BFH to suspend enforcement of late payment penalties

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If a tax is not paid by the taxpayer by the due date, according to Section 240 (1) sentence 1 AO, late payment surcharges of 1% of the rounded-down outstanding tax amount are due for each month of default that has started. Penalties for late payment therefore represent a means of pressure to enforce due taxes.

Late payment penalties apply regardless of whether a tax is correctly assessed. If a tax assessment is canceled or changed, the late payment surcharges set remain unaffected.

However, the financial authority can also suspend the contested administrative act in whole or in part in accordance with § 361 AO. Thus, the enforceability of the disputed administrative act is inhibited. The suspension of execution (AdV) can also affect the late payment penalties in particular, provided that an objection is made to their determination and this is justified accordingly.

In our article from April 5, 2023, we reported on the constitutionality of late payment penalties when interest rates are structurally low. However, the legality of setting late payment penalties is questionable if this provision of Section 240 (1) sentence 1 AO AdV was granted due to serious doubts as to the constitutionality of this provision.

The Federal Fiscal Court (BFH) ruled on December 28, 2022 (Az. III B 48/22) that there are serious doubts as to the legality of the late payment penalties if several senates of the BFH grant AdV in comparable cases and at the same time serious doubts about express the constitutionality of § 240 para. 1 sentence 1 AO. Serious doubts within the meaning of Section 69 (2) sentence 2 FGO also regularly exist if a decision depends on a legal issue that is dealt with differently or contradictorily by several BFH senates. (1st guiding principle).

If several BFH senates affirmed the serious doubts about the constitutionality of Section 240 AO and thus the legality of the decisions based on this norm, it was only logical, in the opinion of the BFH, not to limit the contested administrative act to a lesser extent than these senates to suspend (2nd guiding principle).

facts

In 2022, the tax office issued settlement notices that showed late payment surcharges on income tax and solidarity surcharge from the period 2015 to 2019 and on sales tax from the period 2015 to January 2020 incurred after December 31, 2018. Objections were filed against the notices within the deadline and the suspension or cancellation of enforcement was requested. The objection procedure and the applications for the granting of AdV were unsuccessful. The finance court suspended the surcharges for late payment. The tax office then applied in a complaints procedure to have the decision of the tax court set aside.

Decision of the BFH

In its above-mentioned decision, the BFH rejected the appeal by the tax office as unfounded. A prerequisite for the granting of AdV are serious doubts about the legality of the contested administrative act. This is the case if important reasons come to light in the summary examination of the contested decision that cause indecisiveness or uncertainty in the assessment of legal issues or ambiguity in the assessment of factual issues relevant to the decision. Serious doubts could also be based on constitutional doubts regarding a norm on which the contested administrative act is based.

In the present dispute, the BFH is of the opinion that there are serious doubts as to the constitutionality of the late payment penalties within the meaning of Section 240 (1) sentence 1 AO. There would also be numerous other BFH resolutions in which AdV was granted in comparable cases. The constitutional doubts are essentially based on the fact that the interest rate regulated in Section 238 (1) sentence 1 AO is not considered to be realistic for the time at issue. These doubts could be transferred to the surcharges for late payment according to § 240 AO, taking into account the temporary legal protection. The BFH further states that, to the extent that the late payment penalties contain an interest component, which is regularly assumed by the administration and settled case law to be 0.5% per month, there are constitutional doubts as to the amount of the late payment penalties. These doubts were not dispelled by the decision of the Federal Constitutional Court of July 8, 2021 (Az. 1 BvR 2237/14, 1 BvR 2422/17), in connection with the determination of the unconstitutionality of the interest rate, so that the execution of the settlement notices at issue was to be lifted or suspended.

assessment and outlook

The Senate therefore contradicts the decision cited in our article of April 5, 2023 and states that the amount of the hidden interest portion can very well give rise to constitutional concerns about the provision of Section 240 AO. This circumstance leads to an ambiguous situation for taxpayers. However, it is advisable to file an objection to the determination of late payment penalties and to apply for AdV, in particular with reference to the aforementioned decision and the decisions also cited in the decision.

Feel free to contact us for any further questions.