Unjustly withheld taxes must be interest-bearing at 6 percent. This was decided by the Cologne Finance Court in its judgment of November 17, 2021 (Ref.: 2 K 1544/20).
If taxpayers fall behind on tax payments, they must pay interest on the overdue taxes. However, tax law also works the other way around, as shown by the judgment of the Cologne Finance Court: According to this, a tax refund claim that has been wrongly denied by citing provisions contrary to EU law must also be interest-bearing, explains the law firm MTR Legal, which focuses on tax law in its consultancy.
The plaintiff before the FG Cologne was a company based in Austria. The company had filed various applications for exemption and refund of German capital gains tax and solidarity surcharge with the Federal Central Tax Office (BZSt). However, the applications were rejected by invoking § 50d para. 3 of the Income Tax Act (EStG). The European Court of Justice had decided that this provision is not compatible with EU law, as it violates the freedom of establishment and the free movement of capital. Therefore, the company is entitled to a refund of the taxes paid unjustly. Now, it also demands interest on the taxes to be refunded.
Since the BZSt rejected the interest payment, the company filed a lawsuit. The lawsuit was successful at the FG Cologne. The court found that the plaintiff is entitled to interest at a rate of 0.5 percent per month or 6 percent per year due to the capital gains tax withheld in violation of EU law. The interest claim regularly begins on the first day of the unjustly paid tax payment, according to the court.
However, the FG Cologne further stated that the BZSt should be granted a reasonable period of four months and ten working days for processing the refund application, provided that the taxpayer has not used the legally provided relief procedure for the capital gains tax.
The decision is not final. The appeal is pending before the Federal Fiscal Court under the file number I R 50/21.
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