NAs savers know from the painful experience, interest rates worth mentioning have hardly been anywhere else for a long time. Only the tax authorities insisted on the 6% annual tax rate they set decades ago. The mistake is, as the Federal Constitutional Court of Karlsruhe has now decided. Given that it has been in the low interest rate stage since 2014, high interest rates are unconstitutional. The court stated that this applies to back taxes and interest on tax refunds. Refunds are only available until 2019-starting this year, the Constitutional Court has ordered retrospective corrections (document number 1 BvR 2237/14, etc.). This decision may have an impact in many ways: we answer the most important questions.
What is tax interest?
Generally, if the assessment is delayed for more than 15 months, the tax bureau may accrue interest due to the back payment of taxes and refunds. Unlike the late payment surcharge for late tax returns, interest is not intended as a penalty. The background for this is that all taxpayers should bear the same burden. If part of the tax is only paid back, or the over-paid tax remains in the tax authority for a long time, this principle will be undermined.This Interest expense It is designed to offset the profits that could have been made in time with the money. They are specified in the tax assessment. Taxpayers benefit from reimbursement, and tax authorities benefit from additional payments.
Why is interest rate a problem?
Long ago, in 1961, the flat interest rate was set at 0.5% per month, which is equivalent to 6% per year. Since then, the legislature has not changed anything about this-even in the long historical period of historically low interest rates. Therefore, interest rates have nothing to do with the reality of the capital market: critics complain that currently unrealized profits are being written off. For those who earn interest, this is a good thing-but another person will pay for it.
What is the practical significance of this?
Most importantly, companies that pay high taxes have to worry about additional claims. The two companies filed a lawsuit in Karlsruhe, and their trade taxes have been substantially increased after a tax audit. In one case, the interest to be paid increased from 423 Euros to more than 194,000 Euros. The second procedure also involves six-figure amounts. For private taxpayers, the amount is much smaller. But even there, interest rates may be disproportionately high.
What is the significance of Karlsruhe’s decision?
exist Taxpayers Association (BdSt) is expected to have a “huge widespread impact”. Because interest rates also apply to income tax, corporate tax, wealth tax and sales tax. In 2009, Karlsruhe declared that the provisions of the tax law were constitutional. But at the same time, the low interest rate phase lasted so long that the Federal Finance Court (BFH) turned around in 2018 and expressed “serious doubts about the constitutionality” of the interest period beginning in 2015. Finally, the court proceedings are suspended-everyone is waiting for the Constitutional Court. Now it comes from Karlsruhe: The previous regulations will no longer apply from 2019. Germany’s highest judge asked the legislature to formulate new regulations before July 31, 2022.
What does this mean for taxpayers?
Due to the unclear legal situation, the tax authorities have only tentatively set interest rates in all notices since May 2019. After making a decision, you can now retroactively correct your amount. If you pay too much interest, you will get your money back. The reverse may also apply: anyone who is happy about the high interest rate tax refund may have to pay something back.
What are the tax authorities’ fees?
In the past, the country did business at high interest rates. From 2010 to 2018, the arrears of interest income has always been higher than the sum of the interest repayments that must be paid by the federal, state, and local governments. In some years, the difference exceeded 1 billion euros.That Federal Ministry of Finance Inform upon request that, if necessary, “will discuss the consequences of this decision with the highest tax authorities of the federal states and, if necessary, propose new regulations to the legislature.”
