3 Reasons why you receive a fine from the Tax Authorities

You usually receive a fine from the Tax and Customs Administration for three reasons: you file your return (for example, the VAT return) late or not at all, you pay late or too little, or you knowingly file an incorrect return. The first two are default fines with a fixed, relatively limited amount. The third – an intentionally or grossly negligently incorrect return – can lead to a much heavier penalty. In this article, we explain how it works for each situation, how to avoid a fine, and what you can do if you have received one anyway.

Reason 1: You file late or not at all (failure to file)

As soon as you have received a VAT number from the Tax and Customs Administration, you are required to file a VAT return. This can be done monthly, quarterly, or annually, but for most entrepreneurs, the quarterly return applies. Important to know: you must also file a return if you have no VAT at all over a period – a so-called nil return.

If you file your return late or not at all, the Tax and Customs Administration refers to this as a failure to file. A fixed penalty applies to this. This penalty has been deliberately kept low compared to the payment penalty, but the amount can increase in the event of repeated late filing or failure to file. The exact penalty amounts are updated annually; always consult the Tax and Customs Administration for the current amount.

Good news: the Tax and Customs Administration generally applies a grace period. If you still file your return within 7 calendar days after the deadline has passed, a penalty for failure to file will be waived in most cases.

Request an extension on time

Do you already know in advance that you won't be able to meet your tax return deadline? Then request an extension in time. For the annual income tax return, you can arrange an extension through the Tax and Customs Administration or through your advisor. Keep in mind that an extension for filing a return does not automatically mean you are allowed to pay later – tax interest may be charged on tax paid late.

Set a reminder

Are you someone who manages to get it done on time, but simply forgets the deadline? Then the solution is simple: put the filing dates in your calendar and schedule a reminder a week in advance. The VAT return for a quarter must generally be submitted and paid within a month of the end of that quarter. With a fixed routine, you can easily avoid most late filing penalties.

Reason 2: You pay late or too little (payment default)

Filing a return and paying are two separate obligations. If you have filed a return correctly but pay the VAT due late or incompletely, you will face a late payment penalty. This penalty is a percentage of the amount paid late, with a statutory minimum and a maximum per instance. The percentages and thresholds are adjusted periodically, so check the current rate with the Tax and Customs Administration.

Because the payment penalty is linked to the outstanding amount, it can be significantly higher than a penalty for failure to file. Therefore, pay the tax due on time – even if the return has already been submitted. Are you temporarily unable to pay? Then apply for a payment arrangement or special deferral of payment as soon as possible instead of letting the deadline expire.

Reason 3: You file an incorrect tax return (penalty)

The most serious category arises from an incorrect or incomplete declaration. Here, the distinction between an error and intent is crucial.

• An innocent error – for example, a typo or an incorrectly estimated rate – is annoying, but in principle rectifiable. You correct this yourself (see below).
• Deliberately declaring too little, or acting so negligently that it constitutes gross negligence or intent, can be punished by the Tax and Customs Administration with an offense penalty. This can amount to a substantial percentage of the amount you have underpaid or overclaimed.

Precisely because the difference between 'a minor mistake' and 'gross negligence' determines whether you receive a light or heavy fine, it is important to keep your records in order and to seek advice if in doubt. If you disagree with an imposed penalty, a legal expert can assess whether the Tax and Customs Administration has sufficiently substantiated intent or gross negligence.

Correcting errors with a supplement

Did you discover yourself that your VAT return is incorrect? Then you can correct this with a supplementary VAT return. In fact, correction is mandatory in many cases. If you discover an error that resulted in you declaring too little or too much VAT, you must report this as soon as you can reasonably do so. For larger corrections, you should not wait unnecessarily; the Tax and Customs Administration generally assumes a report will be submitted within a few weeks of discovery. In principle, corrections can be made going back several years.

Please note: making voluntary and timely corrections works to your advantage. If you wait until the Tax Authorities discover the error themselves, you lose that advantage and a fine may still follow. Correcting promptly and of your own accord is therefore almost always wiser than waiting.

Received a fine? Here is how to object

If you disagree with a fine or tax assessment, you can lodge an objection. This is subject to a strict time limit: as a rule, you must submit your notice of objection within 6 weeks of the date of the assessment or fine decision. If you miss this deadline, the Tax and Customs Administration will quickly declare your objection inadmissible – regardless of whether you were correct on the merits.

Filing an objection only pays off on the right grounds. A well-substantiated notice of objection explains factually and legally why the fine or assessment is incorrect – for example, because there was no intent, because the amount is incorrect, or because there is a defensible position. Do you doubt your chances or the substantiation? Have a lawyer review your objection and appeal before the deadline expires.

Avoiding fines from the Tax Authorities: practical checklist

• Put all filing and payment deadlines in your calendar, with a reminder a week in advance.
• File a return even if you owe nothing (nil return).
• Calculate in advance how much you need to pay and ensure the amount is set aside.
• Request a deferral or payment arrangement before the deadline expires, not afterwards.
• Correct errors immediately with a supplementary return, before the Tax Authorities discover them.
• Keep your records carefully so that you can substantiate every entry.

Frequently asked questions about fines from the Tax and Customs Administration

How much is the fine for a late VAT return?

For a late or missing VAT return, a fixed penalty applies, with a statutory maximum that may be higher in the event of repetition. The exact amounts are updated annually; check the current amount with the Tax and Customs Administration or ask your advisor.

Will I get a fine immediately if I am one day late?

Not always. The Tax and Customs Administration generally applies a grace period of 7 calendar days for filing VAT returns. If you submit your return within that period, a penalty for failure to file is usually waived. A separate arrangement applies to payment.

What is the difference between a default penalty and an offense penalty?

You receive a default penalty for an omission where intent does not need to be established, such as filing a tax return late or paying late; the amount is relatively limited. A criminal offense penalty is much heavier and is imposed in cases of intent or gross negligence, for example, deliberately declaring too little tax.

Can I correct an error in my tax return myself?

Yes. For VAT, you do this with a supplementary VAT return. Correction is often mandatory, and it is wise to do so as soon as you discover the error – so before the Tax Authorities find it themselves.

Within what timeframe must I object to a fine?

As a rule, within 6 weeks of the date of the penalty notice or assessment. Be on time: filing an objection is much more difficult after the deadline has passed.

Need help with a fine or dispute with the Tax and Customs Administration?

Have you received a fine or additional tax assessment and are you unsure whether it is justified? Or would you like to have a notice of objection drafted or reviewed? The tax law at MKB Juristen provide entrepreneurs with practical and careful assistance – from a brief assessment of your legal position to conducting the entire objection or appeal procedure. Schedule an intake and present your situation without obligation.