Differentiated Interest Regulation in Tax Law
German tax law stipulates various interest rates that are applied in the context of tax assessments and disputes. Key provisions for this are found in § 233a AO (Tax Code) for additional and refund interest, and § 237 AO for suspension interest. Additional interest typically accrues when a tax claim is paid at a later date, while suspension interest applies in the case of a requested suspension of enforcement, such as when a tax assessment is contested.
Legal Reform from 2022
Following a ruling by the Federal Constitutional Court (BVerfG), the interest rate for additional and refund interest pursuant to § 233a AO was retroactively reduced from 2019 from the previous 0.5 % per month (6 % annually) to the current 0.15 % per month (1.8 % annually). The reason was the finding that the originally high interest rate was no longer realistic and led to unconstitutional excessive taxation. In contrast, the interest rate for suspension interest under § 237 AO initially remained at 0.5 % per month. This disparity was introduced with the Act to Amend the Fiscal Code and the Introductory Act to the Fiscal Code (Interest Adjustment Act).
Constitutional Review Standard
Principle of Equal Treatment (Art. 3 Para. 1 GG)
The principle of equal treatment requires that taxpayers be treated essentially equally and that there must be a factual justification for differentiating regulations. In the context of tax interest, it is therefore necessary to examine whether the differentiated treatment of the case groups (additional interest vs. suspension interest) is based on a sustainable distinction.
Rulings of the BVerfG
The Federal Constitutional Court had already found in its judgment of July 8, 2021 (1 BvR 2237/14) that the previous interest rate for additional and refund interest violated the Basic Law in light of the ongoing low-interest phase. There is currently no high court clarification for the differential treatment of interest.
Current Developments at the Finance Court Cologne
Preliminary Assessment of Constitutionality
In its decision of April 4, 2025 (4 V 444/25), the Cologne Finance Court expressed doubts about the constitutionality of the continued different interest rates for suspension interest under § 237 AO and additional interest under § 233a AO. This was accompanied by the observation that the interest rate applicable to suspension interest of 0.5 % per month, in comparison to the reduced rate for additional interest, could lead to a significant and systematically unjustifiable excess burden. The court bases its doubts on the lack of a factual justification for the unequal treatment after January 1, 2023.
Procedure and Preliminary Decision
The procedure is not yet legally finalized. The FG Cologne expressed its doubts within the framework of a suspension procedure (§ 69 Paras. 3 and 6 FGO) and suspended the enforcement of the interest assessment. Affected interest notices are only executed provisionally in this respect. Whether the Federal Constitutional Court will re-examine the question of the lawful differentiation of interest rates remains to be seen.
Implications for Companies and Asset Holders
Financial Burdens Due to Different Interest Rates
For companies, investors, and wealthy private individuals who request a suspension of enforcement and must pay suspension interest, the continuation of the higher interest rate can lead to significant additional burdens. Compared to additional payments, considerable interest differences can arise over time. This particularly affects large tax and economic disputes, where large tax amounts are contested and long proceedings lead to above-average interest burdens.
Legal Uncertainty
In light of the ongoing discussion about the constitutionality of the different interest regulations, there is a significant legal uncertainty for taxpayers. The risk of a later adjustment of the interest rates or revocation of already legally binding interest determinations cannot be ruled out as long as no final court clarification has been made.
Outlook and Advisory Need
The constitutionally expressed doubts about the ongoing differentiation of tax interest rates raise significant questions that can have detrimental consequences for numerous taxpayers. Whether and to what extent adjustments by the legislators or high court decisions are to be expected cannot be conclusively predicted at the time of reporting (cf. FG Cologne, decision of 04.04.2025, 4 V 444/25; status: 23.07.2025; ongoing procedure).
In view of the dynamics of this subject area – especially in the case of substantial tax back payments or pending finance court proceedings – companies and asset managing persons are advised to conduct a thorough analysis of the individual tax interest situation. MTR Legal Attorneys have extensive experience in the legal assessment and support of complex tax issues. For more information, visit: https://www.mtrlegal.com/en/legal-advice/tax-law/.
