Late payment penalties constitutional
Late payment surcharges
If taxes are not paid by the end of the due date - plus a grace period of three days - a late payment surcharge of one percent of the overdue tax amount rounded down to € 50.00 is due for each month or part thereof (Section 240 (1) of the German Fiscal Code/AO). Calculated over the year, this corresponds to an interest rate of 12%. In addition, the late payment surcharge is incurred irrespective of whether the tax has been correctly assessed.
Interest rate level insignificant
The Federal Fiscal Court (Bundesfinanzhof/BFH) considers the high interest level to be constitutional. The BFH does not consider a comparison with the reduced interest on arrears of 0.15% per month as of January 1, 2019 to be appropriate. Taxpayers liable to pay interest on tax arrears and tax debtors liable to pay a surcharge for late payment cannot be treated in the same way due to the lack of comparable facts (BFH ruling of November 15, 2022, VII R 55/20, published on March 30, 2023).
Late payment surcharge versus interest
Late payment surcharges represent a means of exerting pressure to enforce due tax payments and therefore primarily have a penal function. In contrast, interest on late payments is neither a penalty nor a means of pressure, but rather compensation for a use of capital.
Note
It should be noted that the above-mentioned case concerned late payment surcharges for periods prior to January 1, 2019. On the question of the unconstitutionality of late payment surcharges for periods after 1.1.2019, another case is pending before the BFH (Ref. X R 30/21). It remains to be seen whether the BFH will decide in the same way or in a differentiated manner. A referral to the Federal Constitutional Court would also be possible.
Status: April 26, 2023
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