Constitutional court confirms solidarity surcharge still in line with German constitution

The German federal constitutional court (BVerfG) on 26 March 2025 rejected a challenge regarding the constitutionality of the German solidarity surcharge which was brought to the court by six members of the liberal Free Democratic Party. In the eagerly awaited ruling, the BVerfG based its decision mainly on the argument that while the cost of the German reunification from 1990 likely has decreased, it cannot yet be determined that the federal government no longer faces an additional financial burden resulting from the reunification process.

The solidarity surcharge in its current form was introduced in 1995 to finance the German reunification process and the combination of the eastern and western parts of Germany. The solidarity surcharge is imposed on top of the income tax liability for individuals and the corporate income tax liability for companies. Since 1998, the surcharge has been imposed at 5.5% and as from 1 January 2021, the surcharge has applied only to high-income individual taxpayers and companies. The revenue generated through the solidarity surcharge belongs to the federal government and the revenue projections for the 2025 federal budget resulting from the solidarity surcharge amount to approximately EUR 12.75 billion.

In its decision, the BVerfG emphasized that a supplementary levy such as the solidarity surcharge cannot be levied indefinitely. Such a levy could become unconstitutional when the original reason for the introduction of the surcharge ceases to exist; however, in the court’s opinion, this is not yet the case for the solidarity surcharge. The appellants argued that the solidarity surcharge violates their constitutionally guaranteed property right (in accordance with article 14 (1) of the German constitutional law). Furthermore, they contended that the selective application of the surcharge to high income earners since 2021 constitutes unconstitutional discrimination under article 3 of the German constitutional law. The federal government argued in the proceedings before the BVerfG, among other things, that in addition to the costs of reunification, it now has multiple, additional, and extraordinary financing needs. The concept of Germany being a welfare state permits the limitation of the surcharge to high income earners. In the government’s view, it is irrelevant that the Solidarity Pact for the Reconstruction of the East (“Aufbau Ost”) expired at the end of 2019.

The BVerfG’s decision was eagerly awaited by the public as well as the political parties that are currently negotiating the future German government coalition after the snap elections that took place on 23 February 2025. The Christian Democratic Union which won the elections favors a reduction of the tax burden for companies and is negotiating on this subject with the Social Democratic Party, being the most likely coalition partner. The abolition of the solidarity surcharge has long been one of the main demands presented by German businesses to the federal government and likely will also be one of the tax issues that is on the table for discussion in the negotiating process for the next government coalition.