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Late Payment Surcharges - Beware of Tax Debt!

If you owe taxes and don’t pay them in time your tax office will issue you a surcharge. When is it due and how is it calculated? Find out here.

What is a late payment surcharge?

Late payment surcharges (Säumniszuschlag) are penalties for not paying your taxes, fees, or contributions on time. These belong to “ancillary tax payments” which are regulated by Section 3 Paragraph 4 of the German Fiscal Code (AO) and can only be levied by public authorities. On the other hand, administrative fees such as fees for a permit, certification, or attestation can still be levied at the discretion of the competent authorities according to Section 240 of the German Fiscal Code.

Late payment surcharges don’t always serve as a reminder to pay your tax due, they also cover the additional expenses that the administration incurs when monitoring and repeatedly requesting payments for tax debt.

You can see whether you owe tax, how much you owe, and when it is due on your tax assessment notice which you will receive from the tax office (Finanzamt) after your tax return (Steuererklärung) is processed. Overdue taxes can also include business taxes such as preliminary VAT returns (Umsatzsteuervoranmeldung).

By the way: Late payment surcharges don’t have to be paid in the case of subsequent settlements of wage or corporate income tax or ancillary tax payments (§240 Paragraph 2 German Fiscal Code).

How high are late payment surcharges?

According to §240 Paragraph 1 of the German Fiscal Code (Abgabeordnung, AO), late payment surcharges equal 1% of your rounded tax debt per month of lateness. The 1% is calculated based on your tax debt rounded down to the nearest 50, meaning no late payment surcharges can be issued for tax debts that don’t exceed 50 euros. This also applies to liability debts that arise from being a third party for another’s debt.

Example of a late payment surcharge calculation

Let’s assume you owe 280 euros in taxes and have already missed the deadline by four months. Your debt amount would be rounded down to the nearest amount divisible by 50 (in this case, 250 euros) and a 1% lateness charge would be calculated per month of lateness. Four months late = 4% of 250 euros; therefore, your late payment surcharge would amount to ten euros.

Keep in mind: Late payment surcharges are not to be confused with lateness penalty fees. Lateness penalty fees are charged when you are required to file a tax return and it is overdue, whereas late payment surcharges are incurred when a tax debt is not paid on time.

Is there a grace period?

There is a grace period of 3 days following the deadline which only applies if your payment is received via bank transfer due to transfer waiting times, etc. There is no grace period for payments made in cash or with a check as it is not considered to be paid until three days following the receipt. If the last day of the grace period falls on a weekend or public holiday, the end of the period is extended to the following work day (§ 108 Paragraph 3 AO). If the grace period passes and no payment has been received, your lateness will be calculated from the original due date (before the grace period).

If your tax debt payments are overdue, you must pay both the late payment surcharge as well as the debt. Late payment surcharges are not requested in a separate notice, they will be added on to your tax debt amount and requested in one notice.

Can late payment surcharges be waived?

If your tax assessment is amended, corrected, or cancelled (in accordance with §129 of the German Fiscal Code), accumulated late payment surcharges still remain in place (§240 Paragraph 1 Sentence 4 AO). With this being said, you can apply for a waiver for these surcharges and justify the inequity. Whether or not your surcharges are waved are left up to the discretion of your local tax office.

If you are unable to make a timely payment due to factual or personal reasons such as hospitalization or bankruptcy, impositions of late payment surcharges may be considered “inequitable.”

Submit your tax return today!