Unlawful VAT deduction? Late payment interest can only be imposed if the taxpayer is in a "payment position," according to the Supreme Court!

Before 2023, the rate of late payment interest was 0.8% per month or 9.6% per year.

As from 2023, this rate has been reformed by automatically linking the rate to the statutory interest rate in tax matters, with an additional 4% (new article 91, §1, paragraph 2 of the Belgian VAT code).

This means that for 2023, the late payment interest rate will be 8% per year.
The authorities are traditionally of the opinion that any unauthorized VAT deduction in a VAT return is the equivalent of not paying VAT within the deadline for submitting that return. The Court of Appeal (Liège) had rejected this argument in a dispute with a taxpayer. However, the authorities did not want to give up and decided to appeal to the Supreme Court. But this appeal was not successful . In a short but clear ruling, the Supreme Court rules that late payment interest can only be imposed when, without the incorrect deduction, there is actually an amount due in VAT.

The periodic VAT return that a taxpayer submits normally shows a payable (box 71) or refundable (box 72) position. In the latter case, the amount can be transferred in his favour. It is then recorded on the credit side of the current account. That amount can later be used for the settlement of VAT debts. In the case that was before the Court of Appeal of Liège, a taxpayer had wrongfully deducted VAT. The authorities subsequently claimed interest, but overlooked that the taxpayer in question still had an amount in his favour on his current account. The Court of Appeal therefore decided that the claim - at least in terms of interest - had to be annulled. If a taxpayer incorrectly deducts VAT in his VAT declaration, only interest is due on this amount to the extent that the taxpayer would have been liable for VAT without this deduction, the Court ruled.

This judgement has now been upheld by the Supreme Court. The appeal of the tax authorities is remarkable. The Court had already decided earlier, albeit in a different context, that there can only be interest due if the Treasury has suffered a financial loss, or as an old saying goes "Old wine in new bottles" (Supreme Court, no. F.13.00031.N of October 31, 2014). The question that lingers, is whether we can extend this interpretation mutatis mutandis to fines? Will undoubtably be continued!

Source: Supreme Court - Judgment of 22 December 2022 - F.21.0179.F