Withholding tax – Withholding tax is not reviewed by the Federal Constitutional Court

The defendant tax office has now announced that it has changed the contested income tax assessments and complied with the plaintiff’s application. The legal dispute has thus been settled amicably and the decision in the norm control proceedings at the Federal Constitutional Court was also dropped.

The competent 7th Senate of the Lower Saxony Finance Court was convinced that the withholding tax of 25 percent on capital income violated the requirement of equal treatment of all types of income and uniform taxation according to individual ability to pay and was therefore unconstitutional. While recipients of capital income are subject to the special tax of 25 percent, other taxpayers are subject to a tax rate of up to 45 percent.

Since 2009, income from capital assets has been taxed at a tax rate of 25 percent. Because the tax is withheld directly by the creditors (usually banks) and paid to the tax office, the tax liability is generally settled and no longer has to be stated in the tax return – even if the personal income tax rate is over 25 percent.

If you have further questions about the withholding tax, please contact the experts at the Altehoefer law firm for international tax advice.