Netherlands Notary Office Faces Lower VAT Deduction Due to Interest on Third-Party Account

Notariskantoor BV X had a third-party account with large amounts due to its commercial real estate practice
The company received interest payments on the account in 2011, 2012, and 2013
BV X deducted all input tax on general expenses, but the inspector imposed penalties for incorrect deductions
BV X appealed, arguing that interest amounts should not be considered in calculating deductible input tax
The Court of North Holland rejected the appeal and maintained the penalties, but reduced them by 20% due to undue delay
The Amsterdam Court agreed with the lower court and rejected BV X’s argument that the interest was outside the scope of VAT
The Court ruled that holding funds at a bank for interest was within the scope of VAT if done by a taxable person acting as such
BV X met this condition as a notary and entrepreneur for VAT purposes
The Court also rejected BV X’s appeal based on Article 174, paragraph 2, part b, of the VAT Directive 2006
The Court ruled that the extension income could never be considered as incidental financial transactions
The EU Court confirmed the extension concept in later cases (NCC and Mercedes Benz Italia)
The Amsterdam Court rejected BV X’s appeal based on the neutrality principle
The Court declared BV X’s appeal partially successful as the inspector dropped the penalty during the hearing.

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.