German Fiscal Court Questions Constitutionality of 6% Interest Rate on Tax Deficiencies

Germany's Federal Fiscal Court (Bundesfinanzhof, BFH) has questioned the constitutionality of the current 6% annual interest rate imposed on tax deficiencies and refunds for periods starting from 2015.

The court has suspended the enforcement of an interest rate ruling, deeming it potentially in violation of Germany's Basic Law. The interest rate, established in 1961, is considered by the court to be disproportionately high and disconnected from current economic realities, particularly the sustained low market interest rates.

The case involved a married couple who faced a demand for nearly two million euros in back taxes following a corporate audit. The tax office levied approximately 240,000 euros in interest for the period between April 1, 2015, and November 16, 2017. Despite an appeal being lodged, the interest payment was due.

However, the Federal Fiscal Court granted the couple's request and suspended the enforcement of the interest assessment entirely. The court argued that the statutory interest rate significantly exceeds reasonable economic bounds, especially given the structural and sustained low-interest-rate environment.

Tax advisors are now urging taxpayers to appeal similar interest assessments and request suspension of enforcement. The ruling's implications could also extend to tax refunds, which have historically been subject to the 6% interest rate.