THE BOTTOM LINE
- Responsibility lies with you: Your company is responsible for ensuring tax payments are received on time, not just for initiating the transfer before the deadline.
- Bank errors are not a get-out-of-jail-free card: Blaming your bank for a processing delay will not excuse a late payment, especially if you give the instruction close to the payment deadline.
- Factor in buffer time: This landmark ruling highlights the need for robust internal financial controls that build in a buffer for potential third-party delays in critical payments.
THE DETAILS
The case revolved around a simple but common business scenario. A transport company instructed its bank via telex to pay its quarterly payroll taxes. The instruction was sent on the final day of the unofficial grace period allowed by the tax authorities. However, due to what was described as an “omission” by the bank, the funds were not credited to the tax authority’s account until two days later, making the payment officially late. The tax inspector promptly issued a penalty. The company appealed, arguing that it had done its part and the bank was solely to blame. The dispute centered on a critical question for every business: who bears the risk of a bank’s delay?
The Dutch Supreme Court sided firmly with the tax authorities, creating a lasting precedent. The Court affirmed the lower court’s reasoning that by waiting until the last possible moment to give the payment order, the company had “knowingly taken the risk” of a delay. It was considered common business knowledge that payment processing is not always instantaneous and that delays of one or two days can occur for various reasons. Therefore, the company could not claim a complete “absence of guilt,” as its own timing was a direct contributing factor to the risk that ultimately materialized.
While this judgment dates back to 1988, its principle remains a cornerstone of tax compliance in the Netherlands. It establishes that the ultimate responsibility for timely payment rests squarely with the taxpayer. For CEOs, CFOs, and legal counsel, the takeaway is unambiguous: the definition of “on time” is when the money is in the recipient’s account, not when it leaves yours. Your internal payment procedures and treasury management must account for this reality, building in a sufficient buffer to mitigate the risk of delays caused by banks or other payment intermediaries. Relying on last-minute transfers for critical obligations like taxes is a gamble where the house—in this case, the tax authority—almost always wins.
SOURCE
Hoge Raad der Nederlanden
