What is a lateness penalty fee (Verspätungszuschlag)?
Penalty fees, regulated by §3 Paragraph 4 of the German Fiscal Code (Abgabenordnung), serve to “motivate” citizens to file their tax return before the deadline so 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?
Please note: There is an exception to this rule for your 2020 tax return. Due to the Corona pandemic, the deadline was extended to October 31st, 2021. However, as October 31st falls on a Sunday, the deadline is pushed to the following working day, November 1st. Taxpayers of federal states that celebrate a public holiday (All Saints’ Day) on the 1st do not have to file until November 2nd. This applies to Baden-Württemberg, Bavaria, North Rhine-Westphalia, Rhineland-Palatinate, and Saarland.
There is one additional exception: 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). An example of someone this may apply to is a pensioner who suddenly finds themself above the basic tax-free allowance (Grundfreibetrag) due to an increase in pension contributions. In such a case, they would be requested in writing to submit a tax return and the submission deadline contained in the letter applies.
Who is required to pay a lateness penalty fee?
Not all taxpayers are required to file a tax return. Those who 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 2017 tax year, you have until December 31st, 2021. There are no late filing penalties for voluntary submissions.
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 face either a lateness penalty fee or penalty payment (Zwangsgeld) from the tax office.
Our article on mandatory tax assessment will help you find out if you’re required to file a tax return; however, if you’d like to make it even easier: simply enter your data into our tax tool. Our tool will let you know whether you’re obliged to file or not!
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. This regulation only applies to tax returns not filed within 14 months of the end of the tax year in question, the tax office can still act at their own discretion any time prior to this.
The previously mentioned section 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
- Cases that result in tax refunds
- If the tax office has already extended the deadline or extended it retroactively
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 amount 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 10% (or 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.
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, 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 you do if you can’t submit your 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 you make an appeal?
If you disagree with a penalty fee you’ve received, you have 30 days to make an appeal by providing the tax office with a written objection and giving plausible reasons for your lateness.