Challenging an assessment: objection deadline, form and suspension of enforcement

An electrician receives an income tax assessment in March demanding an additional payment of 6,400 €. He thinks the disallowed rent for his workshop is wrong, files an objection on time and pays nothing, convinced that the dispute puts the payment on hold. Once the due date has passed, every month or part of a month costs him 64 € in late-payment surcharge. The objection was right; the assumption behind it was not.

The deadline starts with notification

An objection, the Einspruch, is the admissible remedy against a tax assessment, because the assessment is an administrative act in a tax matter governed by the Fiscal Code (§ 347(1) sentence 1 no. 1 AO). It must be lodged within one month. The real question is therefore not how long the period is, but on which day it begins.

§ 355(1) sentence 1 AO ties the period to the notification of the administrative act. The date printed at the top of the notice does not decide it. That date records when the tax office drew up the notice or handed it to the post, not when it legally reached the recipient.

For postal delivery, § 122(2) no. 1 AO contains a legal fiction: a written notice sent by post within Germany is deemed notified on the fourth day after it was handed to the post. Under subsection 2a the same applies to a notice transmitted electronically, counted from the day it was sent.

The fiction only ever pushes the date back. If the letter is already in the mailbox on the second day, the period still starts with the fourth day. If it arrives later or not at all, the later receipt counts, and in case of doubt the authority must prove that the notice arrived and when.

Where the tax office holds a written or electronically filed authority to receive documents, the notice should be addressed to the representative (§ 122(1) AO). The period then runs from notification to the adviser's office, not from the day the client sees a copy. Anyone with a tax adviser should agree how notices are passed on.

From the day of notification the period is counted under the Civil Code rules to which § 108(1) AO refers. The day of notification itself is not counted (§ 187(1) BGB). A one-month period ends at the close of the day in the following month that carries the same number (§ 188(2) BGB).

If that day does not exist in the following month, such as a 31st in April, the period ends on the last day of that month (§ 188(3) BGB). If the last day falls on a Saturday, a Sunday or a public holiday, § 108(3) AO moves it to the end of the next working day.

Two special cases: your own return and the silent tax office

Not every tax assessment comes from the tax office. A business computes its own VAT advance return or wage tax return, and under § 168 sentence 1 AO such a self-assessment counts as an assessment subject to later review. Against it, the one-month period runs from the day the return reaches the tax office (§ 355(1) sentence 2 AO).

Where a self-assessment reduces the tax previously payable or produces a refund, it only takes effect once the tax office consents (§ 168 sentence 2 AO). In that case the objection period starts when the consent becomes known. The consent needs no particular form; often it is simply the payment of the refund.

The second special case is silence. If an application has not been decided on its merits within a reasonable time and without an adequate reason being given, an objection is equally admissible (§ 347(1) sentence 2 AO). Under § 355(2) AO this objection for inaction is not bound by any deadline.

The form: little is required, but the right things

§ 357(1) AO requires the objection to be filed in writing or electronically, or declared for the record at the office. It is enough that the filer can be identified, and a wrong label does no harm. A letter headed appeal or complaint is therefore still treated as an objection.

The objection is lodged with the authority whose act is being challenged (§ 357(2) sentence 1 AO). Sending it to another authority by mistake does not lose it, provided it is passed to a competent office before the deadline expires. Whether that forwarding happens in time is, however, no longer in the sender's hands.

Reasons are not a condition of validity. § 357(3) AO describes, as guidance rather than obligation, what an objection should contain. Anyone who lacks documents as the deadline approaches therefore files first without reasons and supplies them later. The deadline is met and the procedure stays open.

• the act being challenged: type of tax, year and date of the notice
• the scope: how far the notice is challenged and its cancellation requested
• the facts on which the objection rests
• the evidence, such as contracts, invoices or bank statements

These four items are the ones listed in § 357(3) AO. In practice the last two decide the outcome, because the tax office can only examine what it knows about. An objection without evidence is valid, but it stands little chance if the evidence never follows.

Missed the deadline: instruction on remedies and reinstatement

Under § 356(1) AO the one-month period only starts if the notice contains an instruction on remedies. It must state the objection, the authority with which it is lodged, that authority's seat and the deadline, and it must do so in the same form as the notice itself.

If the instruction is missing or wrong, § 356(2) AO replaces the month with a period of one year from notification. Even that one-year limit only falls away if filing was impossible earlier because of force majeure, or if the person was told in writing or electronically that no objection was available.

If the period has expired despite a correct instruction, reinstatement under § 110 AO remains. It requires that the person was prevented from meeting the deadline through no fault of their own. A representative's fault is attributed to the person represented, so a tax adviser's slip counts against the client.

The application must be made within one month after the obstacle ends, and the objection itself must be filed within the same period (§ 110(2) AO). The grounds must be substantiated. One year after the end of the missed deadline, reinstatement is excluded unless force majeure prevented the application.

If the objection is filed within that month, reinstatement may even be granted without an express application (§ 110(2) sentence 4 AO). The decision lies with the tax office that has to rule on the objection (subsection 4). Explaining the reasons together with the late objection saves an exchange of letters.

An objection does not stop the payment

§ 361(1) AO says so in terms: lodging an objection does not suspend enforcement of the notice, and in particular it does not halt collection of the tax. The additional payment falls due on the stated date as though there were no dispute. Anyone who does not pay is in default.

Only suspension of enforcement brings a deferral. On application it should be granted if there are serious doubts about the lawfulness of the notice, or if enforcement would cause undue hardship not required by overriding public interests (§ 361(2) sentence 2 AO). Serious doubts do not require certainty of winning.

Suspension has a ceiling. For tax assessments it is limited to the tax assessed less creditable withholding taxes, creditable corporation tax and assessed advance payments (§ 361(2) sentence 4 AO). Advance payments already made therefore do not come back through suspension, unless that is needed to avert substantial disadvantages.

The tax office may make suspension conditional on security (§ 361(2) sentence 5 AO). If the tax has already been paid, cancellation of enforcement takes the place of suspension. If the office refuses, the fiscal court can only be approached on the terms set by § 69 of the Fiscal Court Code (§ 361(5) AO).

Where the dispute concerns a basic notice, such as a determination of a partnership's income, that objection does not suspend the follow-up notices based on it either (§ 361(1) sentence 2 AO). But if enforcement of the basic notice is suspended, subsection 3 requires enforcement of the follow-up notice to be suspended as well.

Suspension is not free if the objection fails. Under § 237(1) AO the suspended amount then bears interest, running from receipt of the objection until the suspension ends (subsection 2). The rate comes from § 238(1) AO: one half of one percent for every full month.

This gives an order of preference. Someone with cash who doubts the outcome pays and keeps disputing. Someone who needs the cash and has good grounds applies for suspension and accepts the interest risk knowingly. Someone who neither pays nor applies chooses the most expensive of all routes.

Full review, adverse change and withdrawal

An objection reopens the whole notice. Under § 367(2) sentence 1 AO the tax office must examine the matter again in full, not just the point complained of. In doing so it may discover errors against the taxpayer that nobody noticed at the original assessment.

A change for the worse is only allowed if the tax office has first given notice of that possibility with reasons and an opportunity to comment (§ 367(2) sentence 2 AO). This warning is both a signal and a legal precondition. Without it, the decision on the objection may not come out worse than the notice.

There are two responses to the warning. One can comment and try to change the office's view. Or one can withdraw the objection, which is possible until the decision on it is notified (§ 362(1) AO). Withdrawal forfeits the objection but leaves the original notice exactly as it was.

Not every objection ends with a formal decision. If the tax office grants relief, for example through an amended notice, a decision is only needed for the part not remedied (§ 367(2) sentence 3 AO). The office may also decide on parts in advance where that is expedient (subsection 2a).

There is a special route for mass proceedings. Pending objections on a legal question already decided by the Court of Justice of the European Union, the Federal Constitutional Court or the Federal Fiscal Court may be rejected by general ruling (§ 367(2b) AO). The period for bringing an action then only ends one year after that ruling is published.