Why the interest rate judgment also brings you disadvantages

The interest rates are in the basement everywhere, only the tax office has previously demanded six percent for back payments. After a ruling by the Constitutional Court, this is now over. But this also brings taxpayers a disadvantage.

Six percent interest – most savers can only dream of that at the moment. Those who do not invest their money in the stock market only know such high returns from the past. Or from his tax assessment.

Because despite the historically low interest rate phase, the state has so far been able to do a lot when you have to pay taxes. But this is now considered unconstitutional. We explain what the verdict means for you – and what downside it has.

What did the constitutional court decide?

Because the phase of low interest rates has persisted for years, the Federal Constitutional Court has declared the high tax office rates unconstitutional since 2014. They are “evidently unrealistic”.

Tax notices that are not yet final and affect interest periods from 2019 must now be corrected. The state has until July 31, 2022.

There is interest in income, corporation, wealth, sales and trade tax. The ruling concerns both interest on back tax payments and on refunds.

What does the judgment mean for taxpayers?

That depends on whether you had to pay back taxes or have had them reimbursed – and whether your final tax assessment was available at least 15 months after the respective tax year. Tax interest is usually only due when this delay occurs.

If you had to pay more, the verdict is good news for you. Because you should now get part of the interest back. The reverse also applies: If you were happy about a refund, you may have to pay something back.

Because the Federal Fiscal Court came to the conclusion in 2018 that the high interest rate violates the constitution, the tax offices have started to issue new notices only provisionally since May 2019. Many offices also temporarily waived to collect the controversial interest.

Is a retroactive tax return still worthwhile?

Anyone who is not obliged to file a tax return has been able to take years of time and thus possibly collect high reimbursement interest. This tactic no longer works, but it can still be worthwhile to submit the voluntary tax return retrospectively.

This almost always applies if you had income from non-self-employed work in a tax year, for example if you were employed. Your employer has already deducted taxes from your salary or wages month after month and paid it to the tax office without knowing your expenses – and this may reduce your tax burden.

For example, if you had advertising expenses above the lump sum of 1,000 euros, Special editions over 36 euros, Insurance contributions above the lump-sum pension amount or high extraordinary burdens, you should state this in your tax return. Otherwise, donate money to the state.


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