Back Tax & Interest in Germany: What to Do

Back Tax in Germany: Where It Comes From

You open your tax assessment (Steuerbescheid), fully expecting a refund — and instead there’s a back payment (Nachzahlung). Sometimes with an extra line called “interest on income tax”. It feels like a penalty, but it isn’t.

A back payment happens whenever too little tax was paid during the year. For employees, this is common with tax class V (Steuerklasse V), side income, or wage replacement benefits that push up your rate. For freelancers, it’s usually because advance payments (Vorauszahlungen) were set too low. And once enough time passes between the tax year and the assessment, back tax interest (Nachzahlungszinsen) is added on top.

In short: Back tax interest only starts after a grace period (Karenzzeit) of 15 months (§ 233a of the German Fiscal Code, AO). Since the 2022 reform the rate is 0.15% per month = 1.8% per year. So for tax year 2024, interest starts running on April 1, 2026. The back payment itself is due one month after the assessment is issued.

When Back Tax Interest Kicks In — the 15-Month Grace Period (§ 233a AO)

The Finanzamt (German tax office) doesn’t charge interest right away. First comes a grace period (Karenzzeit) of 15 months after the end of the calendar year in which the tax arose (§ 233a Abs. 2 AO). Only then does the interest clock start.

Here’s how that looks in practice for the 2024 tax year:

• The tax arises at the end of December 31, 2024.
• The 15-month grace period ends on March 31, 2026.
• Interest starts running on April 1, 2026 and stops on the day your assessment is issued.

The takeaway: if you file early and receive your assessment before April 2026, you pay no back tax interest at all for 2024 — even if you owe money. The later the assessment arrives, the longer interest accrues.

Note: Only full months count (§ 238 Abs. 1 AO) — a partial month is ignored. And the amount being charged interest (the difference between the tax assessed and what you already paid) is rounded down to the nearest €50 (§ 238 Abs. 2 AO).

How High Is Back Tax Interest? 0.15% per Month

For years the Finanzamt charged 0.5% per month, or 6% per year. During the era of near-zero interest rates, that was wildly out of step with reality. In 2021 the Federal Constitutional Court (Bundesverfassungsgericht) ruled that this rate was unconstitutional for periods from 2019 onward.

The legislature responded with the 2022 reform, cutting the rate retroactively to January 1, 2019, down to 0.15% per month = 1.8% per year. That rate still applies today — and it works both ways: the same 1.8% applies to refund interest (Erstattungszinsen) the Finanzamt pays you if you overpaid. The rate’s fairness is reviewed regularly, at least every three years.

Only for back tax interest — not everything

The reduced 1.8% rate applies exclusively to interest on tax back payments and refunds under § 233a AO. Other kinds of interest still use the old 6% per year — for example deferral interest (Stundungszinsen, § 234 AO) if you postpone payment. Keep that distinction in mind; it matters below.

One detail many people miss: back tax interest you pay is a private cost and not deductible (§ 12 No. 3 EStG). Refund interest you receive, on the other hand, is taxable investment income.

Example: How Back Tax Interest Is Calculated

Say your 2024 assessment shows a back payment of €3,000. You filed late, and the assessment is issued in early October 2026.

• Grace period — ends March 31, 2026; interest runs from April 1, 2026
• Full months until the assessment — April, May, June, July, August, September = 6 months
• Rate — 0.15% per month
• Calculation — €3,000 × 0.15% × 6 = €27

So you pay €3,000 in tax plus €27 in interest. With a bigger bill or a later assessment it adds up faster:

Back payment	Interest period	Back tax interest
€3,000	6 months	€27
€5,000	6 months	€45
€10,000	12 months	€180
€10,000	24 months	€360

Payment Deadline: One Month After the Assessment

A back payment is due one month after the tax assessment is issued (§ 36 Abs. 4 EStG). An assessment is generally considered delivered on the third day after the postmark date — the month runs from there.

Miss that deadline and, on top of the interest, you get a late-payment surcharge (Säumniszuschlag): 1% of the outstanding amount (rounded down to €50) per started month (§ 240 AO). It’s a separate charge from interest, and it runs automatically — the Finanzamt won’t send a warning first.

Tip: Note the payment deadline the moment the assessment lands in your mailbox. It’s printed on the assessment under “Fälligkeit” (due date).

What to Do If You Can’t Pay

The worst move is to ignore the letter and hope it sorts itself out. It won’t. If you realize you can’t cover the back payment in time, act before the deadline.

Deferral (Stundung, § 222 AO)

A deferral pushes the due date back. It’s only granted if immediate payment would cause significant hardship and the tax claim isn’t at risk. In return, you pay deferral interest of 0.5% per month (6% per year) (§ 234 AO) — noticeably more than the 1.8% on back tax interest. It buys you room, but at a cost.

Installment Plan (Ratenzahlung)

If you can’t pay in one go but can manage in stages, you can arrange an installment plan with the Finanzamt (usually structured as a deferral in parts). Make an informal, concrete proposal: how much can you pay now, and how much per month? A realistic, well-justified offer is usually accepted.

Avoiding Future Back Payments: Adjust Your Advance Payments (§ 37 EStG)

A back payment often isn’t a one-off — it repeats if nothing changes. That’s why, after a large back payment, the Finanzamt usually sets or raises quarterly advance payments (Vorauszahlungen) for the future (§ 37 EStG), so you pay enough during the year and don’t face a big gap at year’s end.

You can get ahead of it, too. A rule of thumb for the self-employed is to set aside 30–40% of profit in a separate account — more on our page for freelancers. And if back payments keep hitting you as an employee, check your tax class and allowances on our page for employees.

How Restio Helps

A back payment mainly hurts when it takes you by surprise or you miss a deadline. That’s exactly where Restio comes in:

• Deadline watch — the one-month payment deadline and the advance-payment dates (March 10, June 10, September 10, December 10): Restio reminds you in time, before a late-payment surcharge can build up.
• Understand your Finanzamt letter — photograph your assessment or advance-payment notice, and Restio turns it into plain language: what you owe, by when, and how the interest was calculated.
• Scan your receipts — capture your expenses throughout the year so your return is accurate and the back payment is smaller in the first place.
• Stay on top of it — see which amounts are due when, and set aside the right share in good time.

Get Restio and never be caught off guard by a back payment again.

Conclusion

Back tax interest is no reason to panic, but it’s a good reason to keep an eye on your own taxes. The essentials:

• 15-month grace period — interest only starts after that (§ 233a AO)
• 0.15% per month = 1.8% per year — since the 2022 reform
• One-month payment deadline — or a late-payment surcharge is added
• Can’t pay? — apply for a deferral (§ 222 AO) or installment plan before the deadline
• Avoid a repeat — adjust your advance payments and set money aside early

File early, know your deadlines, and plan ahead, and interest becomes almost irrelevant. You file your return — and can request lower advance payments — through ELSTER (Germany’s official online tax-filing portal). More basics on the Restio home page.

Further Reading

• § 233a AO — Interest on tax back payments and refunds
• § 37 EStG — Income tax advance payments
• § 222 AO — Deferral (Stundung)
• ELSTER — Germany’s official tax-filing portal