Germany: Guidance regarding interest on tax underpayments and overpayments

With regard to interest until 31 December 2018, the previous interest rate of 6% annually (0.5% per month) continues to apply.

With regard to interest until 31 December 2018, previous interest rate continues to apply

The Ministry of Finance (BMF) issued guidance regarding the determination of interest on back taxes (or tax underpayments) and tax overpayments (or tax refunds)—guidance issued in response to a 2021 decision of the German Federal Constitutional Court.

The BMF guidance is dated 17 September 2021.


In its 2021 decision, the German Federal Constitutional Court held that interest on back taxes and tax refunds at a rate of 6% annually (0.5% per month) was unconstitutional with regard to interest calculation periods starting as from 2014. The court, however, found that the current rules for interest calculations applied for interest calculation periods up through 2018, but not for interest calculation periods as from 2019. The finding of unconstitutionality generally applies both with regard to tax underpayments and tax overpayments for refund.

The German Federal Constitutional Court further stipulated that the German legislature must amend these rules by 31 July 2022.

The case identifying information is: file ref. 1 BvR 2237/14, 1 BvR 2422/17 (8 July 2021)

BMF guidance

The guidance issued by the Ministry of Finance provides that with regard to interest until 31 December 2018, the previous interest rate of 6% annually (0.5% per month) continues to apply. The guidance further provides:

  • Interest that has been provisionally assessed with a view to the court proceedings or has been contested by an appeal must now be finally assessed.
  • If interest on back taxes has not yet been paid (because of a suspension of enforcement), the suspension of enforcement must end, and the interest on back taxes must be paid.
  • The current treatment with regard to interest is inapplicable for interest periods beginning on or after 1 January 2019. Courts and administrative authorities are no longer permitted to apply these rules.
  • The general rules are:
    • With regard to an initial assessment of interest—"new" interest on back taxes and tax refunds may no longer be charged at a rate of 0.5% per month. The interest rate is to be set as soon as the new interest rate rule is in effect (with the retroactive amendment of the law).
    • Unappealable interest assessments—if interest has already been determined prior to the 2021 decision of the Federal Constitutional Court and this interest assessment is uncontestable (because the period for filing an objection has expired), the rules are neither to be revoked nor amended. However, if the interest has not yet been paid, the interest determination may no longer be enforced.

In addition, the BMF guidance includes detailed information about taxpayer objections and various situations when interest that was already assessed prior to the 2021 decision of the Federal Constitutional Court and now is to be amended.

KPMG observation

Tax professionals expect that a draft bill to amend the interest rate rules will not be presented until after the new federal government has been formed (given that coalition negotiations for the new government are still ongoing).

Read an November 2021 report [PDF 355 KB] prepared by the KPMG member firm in Germany

This KPMG report also includes brief discussions of the following topics:

  • Lower Tax Court of Bremen (2 K 187/17 (3)): Referral to the Court of Justice of the European Union regarding surcharges in the event of violation of duties to cooperate
  • Special coronavirus rules for cross-border commuters: Current status of consultation agreements between Germany and neighbouring countries

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