Germany: Law amending interest on back taxes and tax refunds effective 22 July 2022

Retroactive reduction of the interest rate for interest on back taxes and refunds to 0.15% per month for interest periods from 1 January 2019

Law effective 22 July 2022

The law amending the interest on back taxes and tax refunds was promulgated in the Federal Law Gazette on 21 July 2022, and thus is effective 22 July 2022. 


The German Federal Constitutional Court held on 8 July 2021 that the interest on back taxes and tax refunds of 6% annually (0.5% per month) was unconstitutional for interest calculation periods starting as from 2014. Read TaxNewsFlash

Application of the 6% interest rate was still permitted for interest periods up to and including 2018. However, the legislator was asked by the court to prepare by 31 July 2022 an amendment to the full interest rule for interest periods from 1 January 2019, which is being implemented with this law. 

Overview of law

The law provides for a retroactive reduction of the interest rate for interest on back taxes and refunds to 0.15% per month (thus 1.8% per year) for interest periods from 1 January 2019.

This interest rate is to be evaluated for appropriateness at least every two years taking into account developments in the base rate—for the first time as of 1 January 2024. Any adjustment of the interest rate shall then only take effect for subsequent calendar years. To avoid overly frequent or minor adjustments to the interest rate, however, the rate is to change only if the base rate applicable as of 1 January of the evaluation year deviates by more than one percentage point from the base rate applicable when the interest rate was last fixed or adjusted.

The amendments will generally be applicable in all cases pending on 22 July 2022. In cases of interest being recalculated retroactively, the comments in the law indicate that the principle of protection of confidence shall apply. Accordingly, if an interest assessment is revoked or amended, the taxpayer must not be disadvantaged by any recognition of the Federal Constitutional Court's having established as invalid a law upon which the previous assessed interest was based. 

KPMG observation

The law contains no adjustment of other interest rates under procedural law such as interest on deferrals, evasion, or suspension of collection. The Federal Constitutional Court explicitly stated in its decision that the unconstitutionality does not apply to these other interest situations.

Read an August 2022 report [PDF 1.3 MB] prepared by the KPMG member firm in Germany 


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