I see an amount of interest on the tax assessment I have received. Can you explain this?
Interest on tax assessments
If the final income tax assessment shows that you will receive a refund or will have to pay an additional amount the tax authorities will also calculate interest.
Did you submit a tax declaration before 1 May?
Do you file an income tax return? In that case, you do not pay tax interest if you file a tax return before 1 May following the year for which you are filing a tax return. Only if the tax authorities deviate from your tax return you may still have to pay tax interest.
You can file a tax return from 1 March of the following year.
Do you report later or do the tax authorities have to deviate from the declaration?
You pay interest if the tax authorities impose the assessment after 1 July following the tax year. You pay interest on the amount that you have to pay in tax.
The interest is calculated over a period from 1 July to 6 weeks after the date on the assessment.
Will it take longer than 3 months to impose an assessment? And do the tax authorities not deviate from your declaration? Then the period over which interest is charged is limited to 19 weeks: 3 months to impose an assessment, and 6 weeks before the payment period for that assessment.
Have you already received a final assessment? And do the tax authorities see new facts that require them to change the assessment? You will then receive an additional assessment. For such an assessment, the calculation period runs from 1 July after the tax year to 1 month after the date on the assessment.
Since April 1, 2014 the interest rate for income tax is 4%. For corporate tax the interest rate is 8%.
Minimize the interest
If you want to minimize the amount of interest you can request the tax authorities to issue a provisional tax assessment, which can already be done during the year.
Expatax can file this request for you. The procedure is the same as the procedure to request a provisional refund.