While the European Central Bank’s interest rates may have increased tenfold (or even twentyfold at one point) over the past decade, the Ministry of Economy and Finance is holding steady for another two years, those imposed on late tax payments at the levels they were at in 2014.

A decision by Kyriakos Pierrakakis “freezes” the interest rates charged on overdue debts to the Internal Revenue Service until at least August 2027.

According to what has been in force since 2014, if a citizen fails to pay taxes assessed on time, he or she pays interest at 8.51% plus interest based on the Main Refinancing Rate set by the European Central Bank. The current main refinancing rate is 2.00%, so tax arrears should be charged at 10.51% per annum.

0.73% instead of 0.88% each month

However, the Pierrakakis decision stipulates that until August 2027, the current interest rate announced by the ECB each time (2.00% from June 2025) is not taken into account, but the one in force on 1 January 2014, which was only 0.25%.

Given this, for the 4.2 million debtors who owe overdue debts of 108 billion to the tax authorities, the annual interest rate is “locked” at 8.76% for another two years. That is, they are charged 0.73% for each passing month, instead of the 0.88% that would normally “run” if the freeze decision had not been made.

This doesn’t change until 2027 at least, unless the world “breaks down” sooner, the European interest rate skyrockets again and soars above 5.25% (it was as high as 4% a year ago) versus 2% today.

The other side

With the Pierrakakis decision, however, the freeze also applies in the opposite case, where the government owes tax refunds to citizens.

Once these debts are more than 90 days overdue (NB: they were reported at around €300 million in June), the state pays interest of 6% per annum or 0.50% per month. This is because they are subject to a fixed interest rate of 5.75%, to which 0.25% is added (as it was on 1.1.2104 for the main refinancing by the ECB) instead of the current 2%.

Lower charges…. with adjustments

Taxpayers do, however, have a way to drastically reduce interest on late payment of tax debts to the taxman if they take advantage of the fixed 12 or 24 instalment arrangements.

In fact, since March, with the Pierrakakis law, the Ministry of Finance had already “frozen” for a year the interest rates charged on the fixed arrangements for overdue debts of individuals and legal entities to the tax administration.

And that regulation, too, was intended to contain the cost of servicing settled debts in a period of generalised interest rate increases in the eurozone, preventing additional burdens on taxpayers.

Specifically, the interest rate for instalments on established debts that have been placed in a regulated regime remains fixed until 31 March 2026, at the level of 31 March 2024.

• Thus, the interest rates are kept unchanged:
• – 4.34% for arrangements of up to 12 instalments, i.e., half that for debts left to their own devices.
• – 5,84% for arrangements with more than 12 instalments

Even if someone loses the arrangement and the original interest rates are revived, a new, second adjustment is possible (after losing the first one).

• • In this case, the interest rates are as follows:
  • – 5.84% for up to 12 instalments
  • – 7.34% for more than 12 instalments

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