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02.09.2016 | KPMG Law Insights

Criminal tax law – Bundestag: Act amending the Fiscal Code and the Introductory Act to the Fiscal Code

Bundestag: Act amending the Fiscal Code and the Introductory Act to the Fiscal Code

On December 4, 2014, the Bundestag passed the Act Amending the Fiscal Code and the Introductory Act to the Fiscal Code. The aim is to consistently combat tax evasion. To this end, the rules on voluntary disclosure with exemption from prosecution and on refraining from prosecution in special cases are to be tightened considerably.

Extension of the statute of limitations

The start of the tax assessment period for undeclared foreign investment income is to be significantly postponed. The period begins at the earliest with the end of the calendar year in which the capital gains became known to the tax authority by declaration of the taxpayer or in any other way, but no later than ten years after the end of the calendar year in which the tax arose.

However, this only applies to investment income from countries that are not members of the EU or the European Free Trade Association (Switzerland, Norway, Iceland, Liechtenstein) and to investment income that is not automatically reported to Germany.

On the other hand, the regular assessment periods are to continue to apply to the discontinuation of any reservation of review that affects the entire tax case.

Extension of the correction period

In the future, exemption from punishment shall only occur if information on all tax offenses of a tax type that are not subject to the statute of limitations under criminal law is corrected in full, but at least on all tax offenses within the last ten calendar years.

The criminal statute of limitations is ten years in particularly serious cases and five years in all other cases. The tax assessment period, on the other hand, is always ten years.

Blocking reasons

  • An exemption from penalty does not occur if an examination order or the initiation of criminal or fine proceedings was announced prior to the correction, supplementation, or subsequent completion. This blocking effect previously applied only to disclosure to the perpetrator or his representative. The Act replaces the previous concept of “perpetrator” with the concept of “participant in the act.” The blocking effect also applies to an employee (who has left in the meantime) as a participant in the act who has committed tax evasion for the benefit of the company (beneficiary).
  • It shall not be possible to make an exempting voluntary disclosure during the period in which an official of the tax authority has appeared for a VAT or wage tax inspection or an inspection under other tax regulations and has identified himself.
  • Subject to Section 398a of the German Fiscal Code (AO), an exempting voluntary disclosure is generally only possible if the unjustified tax advantage does not exceed an amount of € 50,000 per offense. The law provides for a reduction of this limit to €25,000.
  • In the future, a new ground for blocking shall also apply to particularly serious cases of tax evasion pursuant to Section 370 para. 3 sentence 2 nos. 2 to 5 AO (Sec. 371 (2) sentence 1 no. 4 AO-E). However, a “waiver of prosecution in special cases” pursuant to Section 398a AO should be possible.
  • The law provides for a special regulation in the area of penalty-exempt voluntary disclosure for wage tax returns and advance VAT returns, unless the return is an annual return. Corrected or late filings should again be considered effective partial self-reporting. By way of derogation from the completeness requirement and the maximum amount rule, corrected filings shall be exempt from penalty to the extent that information is corrected, supplemented or made up for.
  • In addition to the payment of the evaded taxes, the timely payment of interest on evasion and interest on arrears, insofar as it is credited against the interest on evasion, shall in future also be a prerequisite for exemption from punishment (Sec. 371 (3) Sentence 1 AO-E). This should not apply to advance sales tax returns (with the exception of the annual sales tax return) and wage tax returns. In such cases, exemption from penalties shall occur irrespective of the timely payment of interest.

Waiver of prosecution in special cases

  • According to the current legal situation, in cases where exemption from punishment only does not occur because the amount of evasion exceeds €50,000, prosecution is waived if the perpetrator pays the evaded taxes and an additional surcharge of 5% of the evaded taxes. In the future, even in the event of a particularly serious case of tax evasion pursuant to Section 370 (1) of the German Income Tax Act, the taxpayer shall pay the tax. 3 sentence 2 nos. 2 to 5 AO, there is a “special case” that can lead to the waiver of prosecution upon payment of the tax and surcharge.
  • In the future, interest on evasion and interest on arrears, to the extent that it is credited against interest on evasion, will also have to be paid on time.
  • The surcharge of 5% of the evaded taxes is to be significantly increased and will in future depend on the amount of the evaded tax:
Surcharge Evasion amount
10 %≤ 100.000 €
15 %100.000 €;

≤ 1.000.000 €

20 %> 1.000.000 €

 

  • The assessment of the amount of evasion shall be based on the principles set forth in section 370 para. 4 AO (Section 398a (2) AO-E). It should be irrelevant whether the tax could have been reduced for other reasons or the tax advantage could have been claimed for other reasons (so-called compensation prohibition).
  • According to the law, the reopening of criminal proceedings is possible if the tax authority recognizes that the information provided in a voluntary disclosure was incomplete or incorrect.
  • If the criminal proceedings are not discontinued despite payment of the surcharge, or if the criminal proceedings are reopened and end in a conviction, the court should be able to offset the surcharge paid against a fine. However, there is no reimbursement of the surcharge in these cases.

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Contact

Dr. Heiko Hoffmann

Partner
Munich Site Manager
Head of Criminal Tax Law

Friedenstraße 10
81671 München

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

Dr. Jochen Maier

Senior Manager

Heinrich-von-Stephan-Straße 23
79100 Freiburg im Breisgau

tel: +49 761 76999910
jmaier@kpmg-law.com

Arndt Rodatz

Partner
Head of Criminal Tax Law

Fuhlentwiete 5
20355 Hamburg

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

Philipp Schiml

Partner

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