profits will do in the coming year. Especially in turbulent times, many entrepreneurs err on the side of caution and assume a low profit so that the provisional assessment does not weigh too heavily on liquid assets. Understandable, but if the business then performs better than expected, tax interest can cause unpleasant surprises the following year."
"The trick is to keep the periodic payments of the preliminary assessment as realistic as possible. What many do not know is that you are not stuck with the amount of the monthly payments. You can also adjust them in the interim. For example, if you unexpectedly make a hefty profit, you can ask your tax advisor to increase the provisional tax assessment. Or if you face an unexpected loss, you can adjust the assessment downward. You will then stay close to the final tax assessment which can save you a lot of money. So the 'provisional' tax assessment is more flexible than many people think."
How does it work?
If you think your final corporate tax assessment will be significantly higher or lower, you can adjust it. Our tax advisor will then make a recommendation on the new amount of the payments based on your preliminary annual figures. Upon approval, we will contact the Tax Office and apply for the intended adjustment.
Make an appointment
Want to avoid tax interest with an adjustment on your monthly payment of your preliminary corporate tax assessment? Contact us. During an orientation meeting, you will learn all about our services for your situation.