"The federal government is finally addressing default interest and compensation interest."

The Federal Department of Finance (EFD) standardizes the refund and late payment interest rates on taxes and duties. Starting January 1, 2022, the rate for the compensation interest for refunds and the late payment interest will uniformly be 4 percent. The compensation interest rate for voluntary advance payments remains at 0 percent.

The federal government has announced that the late payment and compensation interest rates on taxes and duties will be newly standardized as of January 1, 2022, in the Ordinance on Late Payment and Compensation Interest Rates on Taxes and Duties (Interest Rate Ordinance EFD). Five existing ordinances regarding late payment and compensation interest rates for motor vehicle tax, tobacco and beer taxes, stamp duties, and withholding tax will be repealed. The new Interest Rate Ordinance EFD implements Motion 16.3055 Jauslin “Harmonizing Interest Rates on Federal Tax Reliefs.”

Six Ordinances with Three Types of Interest

Under current law, there are six EFD ordinances that establish the interest rates for federal taxes and duties. The ordinances basically distinguish between three types of interest:

• ‍Compensation interest for voluntary advance payments: The compensation interest for payments voluntarily made by the taxpayer;
• ‍Late payment interest: Interest on amounts charged by the tax authority that are paid late by the taxpayer;
• ‍Compensation interest for refunds: Compensation interest for amounts charged by the tax authority that are refunded late by the tax authority.

Depending on the type of duty or tax, the late payment interest and the compensation interest for refunds will range between 3 – 5 percent. The compensation interest for voluntary advance payments currently stands at 0 percent.

Uniform Rate of 4 Percent

The Interest Rate Ordinance EFD, which comes into effect on January 1, 2022, includes three essential innovations:

• ‍Two Ordinances: There will now only be two interest ordinances from the EFD. The Interest Rate Ordinance EFD replaces a large part of the previous ordinances. Only the ordinance on the due date and interest on direct federal tax remains in effect.‍
• ‍Uniform Interest Rate: The three types of interest existing under current law will fundamentally remain. However, the rate for the late payment interest and the compensation interest for refunds will uniformly be set at 4 percent. The compensation interest rate for voluntary advance payments will continue to be 0 percent.‍
• ‍Annual Review: The late payment and compensation interest rates will now be reviewed annually for all taxes and duties regulated in EFD ordinances and adjusted as necessary to reflect the current interest environment.

The new Interest Rate Ordinance EFD allows for the regulation of interest rates for VAT, various special consumption taxes, stamp duties, withholding tax, as well as customs duties within one ordinance. In this way, the new regulation facilitates the application of law and reduces the administrative burden on taxpayers.

Source: Press Release EFD dated June 25, 2021

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