Facts

In the period from 2 April 2019 to 28 June 2019, the applicant, acting as a direct customs representative, submitted four customs declarations for release for free circulation on behalf of an importer established in the Netherlands. On 15 August 2019, the applicant informed the inspector that it had understated the customs value of the goods in these customs declarations, resulting in an underpayment of import duties and import VAT.

On the basis of the information provided to the inspector by the applicant, the inspector imposed an additional assessment consisting of import duties and import VAT. The inspector also charged interest on arrears on the amount of import duties and import VAT due from the date on which the customs declarations were accepted until the date on which the additional assessment was issued to the applicant. At issue is whether interest on arrears was rightly charged on the import VAT in the additional assessment. In its interlocutory judgment, the customs chamber of the District Court of North Holland referred the following questions to the Supreme Court for a preliminary ruling.

  1. Does Article 22(1) of the Dutch Turnover Tax Act 1968 ('Turnover Tax Act') provide a legal basis for charging interest on arrears within the meaning of Article 114(2) of the Union Customs Code ('UCC') on import VAT due on importation, as stipulated under Article 18 of the Turnover Tax Act and levied by way of an additional assessment?
  2. In answering the first question, is it relevant whether the taxpayer or the (other) taxable person to whom the goods are intended is entitled to deduct this import VAT pursuant to Article 15(1)(c) of the Turnover Tax Act?

Assessment

First, the Dutch Supreme Court considers that the link between Article 22(1) of the Turnover Tax Act and the customs legislation is only exempted in specific cases and that in such cases a special provision is made – which is not the case for the calculation of interest on arrears. In addition, the Dutch Supreme Court considers that Article 22(1) of the Turnover Tax Act satisfies the requirement of legal certainty, which, in the opinion of the Dutch Supreme Court, provides a sufficiently precise, clear and foreseeable legal basis for charging interest on arrears on the import VAT that has become due upon import.

Second, the Supreme Court considers that Article 114(2) of the UCC contributes to the timely collection of taxes due, so that debtors are incentivized to ensure timely and proper collection of import duties and import VAT. The fact that tax authorities do not suffer any interest loss as a result of late payment, because the import VAT due can be deducted in the VAT return, is irrelevant in this respect. In addition, the Dutch Supreme Court is of the view that the provisions in question do not differentiate between taxable persons who can (fully) deduct import VAT and those who cannot, when determining the interest on arrears.

Practical relevance

This preliminary ruling by the Dutch Supreme Court clarifies the legal basis for the calculation of interest on arrears and the requirement of legal certainty in the context of the confluence of import VAT and import duties. The full judgment can be found here. If you have any questions, please do not hesitate to reach out to any of the contacts below.