Solidarity Surcharge Remains Constitutional: Federal Constitutional Court Rejects Constitutional Complaint

Overview of the Federal Constitutional Court Decision

On March 26, 2025, the Federal Constitutional Court (BVerfG) ruled on the constitutional complaint challenging the continued levy of the solidarity surcharge (Solidaritätszuschlag) for 2020 and 2021 (Case No. 2 BvR 1505/20) — and dismissed it. Despite intense debate and conflicting assessments, the Court found no constitutional violation. For companies and private taxpayers, the current legal situation remains unchanged. Nevertheless, strategic adjustments should be considered, particularly in light of potential political developments following the 2025 federal elections.

The complainants primarily argued that the surcharge violated property rights under Article 14 of the German Constitution (Grundgesetz). The BVerfG rejected this claim:

• Permissible supplementary levy: The solidarity surcharge qualifies as an admissible supplementary levy under Art. 106 (1) No. 6 GG, not as a special levy.
• No clear elimination of financial need: Expert opinions showed no evidence that the additional financing requirements related to German reunification had completely disappeared.
• Legislative duty to review: The legislature must periodically review whether the financial need still exists, but retains discretion and latitude in doing so.

A dissenting opinion within the panel criticized the Court’s increasing influence on political decision-making, but did not alter the outcome.

Analysis: Implications for companies and taxpayers

1. Tax burden remains: Companies and investors must continue to pay the solidarity surcharge on corporate income tax and capital income — with no prospect of short-term abolition through the courts.
2. Planning uncertainty due to politics: While the BVerfG confirmed constitutionality, a new government could still reform or abolish the surcharge for political reasons. Tax strategies should therefore remain flexible.
3. Explore optimization opportunities: Particularly in corporate taxation and investment structures, targeted tax planning can help mitigate the impact of the surcharge.

Practical recommendations

• Model tax exposure: Factor expected surcharge payments into cash flow and earnings forecasts.
• Adjust investment and legal structures: Consider appropriate corporate forms and holding structures to optimize overall tax burdens.
• Monitor political developments: Maintain flexibility to adapt quickly if reforms or abolition are enacted after the elections.

Conclusion: The BVerfG confirmed the constitutionality of the solidarity surcharge for 2020/2021. Taxpayers must continue to account for this additional levy — while keeping political reform prospects in view and aligning tax strategy accordingly.

Checklist: Solidarity Surcharge — Optimization Options for 2025

• Review corporate structures: Identify optimization potential through legal structuring (e.g., holding companies) to manage corporate tax and surcharge burdens.
• Strategic investment planning: Structure capital investments using tax-advantaged instruments (e.g., accumulating funds, tax-free capital gains).
• Adjust dividend policy: Corporate groups can manage shareholder-level surcharge exposure through optimized profit distribution policies.
• Utilize loss offsets: Plan for loss utilization across income categories to reduce taxable income and surcharge exposure.
• Track political developments: Keep tax strategies flexible to adapt swiftly to possible reforms or abolition.

FAQ: Solidarity Surcharge 2025

• Does the surcharge still apply to all taxpayers? No. Since 2021, many individual income taxpayers have been fully or partially exempt. However, corporations and capital income remain fully subject to the surcharge.
• What is the current rate? The surcharge remains 5.5% of assessed income tax, corporate tax, or withholding tax on capital income.
• Can the surcharge on capital income be avoided? Only to a limited extent. Through targeted investment strategies, capital income can be structured to reduce or avoid the surcharge.
• What changes after the BVerfG ruling? Legally, nothing changes. The surcharge remains in its current form, though political decisions could follow after the federal elections.
• Are there exemptions or allowances? Yes, thresholds and relief provisions apply for individual income tax. However, no such relief exists for corporations or for capital income of individuals.