Insights
TAX & BUSINESS
Interest on COFAG Repayment Claims
The Federal Finance Court (BFG) has ruled that the interest on COFAG repayments by the tax office from the date of the original disbursement is lawful.
In the course of the COVID-19 pandemic the Federal COVID-19 Financing Agency (COFAG) provided state support to numerous companies. Some of these subsidies were later deemed unlawful and had to be repaid. Since 1 August 2024 the COFAG Reorganisation and Settlement Act (COFAG-NoAG) provides that such repayments are to be accrued interest from the day of the original disbursement at a rate of two percentage points above the base rate per annum.
Decision of the BFG
A company lodged an appeal. It regarded this provision as an impermissible retroactive measure, arguing that no explicit interest rule existed prior to the entry into force of the Act.
The Federal Finance Court (BFG) rejected the arguments and stressed that the interest is required under Union law. Only by demanding repayment together with interest can an unlawfully obtained competitive advantage be fully neutralised. A protected expectation of interest‑free repayment did not exist. On the one hand, the possibility of repayment had been communicated from the outset; on the other hand, no one can rely on retaining unlawfully obtained aid permanently or without interest. The interest therefore is neither surprising nor arbitrary. That earlier repayment procedures did not mention interest is not decisive, as there was never an explicit exclusion of interest. The legislature also acted within its constitutional margin of discretion.
Conclusion
With its ruling the BFG thus confirms the tax administration’s practice of demanding repayment. The interest on COFAG subsidies that were wrongly paid out is covered by Union and constitutional law. Retroactive provisions are permissible where they are substantively justified and foreseeable.
Decision of the BFG
A company lodged an appeal. It regarded this provision as an impermissible retroactive measure, arguing that no explicit interest rule existed prior to the entry into force of the Act.
The Federal Finance Court (BFG) rejected the arguments and stressed that the interest is required under Union law. Only by demanding repayment together with interest can an unlawfully obtained competitive advantage be fully neutralised. A protected expectation of interest‑free repayment did not exist. On the one hand, the possibility of repayment had been communicated from the outset; on the other hand, no one can rely on retaining unlawfully obtained aid permanently or without interest. The interest therefore is neither surprising nor arbitrary. That earlier repayment procedures did not mention interest is not decisive, as there was never an explicit exclusion of interest. The legislature also acted within its constitutional margin of discretion.
Conclusion
With its ruling the BFG thus confirms the tax administration’s practice of demanding repayment. The interest on COFAG subsidies that were wrongly paid out is covered by Union and constitutional law. Retroactive provisions are permissible where they are substantively justified and foreseeable.