Recent case law has already been hotly debated, according to which customs duties levied in contravention of European law are not only to be reimbursed but are also to bear interest of 6% p.a. Interest on excise duties (e.g. electricity tax, energy tax, tobacco tax) has not been the focus of discussion so far.
The Federal Fiscal Court (BFH) has now ruled that the 6% interest rate can also be applied to a refund of the electricity tax if the tax has been set in breach of European law.
Companies that have to be reimbursed excise duties should therefore examine whether they can demand additional interest from customs.
Right to interest under European law in case of incorrectly assessed tax
In several judgments, the European Court of Justice (ECJ) has ruled that a Member State must pay interest on the reimbursement of a tax levied in breach of European law.
Such a claim is not explicitly laid down in European law and arises solely from the case law of the Court of Justice. Interest is payable from the date of payment until the date of refund of the tax.
This entitlement therefore goes much further than the entitlement to interest on legal proceedings under German law, which only comes into consideration from the date of a court action.
The German customs authorities continue to oppose the obligation to pay interest on customs refunds, arguing that, according to the case-law, interest is allegedly limited to cases where an anti-dumping duty regulation has been annulled.
The ECJ has ruled in several judgments that interest must be paid not only on customs duties but also on taxes generally levied in breach of European law.
Electricity tax and interest: decision of the BFH
Quite incidentally, the Federal Court of Finance has now extended the interest claim to the refund of an electricity tax levied in violation of European law (cf. Federal Court of Finance Decision VII R 17/18).
In these proceedings, an energy-intensive company applied to the customs authorities for the application of a reduced rate of tax on the recharging of accumulators. The customs authorities then set the regular tax rate, lost the subsequent court case and had to refund the tax. The applicant subsequently claimed interest on the refund.
The question which now arises for BFH in these proceedings is whether the customs authorities fixed the electricity tax in a manner contrary to European law. Only in this case, according to the BFH, would interest have to be paid, with reference to the case law of the ECJ.
However, the special feature of this case is that the tax reduction initially follows from the German electricity tax law and not directly from European law. The corresponding European law directive 2003/96 authorised a Member State to grant tax reductions for energy-intensive companies, but did not oblige it to do so (optional tax reduction).
According to the BFH, a mandatory (obligatory) tax reduction under the directive would give rise to an interest claim.
However, since the Directive does not make a tax reduction compulsory in the event of a dispute, the BFH also tends to refuse to pay interest on the refund. However, the BFH admits that from the taxpayer’s point of view it does not matter whether the tax reduction was optional or mandatory under the Directive. In both cases the taxpayer does not have access to the amount of tax, which is precisely what the interest is intended to compensate for.
Therefore, the BFH referred the question to the ECJ by way of the so-called preliminary ruling procedure whether interest is also payable in the case of optional tax reductions.
Apply now for interest on excise duties
Irrespective of the eagerly awaited decision of the ECJ, companies should already now consider whether they can claim interest on refunds of excise duties. For one thing, it follows from the decision of the Federal Court of Finance that the unwritten claim to interest under European law also applies to excise duties. On the other hand, it follows from the decision that the interest claim can be justified in particular in the event of violation of mandatory provisions of European law.
Interest would have to be claimed from customs, as customs are unlikely to pay interest on their own initiative. The question of when the claim to interest is time-barred has also not yet been clarified by the courts, so that applications should be made as soon as possible.
Our customs attorneys have years of experience filing interest applications for our clients at customs. We will assess whether an application for interest is worthwhile in your case.