The high tax rates of six percent per year are unconstitutional in view of the ongoing low interest rate phase since 2014. This applies to interest on back tax payments and tax refunds, announced the Federal Constitutional Court in Karlsruhe. It ordered a retrospective correction, which, however, only affects all tax assessments that are not yet final for interest periods starting in 2019. The legislature has until July 31, 2022 for the new regulation (Ref .: 1 BvR 2237/14 et al).
There is interest in income, corporation, wealth, sales and trade tax. They become due if a back tax payment or refund is delayed by more than 15 months. In the first case the tax authorities benefit, in the second the taxpayers. The level has remained unchanged at six percent for decades. In the historic low interest rate phase after the outbreak of the financial crisis in 2008, this resulted in a much-criticized imbalance: Because interest rates are supposed to compensate for potential profits that cannot be achieved at this level on the capital market at the moment.
Since the Karlsruhe decision also includes reimbursements, not all taxpayers will probably benefit. Anyone who had to pay back should get part of the interest back. But those who have received too much taxes back from the tax office may have to repay some of the interest.
For the period from 2014 to 2018, the judges of the First Senate left the disputed provision in force. Here the legislature is not obliged to retrospectively create a constitutional regulation. In the years up to 2013, general interest rates had already plummeted. At that time, however, the fixed interest rate was “still in the right proportion,” it said. Since 2014 at the latest, however, it has been “evidently unrealistic”.
The Federal Fiscal Court also questioned the constitutionality of the high interest rates in 2018. Because of these decisions and the unclear legal situation, the tax offices have only set the interest rates provisionally since May 2019. This means that the notices can now be changed retrospectively. In addition, the authorities had temporarily waived the collection of interest in certain cases.
In Karlsruhe, two companies had sued that, after a tax audit, were to pay six-figure interest. Because the period between 2010 and 2014 was involved, only one of these constitutional complaints was partially successful.