Late payment surcharges remain: BFH confirms legal basis!

Late payment surcharges remain: BFH confirms legal basis!

The Federal Finance Court (BFH) recently confirmed the constitutionality of late payment surcharges for late tax payments. This means that the regulations that provide for a surcharge of 1 percent for each month of late payment continue to apply. These surcharges, which effectively amount to 12 percent per year, are intended to serve as a means of pressure for on-time payments and to offset the financial losses to the treasury due to late payments. The confirmation was consolidated by a decision of the BFH of March 21, 2025 (ref. X B 21/25), which also dispelled concerns about the appropriateness of the interest rate during the low interest rate phase.

In the past, BFH senates continued to express doubts about the constitutionality of the amount of late payment surcharges. These were particularly relevant for periods before March 2022 when the market interest rate was still low. After a ruling by the Federal Constitutional Court in 2021, which classified the interest rate of 6 percent annually for back taxes as unconstitutional, the regulations were questioned several times. Nevertheless, the BFH determined that there were no longer any constitutional concerns for periods up to 2017 and from 2019 onwards. In July 2024, the BFH declared that there was no longer any need for clarification regarding late payment surcharges, thus solidifying the legal situation.

Late payment surcharges in detail

The late payment surcharges that are levied in the event of late payment of taxes amount to 1 percent of the overdue tax amount and must be rounded down to the full 50 euros. This is regulated in Section 240 Paragraph 1 AO. The function of these surcharges is threefold: they are intended to skim the interest benefit from taxpayers, serve as an incentive to pay on time and compensate for the additional administrative burden on the tax offices. Although previous financing conditions were constitutionally questioned during the low interest rate phase, the BFH has now determined that the interest rate of 1 percent per month can no longer be viewed as unrealistic in the current economic conditions.

It is also interesting that there is the possibility of waiving late payment surcharges in the event of undue hardship. This is especially true for taxpayers who are reliable and make a mistake the first time. However, such requests for remission must be well justified and involve additional administrative work, which makes it challenging for those affected.

Taxpayers should therefore ask themselves whether they can appeal against notices of late payment surcharges from periods before March 2022 if these notices are not yet final. In its current decision, the BFH has finally concluded the discussion about the constitutionality of late payment surcharges and thus created a clear legal situation.

For more detailed information on the decisions and the background, we refer to the articles by t-online.de and lohnsteuer-kompakt.de.