Objection recommendation: Possible unconstitutionality of suspension interest

After the Federal Constitutional Court ruled in 2021 that the then applicable regulations on the so-called full interest in accordance with Art. 233a AO (German General Tax Code), taking into account an interest rate of 6 % from 2014, were unconstitutional and obliged the legislator to introduce new regulations for interest periods from 2019, the legislator reduced this interest rate to 1.8 % p. a. However, the interest rate for other types of interest, i.e., suspension, deferral and evasion interest, was not reduced. These types of interest are still subject to an interest rate of 6 % p.a. At the time, the Federal Constitutional Court did not extend its assessment to include these interest elements, as each of these would require a separate constitutional review. However, it did state that the taxpayer could decide for themselves whether the respective interest was triggered, for example, by submitting an application for deferral.

At the time, the court thus at least showed a tendency that no obvious unconstitutionality could be assumed. The legislator has probably taken favorable note of these statements and has thus refrained from adjusting this interest rate as part of the new regulation of full interest.

The non-adjustment of the interest rate, in particular in the case of suspension interest, has already been the subject of several decisions by the tax courts. The tax courts of Münster (3 V 2464/22 dated February 10, 2023 and 6 K 2094/22 dated March 8, 2023), Baden-Württemberg (1 K 180/22 dated May 11, 2023), the 14th Senate of the Munich Tax Court (15 K 358/22 dated September 7, 2022) and the Düsseldorf Fiscal Court (12 V 1597/22 A) rejected constitutional concerns about the amount of interest by referring to the Federal Constitutional Court’s statements, as the taxpayer could decide in each case whether or not suspension interest was incurred. The 7th Senate of the Munich Fiscal Court has now countered this view with a decision dated June 24, 2024 (7 V 11/24) in the suspension proceedings with comprehensive reasoning.

In any case, for interest periods between January 1, 2019 and April 2023, the court expresses serious doubts about the constitutionality of an interest rate of 6 % and points out that the Federal Constitutional Court has not conducted an in-depth constitutional review of the standard. In particular, the tax court sees no justification for making a distinction in the level of the interest rate for the various interest types in low-interest phases. In particular, the argument taken up by the other tax courts that it was up to the taxpayer to decide whether suspension interest is incurred at all is not a reasonable argument for the deciding senate. On the contrary, in the case of tax interest above the market level, the interest obligation was only imposed on those who cannot afford the funds to avert the high tax interest from existing liquidity or obtain them at favorable interest rates.

As a result, the tax court granted a stay of execution in the amount of the difference between the fixed interest rate of 6 % and the interest rate of 1.8 % to be used as a basis for the full interest.
An appeal against the above-mentioned decision of the Münster Fiscal Court dated March 8, 2023 is pending before the Federal Fiscal Court (VIII R 9/23). Should the Federal Fiscal Court also have constitutional concerns, the matter of suspension interest would also have to be referred to the Federal Constitutional Court. When assessing suspension interest for past periods, it is therefore advisable to keep the assessment open by means of an objection.