On 21 July 2022, The Ministry of Finance published the bill providing for a reduced rate for late interest payments on excess payments and refunds of tax in the Official Gazette. The bill had been previously approved by the lower house of the parliament (Bundestag) on 23 June 2022 and by the Federal Council on 8 July 2022. The bill entered into force on 22 July 2022.
The bill is a response to the decision (1 BvR 2237/14, 1 BvR 2422/17) of the Federal Constitutional Court of 8 July 2021. In that decision, the Federal Constitutional Court found that late payment interest levied at a rate of 0.5% per month (6% per year) on excess payments and refunds of tax relating to interest periods from 1 January 2014 is unconstitutional. The Court obliged the legislature to amend the rules on late payment interest with retroactive effect from 1 January 2019 in order to comply with the Constitution by 31 July 2022.
The bill also provides for a reduced late payment interest levied at a rate of 0.15% per month (1.8% per year) on excess payments and refunds of tax with retroactive effect from 1 January 2019. The bill further provides that the late payment interest rate shall be evaluated and eventually amended for the future every 3 years (for the first time in 2026).
