Solidarity surcharge in Germany remains constitutional
The solidarity surcharge “Soli” in Germany remains constitutional. This decision was made by Germany’s highest court, the Federal Constitutional Court (BVerfG), on March 26th 2025 (Az. 2 BvR 1505/20).
The Second Senate found that the additional financial requirements of the federal government, resulting from the accession of the new federal states following German reunification in 1990, had not ceased to exist.
However, the Senate emphasized that levying the “Soli” for an unlimited period of time is not constitutionally permissible and that the legislature has an “obligation to monitor” the situation. If the original additional requirements cease to exist, the solidarity surcharge could become unconstitutional – but this is not currently the case.
Solidarity Surcharge
The “Soli” is a supplementary tax levied at a rate of 5.5% on income tax, corporation tax, and capital gains. The solidarity surcharge was introduced in 1995 to finance Germanys reunification and is based on Article 106 I No. 6 of the Basic Law.
Nowadays, the “Soli” only affects 10% of taxpayers in Germany, because since 2021, only high earners, companies, and capital investors have to pay the solidarity surcharge.
However, this means that around six million people and 600,000 corporations will still have to pay the solidarity surcharge in 2025. It affects those who have to pay at least €19,950 in taxes on their income. The solidarity surcharge is therefore payable proportionally from a taxable income of around €73,500. The full solidarity surcharge is payable on taxable income of around €114,300, with higher limits applying to married couples and taxpayers with children.
Background to the lawsuit
This ruling defeated six members of the liberal party in German parliament, the FDP, who had filed a constitutional complaint to prevent the continuation of the solidarity surcharge.
The MPs justified their constitutional complaint by arguing that the solidarity surcharge violated their right to property under Article 14 (1) of the Basic Law. They also argued that it constituted unconstitutional unequal treatment, as only higher earners would now have to pay the solidarity surcharge.
The federal government justified the restriction of the “Soli” to higher earners on the grounds that, in addition to the costs of reunification, the federal government now also had new special financial requirements.
It was irrelevant that the Solidarity Pact for the reconstruction of eastern Germany had expired at the end of 2019.
Significance of the BVerfG's decision
The BVerfG’s decision has significant implications for the work of the new federal government in Germany. In its draft budget for 2025, the federal government has earmarked 12.75 billion euros in solidarity surcharge revenue, which would have been lost without the ruling. In addition, a successful ruling by the complainants could have meant that the state would have had to repay the solidarity surcharge revenues of recent years – around €65 billion since 2020.
The CDU/ CSU, Germany´s Christian democratic party, welcomed the ruling, but emphasized the need for tax relief to improve Germany’s competitiveness. Mathias Middelberg, budget politician for the CDU/CSU, emphasized that the acceptance of the ruling should not diminish the urgent need for relief for businesses and the middle class. Former Federal Finance Minister Jörg Kukies (SPD) welcomed the ruling and spoke of “clarity for the federal budget.”
Justification of the argument
A report by the German Institute for Economic Research (DIW) was of decisive importance for the court’s ruling. It showed that even 30 years after reunification structural differences between East and West still exist and that the federal budget is likely to continue to be burdened by reunification costs until 2030.
Constitutional Court judge Prof. Dr. Astrid Wallrabenstein agreed with the ruling but criticized the reasoning behind it in a dissenting opinion and warned of constitutional uncertainty due to the legislature’s “duty to observe.”
Verfassungsrichterin Prof. Dr. Astrid Wallrabenstein stimmte dem Urteil zu, kritisierte aber in einer abweichenden Stellungnahme die Begründung und warnte vor verfassungsrechtlichen Unsicherheiten aufgrund der „Beobachtungspflicht“ des Gesetzgebers.
Reactions to the ruling
Business associations criticize the ruling as a setback for companies. Tanja Gönner of the Federation of German Industries (BDI) called on politicians to find a quick solution, while the president of the German Chamber of Industry and Commerce (DIHK), Peter Adrian, emphasized that a complete abolition of the solidarity surcharge would be an important signal for companies and a possible corporate tax reform.
Other politicians such as Christian Dürr, liberal party, are also calling for billions in relief for businesses and savers in the wake of the ruling in order to strengthen Germany as a business location.
Outlook
The ruling made it clear that the solidarity surcharge cannot be implemented indefinitely. It remains to be seen to what extent the legislature will fulfill its newly defined duty to monitor the solidarity surcharge.
The reactions to this ruling once again highlighted the need for tax relief for private individuals and companies in order to make Germany more attractive as a business location.
Die Reaktionen auf dieses Urteil verdeutlichten einmal mehr die Notwendigkeit von Steuererleichterungen für Privatpersonen und Unternehmen, um die Attraktivität des Standorts Deutschland zu erhöhen.