The German Federal Government has introduced the draft Annual Tax Act 2026 — Jahressteuergesetz 2026 (Drucksache 21/8283). As reported by the Bundestag’s hib news service on October 2, the bill provides for doubling the statutory interest rate applied to back taxes and tax refunds starting in 2027.
- The draft bill raises the monthly interest rate from 0.15% to 0.3%, representing an increase from 1.8% to 3.6% annually.
- The adjustment applies equally to interest levied on tax arrears and interest paid to taxpayers on refunds.
- Additional provisions include full child tax allowances for children resident elsewhere in the EU/EEA and default electronic assessment delivery for ELSTER account holders from 2027.
Government’s Proposed Interest Rates
According to hib, the current interest rate of 0.15% per month has been in effect since 2019. The draft proposes raising it to 0.3% per month from 2027. The government justifies the increase by citing general interest rate developments across the financial markets.
This statutory interest applies both to tax repayments owed by taxpayers and to tax refunds paid by revenue offices. The Bundestag report notes that under the Fiscal Code (Abgabenordnung), interest accrual generally commences 15 months after the end of the calendar year in which the tax liability arose.
The proposed rate increase represents a provision within a draft bill and has not yet been enacted into law.
Child Allowances for Dependents Abroad
As reported by hib, another statutory amendment will grant taxpayers full child tax allowances (Kinderfreibetrag) if their children reside in another EU member state or a country subject to the European Economic Area agreement.
This change complies with a ruling by the European Court of Justice (ECJ), which deemed national reductions of family benefits and tax breaks for workers whose children live in another member state incompatible with EU law. According to hib, the allowable allowance previously depended on country-specific cost-of-living indexations.
Electronic Tax Assessments and International Reporting
The draft bill also stipulates that from 2027 onwards, income tax assessments and decisions on administrative objections will be issued exclusively in electronic form whenever a taxpayer holds an active ELSTER account, hib reports.
A further clause expands international tax information exchange concerning revenue generated via digital platforms. While exchange mechanisms already operate across EU member states, the bill extends reporting obligations to platform operators based in third countries.