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Interest of 6% on tax arrears and tax refunds is unconstitutional

Interest becomes due on tax arrears and tax refunds if 15 months after the end of the calendar year in which the tax liability arose the tax has not yet been paid. Currently, the interest rate is 0.5% per month, or 6% per year. The Federal Constitutional Court (Bundesverfassungsgericht, BVerfG) now holds that this rate of interest is unconstitutional given that interest rates have consolidated at a low level; the BVerfG’s ruling will give rise to far-reaching consequences as of the 2019 interest period.


The standardised interest rate of 6% p.a. on tax arrears and tax refunds was determined in 1961 already and has remained unchanged since then. The interest period always begins 15 months after the date on which the tax liability arose. However, the fact that interest rates on the capital markets have been falling for decades has not been taken into account. For some time now, the deposit rate has indeed even been in negative territory - currently it is at minus 0.5%. Interest of 6% per year on tax arrears and tax refunds has thus been divorced from the reality on the capital market for a long time and it was for this reason that the issue of the constitutionality of this rate was referred to the BVerfG for a review.

The decision of the Federal Constitutional Court

The BVerfG, in its decision of  8.7.2021 (case reference: 1 BvR 2237/14, 1 BvR 2422/17) concluded that the standardised annual interest rate of 6% became divorced from reality at the very latest in 2014 and that it now has an excessive effect. In its decision, which was published on 18.8.2021, the BVerfG stated that interest incurred for all interest periods from 2014 onwards was incompatible with the Basic Law. Despite this unconstitutionality, the BVerfG will continue to allow interest of 6% for the 2014 to 2018 interest periods that fall in the years up to and including 2018. However, for interest periods starting 1.1.2019 the respective provisions on interest will no longer be applicable. The legislator is obliged to agree new rules by 31.7.2022.

Please note:  All tax assessment notices that are not yet final and unappealable and with interest periods starting from 2019 will have to be corrected. Those who have paid too much interest will, in this case, benefit from a refund. Then again, tax refunds would potentially have to be partly paid back insofar as they included an interest component. In such cases, the amounts would depend on the interest rate that is set for the period from 1.1.2019

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