Lateness penalty fees for overdue tax returns

AT A GLANCE

• If you are required to submit a tax return, you have to meet the filing deadline.
• Late submission carries the risk of a late-filing penalty.
• Filing your tax return more than 14 months after the end of the tax year results in inevitable fines.
• The penalty amounts to 0.25% of your tax liability, with a minimum of 25 euros for each started month.

What is a lateness penalty fee (Verspätungszuschlag)?

Lateness penalty fees, regulated by §3 Paragraph 4 of the German Fiscal Code (Abgabenordnung), belong to the ancillary tax services. The fees serve to sanction the delayed submission of mandatory tax returns, ensuring that taxes can be assessed and paid on time. The “Act on the Modernization of the Taxation Procedure” of 2019 enabled lateness penalty fees to be more strictly regulated in accordance with section 152 of the German Fiscal Code. Prior to this, whether and how you received a penalty fee was at the discretion of your local tax office (Finanzamt).

When is the deadline to file my tax return?

Taxpayers subject to a mandatory tax return must file by the deadline of July 31st following the tax year. If the last day of the submission deadline falls on a weekend or public holiday, the deadline is extended to the following working day.

There is an exception to the deadline: Some taxpayers are not required to file if they were not required to do so in previous years and have a non-assessment certificate (Nichtveranlagungsbescheinigung). This may apply to a pensioner who suddenly finds themself above the basic tax-free allowance (Grundfreibetrag) due to an increase in pensions (Rentenerhöhung). In such a case, they would be requested in writing to submit a tax return and the submission deadline contained in the letter applies.

Those who are not required to file but wish to submit a voluntary tax return have 4 years to file it – up until December 31st, 4 years following the tax year in question. That means if you wish to file a voluntary tax return for the 2019 tax year, you have until December 31st, 2023. There are no late filing penalties for voluntary submissions.

Who has to pay a lateness penalty fee?

If you are required to file a tax return – e.g. if you’re self-employed or received wage replacement benefits of more than 410 euros within the calendar year (from unemployment benefits to short-term work benefits to parental benefits or sickness benefits), it is important to meet the deadline. If you miss it, you will probably face a lateness penalty fee.

Our article on Mandatory Tax Assessment: Who has to file a tax return? will help you find out if you’re required to file a tax return.

When is the penalty fee due?

According to §152 of the German Fiscal Code, overdue tax returns are penalized with a penalty fee for each month that they are overdue. The tax office is obliged to charge you with a penalty fee if you don’t file your tax return within 14 months of the end of the tax year in question.

However, before the expiration of 14 months, the tax office can still decide at their own discretion. If you have been punctual with your tax returns so far, you may not have to pay a lateness penalty fee.

Section §152 of the fiscal code lists a few more exceptions that allow the tax office to make their own decisions or refrain from imposing penalty fees:

• Tax returns with a tax assessment of zero euros or of a negative amount
• Cases that result in tax refunds
• If the tax office has already extended the deadline or extended it retroactively
• In cases of annual wage tax registrations

If multiple people are required to file a tax return, such as in the case of a company constituted under civil law (GbR), the tax office can decide whether one, several, or all persons receive a penalty fee. The following debt from the fee can be divided if necessary.

How much are lateness penalty fees?

Lateness penalty fees have to be rounded down to the full euro. The fee amounts to 0.25% of your total assessed tax due (minus any advance payments or tax deductions) with a minimum of 25 euros per month (or part of the month). A maximum fee of 25,000 euros can become due depending on your tax liability amount of length of time it’s been overdue.

Example penalty fee

If you were, for example, required to file a 2019 tax return and had not filed by March 2021 (15 months following the tax year), the tax office can no longer provide discretionary leeway and will assess a lateness penalty fee. For the overdue period of of 8 months, August 2020 to March 2021, 8 x 0.25% of your assessed tax due or a minimum of 8 x 25 euros (200 euros) would be charged.

What happens if I still don’t submit my tax return?

If the tax office gives you a warning in writing to submit your tax return and sets a new deadline that you miss this can result in an additional penalty payment (Zwangsgeld), typically between 100 and 500 euros. Another penalty method is the so-called tax estimate (Steuerschätzung) which is not typically in your favor. You can appeal against the estimate within one month and must submit your tax return regardless.

What should I do if I can’t submit my tax return on time?

If you are unable to submit your tax return on time, you can apply for an extension of the deadline before it expires. The tax office does not have to agree to this by law, but your chances increase if you have not been noticed for frequent delays and can provide a reason that is not your fault such as a long stay in hospital. Here you can find an example letter (in German) for requesting a deadline extension.

Can I make an appeal against the lateness penalty fee?

If you disagree with a penalty fee you’ve received, you have one month to make an appeal by providing the tax office with a written objection and giving plausible reasons for your lateness.