Search
Contact
02.09.2016 | KPMG Law Insights

Commercial Criminal Law – Mere Correction or Already Self-Disclosure?

Mere correction or already self-disclosure?

For the first time, the Federal Ministry of Finance intends to issue an administrative instruction on the distinction between a correction of declarations pursuant to Section 153 of the German Fiscal Code (AO) and an exempting voluntary declaration pursuant to Section 371 of the German Fiscal Code (AO). Functioning internal control systems (tax compliance systems) can invalidate accusations of intent or recklessness.

In recent years, companies have increasingly been confronted with the question of whether a mere notification and correction of declarations pursuant to Section 153 AO is still sufficient. Or do the persons involved have to protect themselves under criminal law or the law on fines by filing a voluntary disclosure if inaccuracies in submitted tax returns come to light?

Background of the administrative instruction

Legislators and politicians have their sights set on taxpayers with untaxed capital gains from assets abroad and criminal gangs when it comes to tightening up the criminal tax law. The fact that such situations do not regularly occur at companies has been given little consideration to date.

Even the innovations brought about by the Act Amending the Fiscal Code (including amendments to the provisions on voluntary disclosure) effective January 1, 2015 are still causing considerable difficulties for companies in practice. For example, if information on the last ten calendar years must now be provided for an exempting voluntary disclosure or if an exempting partial voluntary disclosure is only possible to a limited extent.

Delimitation of the two legal norms

Whereas until April 2011 it could be left open whether a correction was to be qualified as a correction pursuant to Section 153 AO or as a self-disclosure exempting from punishment pursuant to Section 371 AO, since the introduction of Section 398a AO (penalty surcharge) this distinction has become of decisive importance.

If the correction is deemed to be a self-disclosure with regard to intentional evasion of taxes in the amount of more than € 25,000, prosecution will be waived only after payment of a penalty surcharge of 10 to 20 percent of the evaded tax. The penalty surcharge must be paid by each party to the offense and thus, if necessary, several times (e.g. separately by all board members or managing directors). This can have an existence-destroying effect on those involved in the crime in the company.

Both in the case of a report and correction pursuant to Section 153 AO and in the case of a voluntary declaration, the declaration was objectively incorrect at the time it was made. If the taxpayer recognizes the inaccuracy of his declaration only after the fact, according to the discussion draft now published, there is neither tax evasion nor reckless tax evasion, as both intent and recklessness were lacking.

This statement, in its brevity and simplicity, is inaccurate for several cases. In the case of a reckless tax evasion, the taxpayer, who did not have positive knowledge at the time of filing the return, but acted recklessly, for example, always recognizes the incorrectness only after the fact. Nevertheless, he committed a reckless tax evasion (§ 378 AO).

No initial suspicion based solely on amount of tax and number of adjustments

The discussion draft clarifies that not every objective inaccuracy suggests the suspicion of a tax offense or tax misdemeanor. A careful examination by the competent tax authority is required to determine whether there is an initial suspicion of intentional tax evasion or reckless tax evasion.

On the other hand, it is pointed out that an initial suspicion of intentional tax evasion or reckless tax evasion cannot be automatically assumed solely on the basis of the amount of the tax impact of the incorrectness of the submitted declaration and the number of submitted corrections. This has often been handled differently in law enforcement practice.

No intent or recklessness in internal control system

In this context, for the first time, the existence of a functioning internal control system (tax compliance system) opens up the possibility of invalidating the accusation of intentional or reckless conduct. Thus, there would “only” be an obligation to correct according to § 153 AO.

All types of companies, in particular group parent companies as well as taxable entities for VAT purposes, are therefore strongly advised to become aware of this group-wide tax compliance obligation.

Persons obliged to report and correct

The taxpayer or the universal successor of a taxpayer is obliged to notify and correct the tax. In the case of legal entities, this obligation applies to the persons acting in accordance with §§ 34 and 35 AO, i.e. e.g. each individual managing director or board member.

Whether in practice, from the point of view of criminal law and the law on fines, other responsible persons should also submit the report and correction must be decided on a case-by-case basis.

Time of the correction notification

The draft clarifies that the notification under Section 153 AO must be made without delay, i.e. without culpable hesitation. However, the correction itself may not be made until later if some time is required to prepare the documents. In this respect, the BMF recommends that the required period of time be justified to the tax authority.

However, whether the mere reporting of an inaccuracy without simultaneous correction is advisable in practice depends on the specific individual case. A mere notification will regularly not meet all the requirements of a voluntary disclosure, so that in this respect the procedure should be coordinated in advance with an advisor and, if necessary, the correction should be made together with the notification.

If there is not enough time for a detailed investigation of the facts and the bases of assessment, a correction, which also meets the requirements of a voluntary disclosure, can be made by way of an estimate including a safety margin. In this context, the draft points out – in line with existing case law – that in the event of a deliberate breach of the obligation to report immediately, there is tax evasion by omission.

Explore #more

06.11.2024 | In the media

Interview in stores + stores magazine on the topic: “Companies need AI rules”

Evaluating application videos using AI, translating employment contracts via smartphone or using AI analyses for target agreements and salary discussions – all of this is…

31.10.2024 | In the media, Legal Financial Services

Statement by Ulrich Keunecke in the in-house counsel on the topic of capital market compliance

For private equity investors, going public is the most common exit strategy when investing in a company.
However, family businesses and SMEs can also gain…

30.10.2024 | In the media

Guest article in ZURe on the topic of reporting channels under the Whistleblower Protection Act and the Supply Chain Due Diligence Act

The dual obligation to implement reporting channels in accordance with the HinSchG and LkSG poses major personnel and administrative challenges for practitioners, especially in times…

25.10.2024 | In the media

Guest article in the Audit Committee Quarterly: New regulations on the remuneration of works councils

On June 28, 2024, the German Bundestag passed the Second Act Amending the Works Constitution Act (BetrVG). This amendment is intended to increase legal certainty…

23.10.2024 | In the media

Guest article in the Neue Zeitschrift für Gesellschaftsrecht: Update Gesellschafterdarlehen: Risks in M&A transactions

Christian Hensel and Daniel Dörstling have published a new article on the insolvency-proof handling of shareholder loans in the context of M&A transactions in the…

21.10.2024 | KPMG Law Insights

EU deforestation regulation forces companies to act

Anyone who trades in or uses the raw materials soy, oil palm, cattle, coffee, cocoa, rubber and wood and certain products made from them should…

18.10.2024 | Deal Notifications

KPMG Law advises Adiuva Capital on the acquisition of a majority stake in Advellence Solutions AG and Sharedien AG

KPMG Law Rechtsanwaltsgesellschaft mbH and KPMG Law Switzerland (KPMG Law) advised the owner-managed investment company Adiuva Capital GmbH (Adiuva) on the due diligence, structuring and…

18.10.2024 | KPMG Law Insights

BAG: Showering can be working time

Can showering be working time? The Federal Labor Court had to decide on this question (BAG, judgment of April 23, 2024 – 5 AZR 212/23

11.10.2024 |

Deforestation regulation: The most common mistakes made by companies

The very name of the regulation is misleading. “Deforestation Ordinance” sounds more like a set of rules for agriculture or forestry. But it…

11.10.2024 | In the media

Guest article in the Asset Management Guide 2024: The Fund Market Strengthening Act – Flexibilization and Debt Fund reloaded

On August 5, 2024, the Federal Ministry of Finance published the draft bill for the Act to Strengthen the German Fund Market and Implement Directive…

Contact

Dr. Konstantin von Busekist

Managing Partner
Head of Global Compliance Practice
KPMG Law EMA Leader

Tersteegenstraße 19-23
40474 Düsseldorf

Tel.: +49 211 4155597123
kvonbusekist@kpmg-law.com

Dr. Heiko Hoffmann

Partner
Munich Site Manager
Head of Criminal Tax Law

Friedenstraße 10
81671 München

Tel.: +49 89 59976061652
HHoffmann@kpmg-law.com

Arndt Rodatz

Partner
Head of Criminal Tax Law

Fuhlentwiete 5
20355 Hamburg

Tel.: +49 40 360994 5081
arodatz@kpmg-law.com

© 2024 KPMG Law Rechtsanwaltsgesellschaft mbH, associated with KPMG AG Wirtschaftsprüfungsgesellschaft, a public limited company under German law and a member of the global KPMG organisation of independent member firms affiliated with KPMG International Limited, a Private English Company Limited by Guarantee. All rights reserved. For more details on the structure of KPMG’s global organisation, please visit https://home.kpmg/governance.

 KPMG International does not provide services to clients. No member firm is authorised to bind or contract KPMG International or any other member firm to any third party, just as KPMG International is not authorised to bind or contract any other member firm.

Scroll