Six per cent tax interest is unconstitutional since 2014

The Federal Constitutional Court has ruled that the nationwide regulation for full interest on tax claims, which has been in effect since 2014, at the rate of 6% per year, is unconstitutional due to the low-interest phase. It is already foreseeable that the ruling will have a negative impact on the public budget.

The interest on back taxes and tax refunds is unconstitutional meaning that the interest calculation for interest periods from 2014 onwards is based on an interest rate of 0.5% per month. The Federal Constitutional Court ruled that the typical interest rate of 6% per year has been “evidently unrealistic” since 2014. After the outbreak of the financial crisis in 2008, a structural low interest rate level had developed. According to the BVerfG, the previous law remains applicable for interest periods up to and including 2018. The interest regulation affects income, corporation, property, turnover or trade tax.

By the end of July 2022, the legislature must adopt a new regulation that complies with the constitution.

Author: Veit Kachelmann, Lawyer I Tax Advisor I Specialist Lawyer for Tax Law, Counsel ARNECKE SIBETH DABELSTEIN

Translated with www.DeepL.com/Translator (free version)