Challenging a Determined Tax Decision: Timing Matters
Although the interest rate for tax payments and refunds was reduced to 1.8% following the Federal Constitutional Court's (BVerfG) evaluation of it as excessively high in 2021, the six percent annual rate is still applied for deferrals and suspensions. However, the BVerfG might soon challenge this regulation.
If you've been charged a six percent interest rate by the tax office for a deferral or suspension, it's recommended to contest this charge by lodging an objection against the notice. This is the advice from the Federation of Taxpayers.
In a particular case (Az.: VIII R 9/23), a taxpayer was required to pay over 12,500 euros in interest as part of a suspension process, which corresponds to the six percent annual rate. The tax authority has the right to charge these interest rates if there's a dispute between them and the taxpayer, and the enforcement of the tax notice is suspended until a final court decision. However, the taxpayer contested the interest rate amount.
Submit an objection in relation to the ongoing case
Given that the case is still ongoing at the BVerfG, those affected should take action. It might be beneficial to lodge an objection against non-final notices, referring to the ongoing case, and request for the suspension of the process. This will keep the tax notice active, allowing the tax office to make adjustments after the conclusion of the court procedure.
This decision will impact interest for suspensions and deferrals, as well as late payment interest for overdue taxes and process interest on refund amounts.
Important to note: Interest on late payments cannot be deducted from taxes.
If the BVerfG ever finds issue with the six percent interest rate for deferrals and suspensions, any objections lodged prior to this decision might need to be reconsidered. Legal matters surrounding interest rates and tax payments are complex, and seeking advice from a tax specialist could be beneficial.
