Expiry of the COVID-19 special tax deferral arrangements

To mitigate the negative economic consequences of the COVID-19 pandemic, the deferral interest rate was reduced from 4.5% to 2% above the base rate. This COVID-19-related reduction of the deferral interest rate expires on 30 June 2024. From 1 July 2024, the deferral interest rate will be again 4.5% above the base rate.

After years of consistently low interest rates (the base rate was -0.62%) and thus only COVID-19-related temporary interest rates adjustments regarding deferrals (as well as other tax related interest rates), the base rate was increased since 2022 several times by the ECB. These increases resulted in a base rate of 3.88% p.a. and a deferral interest rate of 5.88% p.a. so far. From July 1, 2024, the deferral interest rate will be increased to 8.38% p.a.. 

The expiry of the COVID-19 arrangements in combination with the increases of the base rate led to a significant burden of deferral interest. As of now, it should be carefully evaluated whether a tax deferral or a payment by installments is economically profitable.

Finally, the other tax related interest rates such as interest for suspension during appeal procedures, interest on arrears, interest on tax credits from successful appeal procedures and VAT interest are still 2% above the base rate and will remain as of 1 July 2024, at 5.88%, whereas further changes of the base rate and therefore for all kinds of tax interest are expected.