The solidarity surcharge is heavily criticised. A case before the Federal Constitutional Court (BVerfG) is currently pending. Most recently, the Confederation of Taxpayers wanted to obtain a submission to the BVerfG in a model trial before the Federal Finance Court. However, the submission was rejected. We address the different arguments for and against the solidarity surcharge and explain who still has to pay it.

The solidarity surcharge was introduced for a limited period of one year in 1991. It was intended to finance the costs of the second Gulf War and to promote states in Central and Eastern Europe.

The additional levy was suspended for the following three years. But since 1995, the Treasury has imposed it as an unlimited surcharge on the income tax payable. The reintroduction was justified by the permanent burdens of the reunification of Germany. With the Solidarity Pact, the Federal Government and the Länder agreed to support the new federal states in particular within the framework of the state financial compensation in order to bring the economic level of East Germany and West Germany closer. In contrast to the Solidarity Pact II, which expired at the end of 2019, the solidarity surcharge is unlimited in time. In 2019, the federal government thus achieved 19.6 billion euros, which it alone is entitled to.

Nevertheless, on 14 November 2019, the Bundestag adopted the law on the repatriation of the solidarity surcharge. For this reason, 90 percent of those who originally had to pay the solidarity surcharge no longer pay a solidarity surcharge since 2019.

For a part of the population, however, the solidarity surcharge remains. Furthermore, taxpayers whose collective income tax originally amounts to more than EUR 16 956 per year (EUR 33 912) have to pay solidarity surcharge. This annual allowance has been increased to EUR 17 543 and EUR 35 086 for married persons in 2023.

For this purpose, a so-called mitigation zone was introduced. This means that the solidarity surcharge increases with increasing income tax liability until it reaches the full rate of 5.5 percent. The mitigation zone goes from the allowance (EUR 17 543) to the income tax liability of EUR 31 528.

Around 3.5 percent also exceed this mitigation zone and must therefore pay the solidarity surcharge in full. According to the calculation of the Federal Ministry of Finance (BMF), this is the case if in 2022 the taxable income exceeds EUR 96.409 (single) or EUR 192,818 (married). This corresponds to a gross earnings of a single person of a good EUR 110,500.

In addition, there is still a solidarity surcharge on capital income. Up to the savings lump sum of EUR 1 000 per year, there is no tax. If the capital gains exceed this savings allowance or the exemption amount submitted to the bank, the bank in Germany must withhold 25 percent capital gains tax and the solidarity surcharge and pay it to the tax office. The solidarity surcharge is always 5.5 percent of the withholding tax to be paid. There is therefore no mitigation zone.

Also, entities subject to corporate tax must pay solidarity surcharge.

You can calculate how high the solidarity surcharge is on the BMF homepage.

For employees, the employer also pays the solidarity surcharge in the payroll tax deduction procedure. Originally, the exemption limit was not taken into account for other emoluments, such as holiday allowances, annual bonuses and severance payments. In 2021, this changed, so that employers must now also observe the annual exemption limit for other remuneration. For an average earning employee, the employer does not have to withhold a solidarity surcharge from wages during the year. Then a tax declaration on the part of the employee alone is not necessary to have the solidarity surcharge refunded. Only if the gross earnings annually exceed EUR 110,500, solidarity surcharge is paid.

For investment income, the bank also complies with the solidarity surcharge. In another article, we explained when it makes sense to fill out the tax return for capital gains.

There is much criticism of the solidarity surcharge. In essence, the criticism revolves around the fact that the solidarity surcharge as a source of financing in emergencies is limited in time and the justification has been dropped because the current design violates the principle of equal treatment. In addition, the question arises as to whether the federal government is entitled to legislative powers at all.

The solidarity surcharge is always marked with a provisional note on the income tax assessment. The tax office therefore only withdraws it under the condition that it is confirmed by the Federal Constitutional Court (BVerfG) as constitutionally compliant. In a letter dated 04.01.2021, the Federal Ministry of Finance obliged the tax offices to extend the previous provisional note in the tax assessments. As a taxpayer, however, you do not have to act yourself. Rather, you can wait for the decision of the BVerfG. Any refund will then be made automatically

In the assessment year 2002, the first constitutional complaint was filed against the solidarity surcharge. Only recently, on 30.01.2023, the Federal Finance Court decided on the revision of a married couple with the support of the Federation of Taxpayers. He judged the solidarity surcharge as not yet unconstitutional (reference: IX R 15/29). However, the decision indicates that the award cannot be continued for eternity. However, pending before the BVerfG is still another procedure.