New VAT implementation timeline in the Netherlands.

Netherlands sets clear 8-week deadline for VAT error corrections in new law

Previously, VAT entrepreneurs faced ambiguity around the deadlines for submitting corrections, with terms like "as soon as possible" leading to varying interpretations. In 2023, a court ruling highlighted this issue, where a taxpayer was allowed to delay their correction until after the tax authority discovered the error. This leniency was viewed as undesirable, as it encouraged inaction before the inspector became aware of the mistake. With the new law, this issue is eliminated by establishing an eight-week deadline for submitting corrections after an error is discovered, ensuring more timely submissions.

New deadlines and interest charges explained

The new eight-week deadline aligns with the correction deadlines for other tax obligations like wage tax, creating uniformity across reporting rules. For errors identified before 2025, the correction must be submitted by February 26, 2025. If a correction results in an outstanding VAT payment, interest will apply. For supplementations related to the 2024 tax year, taxpayers can avoid interest charges by filing corrections before April 1, 2025. However, if an error was identified earlier, the new eight-week rule applies, and late submission could result in a penalty for negligence. This change simplifies the correction process but introduces a stricter requirement for timely filing, with no room for delays. Businesses must act now to avoid penalties.

Voluntary disclosure still key to avoiding penalties

Despite the clearer deadline, businesses must still file their correction before the tax authority becomes aware of the error. This can lead to penalties if the inspector discovers the mistake before the eight-week period ends. While the law gives tax authorities some discretion in applying penalties, businesses may still face fines even if they meet the eight-week deadline if the inspector has already found the error.

The voluntary disclosure regime (Article 67n AWR) remains in effect, meaning that businesses may avoid penalties if they voluntarily report the mistake before the tax authority detects it. The official legislative commentary suggests that in exceptional cases, where the voluntary disclosure deadline and the eight-week deadline expire simultaneously, inspectors should consider waiving penalties. However, this is left open to interpretation, as penalties will only be waived if the “facts and circumstances” justify it. The decision to impose a penalty will depend on the specific facts and circumstances of each case. However, this decision remains open to interpretation, leaving room for potential legal challenges by businesses.

Consequences of late VAT corrections in the Netherlands: intent matters

Submitting a VAT correction after the eight-week deadline doesn’t automatically result in a penalty. However, if the tax authority can prove that the taxpayer acted with intent or gross negligence in delaying the correction, penalties may be imposed. If a business can demonstrate that they took reasonable steps to correct the error as soon as possible, it may be difficult for the tax authorities to justify a penalty.