The taxpayer who in his return claims a deduction must substantiate this with documentary evidence. How long should these supporting documents be kept? A judgment of the Supreme Court of the Netherlands has shown that this retention obligation with respect to the deduction of interest on a mortgage actually does not have a time limit.
Based on article 3.123 of the 2001 Income Tax Act (Wet IB 2001) financing costs for improvement or maintenance of the owner-occupied home are only taken into account as a deduction in the tax return if these costs can be substantiated with ‘written documents’. It follows from the history of the law that ‘written documents’ refers in particular to the copy of invoices for renovation costs and the underlying bank statements of payments.
A taxpayer had taken up an additional mortgage in 2007. In 2007 and subsequent years a deduction of the mortgage interest in the income tax return was taken into account. The Taxauthorities accepted the income tax returns filed. In 2013, the Taxauthorities raised questions about the increase in the mortgage. In the meantime, the taxpayer had thrown the underlaying documents away. As a result, the Taxauthorities corrected the income tax return(s).
After a procedure, the Supreme Court decided as follows:
“However, it does not follow from Article 3.123 of the Income Tax Act 2001 that the inspector is obliged to request the written documents referred to in this provision within six years or within the recovery period.
The above is not altered by the fact that the inspector has accepted the returns in other years.“
It is therefore important to keep all documents (invoices, bank statements) in support of the mortgage interest deduction permanently (digitally).