CJEU: BFH Confirms: Late Payment Surcharges Not Deductible as Business Expenses (Case VII R 17/22)

In a recent judgment (BFH, ruling of February 18, 2025, VII R 17/22), the German Federal Fiscal Court (Bundesfinanzhof – BFH) confirmed that surcharges imposed for late payment of taxes (§ 152 AO) are not deductible as business expenses under German income tax law.

The court emphasized that such surcharges are not designed to compensate for financial disadvantages suffered by the tax authority, but rather serve as an instrument of sanction and deterrence. Consequently, they do not qualify as operationally related expenses and must be disallowed for tax purposes.

The decision aligns with previous BFH case law and confirms the German tax authorities' administrative practice.

Who is Affected? 

Companies and entrepreneurs that have incurred late payment surcharges on tax liabilities.

What Should Affected Companies Do?

Ensure that late payment surcharges are properly excluded from deductible operating expenses in tax filings. Tax accounting teams may want to review past returns to verify compliance.

Your contact at Alvarez & Marsal Tax: Nadine Lange