On 14 May 2018, the Federal Finance Court (BFH) issued a decision suspending the additional default interest of 0.5% per month for unpaid taxes. The additional interest is considered unconstitutional. The simple penalty of 0.5% applies to every full month starting 15 months after the end of the calendar year for which the tax is assessed. The interest is in addition to other penalties for late tax payments and also applies to tax refunds. The rate of 0.5% has not changed since 1961.
In the event of a dispute, the tax office (Finanzamt – FA) initially set the income tax to be paid by the applicants for 2009 at € 159,139. Following an external audit, the FA changed the income tax assessment to € 2,143,939 on 13 November 2017. A tax of € 1,984,800 had to be paid in arrears. The tax office also demanded additional interest of € 240,831 for the period from April 1, 2015 to November 16, 2017 in the interest statement associated with the tax assessment. The applicants request the suspension of execution of the interest notification, since the interest rate of 1.5% for each month is unconstitutional. The FA and the tax court rejected this.
Accordingly, the Court ordered the collection of monthly interest from 2015 onwards. However, the decision is not final, as the Federal Constitutional Court is still negotiating the case and similar cases. In the meantime, taxpayers can cite the decision of the Bundesfinanzhof against an assessment of interest.
