Self-disclosure to the tax office – a term that makes many entrepreneurs uncomfortable. But what is behind this instrument, which is enshrined in German tax law?
Self-disclosure tax office
Essentially, the aim is to correct incorrect or incomplete information in the tax return before the tax office discovers it. A step that initially takes some effort, but can prove to be strategically valuable. This is because a voluntary disclosure can lead to exemption from punishment for tax evasion if it is made before discovery and in full. It enables companies to clean up their tax affairs and return to tax compliance.
Lüders Warneboldt is your experienced partner when it comes to the complex issue of voluntary disclosure.
We support you in the careful examination of your tax situation, the preparation of a legally compliant voluntary disclosure and communication with the tax office. Our aim is to give you the certainty that you have taken all the necessary steps to organise your tax affairs and future-proof your company.
What is tax evasion?
Tax evasion is a criminal offence in accordance with Section 370 of the German Fiscal Code (AO). In particular, it is a criminal offence if someone intentionally provides incorrect or incomplete information to the tax office or fails to inform the tax office of tax-relevant facts in breach of duty in order to reduce taxes or obtain tax advantages. This can involve very different actions, for example
- Concealing income: This can relate to income from non-commercial or self-employed work as well as income from capital assets or letting and leasing.
- Overstating operating expenses: This is where expenses are claimed that were not actually incurred or were not incurred in the amount stated.
- Incorrect information on VAT: This can be, for example, the understatement of turnover or the unauthorised claiming of input tax amounts.
The significance of tax evasion for the individual taxpayer is enormous. Anyone who evades taxes risks not only high back payments and interest, but also severe fines or even imprisonment. In addition, a conviction for tax evasion can have considerable reputational consequences for entrepreneurs and companies.
When assessing tax offences, the distinction between negligent and intentional acts is of great importance. This differentiation has a considerable impact on the legal consequences and the possibilities for correction.
Intentional tax evasion, regulated in Section 370 of the German Fiscal Code (AO), occurs when the perpetrator acts deliberately and intentionally in order to reduce taxes. The taxpayer knows that his actions are unlawful and accepts this.
Negligent tax evasion in the form of reckless tax evasion is regulated in Section 378 AO and occurs when the taxpayer disregards the necessary care to an unusually high degree. The offender does not recognise the possible tax consequences of his actions, but could have recognised them if he had exercised reasonable care.
The main differences:
- Legal classification: wilful tax evasion is a criminal offence, while reckless tax evasion is classified as an administrative offence.
- Sanctions: Intentional tax evasion is punishable by fines or imprisonment. Reckless tax evasion can be penalised with a fine of up to 50,000 euros.
- Correction options:
- In the case of wilful tax evasion, it is possible to make a voluntary self-disclosure in accordance with Section 371 AO.
- In the case of reckless tax evasion, the fine is waived if the offender corrects the false information, completes incomplete information or makes up for omitted information before being notified of criminal or fine proceedings. Even if taxes have already been reduced, no fine is imposed if the offender pays the reduced taxes within a reasonable period of time.
- Limitation periods: The limitation periods are longer for wilful tax evasion than for reckless tax evasion.
It is important to emphasise that the line between intent and recklessness is often blurred and must be carefully examined in each individual case. Professional advice from experienced tax advisors and lawyers is essential in order to correctly assess the situation and develop the best strategy – be it to avoid tax offences or to initiate a correction if an offence has already been committed.
What is a voluntary disclosure to the tax office?
A voluntary disclosure to the tax office is a legal instrument that enables taxpayers to voluntarily disclose tax offences or tax offences committed. The aim of a voluntary disclosure is to obtain immunity from prosecution. It offers tax evaders the opportunity to clear up their tax affairs by providing the tax office with previously concealed or incorrect information.
The voluntary disclosure covers all tax offences of one type of tax, such as income tax or VAT, for a specific assessment period. It must be complete and disclose all evaded taxes. The effect of exemption from prosecution only applies if the requirements of Section 371 AO are met and there are no grounds for exclusion in accordance with Section 371 Para. 2 AO.
As already mentioned, voluntary disclosure in German tax law has its legal basis in Section 371 of the German Fiscal Code (AO). This section regulates the conditions under which a voluntary disclosure can lead to impunity.
The main points of the legal regulation are
- Completeness: The voluntary disclosure must correct all incorrect information, complete incomplete information or make up for omitted information.
- Timeliness: The report must be made before, for example, the offence was discovered or criminal or fine proceedings were initiated.
- Subsequent payment: The evaded taxes, the interest on evaded taxes pursuant to Section 235 AO and the interest pursuant to Section 233a AO must be paid in full within a deadline set by the tax office.
- Reasons for exclusion: In certain cases, which are listed in Section 371 Para. 2 AO, a voluntary disclosure with exemption from prosecution is excluded, for example if the offence has already been discovered or in the case of high evasion amounts; in the latter case, prosecution can be waived under certain conditions in accordance with Section 398a AO.
The submission of a voluntary disclosure requires careful examination and preparation, as errors or incompleteness can lead to the effect of exemption from prosecution not being realised. It is therefore advisable to seek expert support for this complex process.
Do you have questions about voluntary disclosure or are you concerned that you may be involved in a criminal tax offence?
Our experts are available for a discreet and non-binding initial consultation. We will treat your concerns with the utmost confidentiality and work with you to develop a customised strategy.
When does it make sense to file a voluntary disclosure with the tax office?
A voluntary disclosure to the tax office is particularly useful if taxpayers realise that incomplete or incorrect information has been provided in their tax returns. This voluntary disclosure makes it possible to correct tax misconduct and assume tax responsibility.
Typical situations in which voluntary disclosure can be useful:
- Discovery of your own mistakes: if, when reviewing your documents, you realise that you have made incomplete or incorrect statements in the past.
- Inheritance or gift: In the case of previously undeclared assets from inheritances or gifts.
- Foreign assets: If you have previously undeclared income from foreign investments.
- Imminent tax audit: If you learn of an imminent tax audit and fear irregularities.
- Suspicion of an investigation: If you suspect that you are already under investigation but no official notification or announcement has yet been made.
Risks of not reporting:
- Criminal prosecution: Without voluntary disclosure, there is a risk of severe fines or even imprisonment if discovered.
- Higher financial burden: In addition to back taxes, interest and penalties may be due.
- Reputational damage: A conviction for tax evasion can have serious consequences both privately and commercially.
- Mental stress: The constant fear of being discovered can cause considerable stress
Advantages of a possible voluntary disclosure:
- Immunity from prosecution: A correctly executed voluntary disclosure exempting you from prosecution protects you from criminal prosecution.
- Legal certainty: You create clear conditions and end the state of uncertainty.
- Calming of conscience: Returning to tax honesty can provide great psychological relief.
- Avoidance of higher costs: By acting early, you may be able to avoid severe fines or penalties.
Are you about to decide to file a voluntary disclosure with the tax office?
The legal requirements are complex and the consequences of incorrect implementation can be serious. Rely on the expertise of LW-P Lüders Warneboldt. Our experienced tax consultants and lawyers offer you:
✔ Confidential initial assessment of your situation
✔ Customised strategy development
✔ Professional support throughout the entire process
✔ Maximising your chances of impunity
Steps to submit a voluntary disclosure
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Inventory and analysis
The first step is to collect all relevant documents and information and carry out a precise analysis of the tax situation. This includes identifying all undeclared or incompletely declared income and assets.
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Legal assessment
A tax consultant or lawyer will check whether the requirements for a voluntary disclosure exempting you from prosecution are met and whether there are any grounds for exclusion.
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Preparation of the voluntary disclosure
The voluntary disclosure is carefully formulated. It is crucial that all relevant information is provided completely and correctly. Although no specific form is prescribed, it is strongly recommended that the voluntary disclosure is submitted in writing. This serves as proof of the completeness of the information provided in the event of any subsequent doubts or disputes.
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Calculation of the additional tax payment
An exact calculation of the evaded taxes including interest is made.
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Submission of the voluntary disclosure
The voluntary declaration is submitted to the relevant tax office. It is important to keep a copy of the submitted letter.
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Joint voluntary disclosure
In cases where several people are involved (e.g. married couples with joint taxation or business partners), a joint voluntary disclosure may be useful or even necessary.
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Communication with the tax authorities
After submission, the tax office may have queries or request further documents. A professional and prompt response is crucial here.
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Back payment of taxes
As soon as the tax office has determined the amount of the back tax payment, it must be paid in full within the set deadline.
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Conclusion of the procedure
After successful verification and payment, the tax office usually confirms that the voluntary disclosure has the effect of exonerating the offence.
Costs of a voluntary disclosure to the tax office
Various costs may be incurred when carrying out a voluntary disclosure. The amount of these costs depends on several factors and can vary greatly depending on the individual case.
- Back tax payments: This is usually the main part of the costs. The evaded taxes must be paid in full in order for the voluntary disclosure to have the effect of exonerating the offence.
- Interest: Interest is charged on the tax debt, which amounts to 1.8% or 6% per year.
- Penalty surcharge according to § 398a AO: In particularly serious cases, an additional penalty surcharge is due. This is staggered as follows:
- For an evasion volume of over 25,000 euros up to 100,000 euros: 10 per cent
- Over 100,000 euros up to 1,000,000 euros: 15 per cent
- Over 1,000,000 euros: 20 per cent
- Consultancy costs: The fees for tax consultants and lawyers who assist with the preparation and submission of the voluntary disclosure are an important cost factor. However, this expense is often essential in view of the complexity of the procedure and the potential risks of incorrect implementation.
It is important to emphasise that the costs of a voluntary disclosure, in particular the back taxes, interest and possible penalties, are disproportionate to the potential financial and criminal consequences that would be incurred if the offence were discovered without prior voluntary disclosure. Investing in a correctly executed voluntary disclosure can lead to considerable savings in the long term and offer legal security.
Statute of limitations and its effects on voluntary disclosure
The statute of limitations is a decisive factor in voluntary disclosure, as it determines the correction period. The statute of limitations has an impact on whether and when tax offences can no longer be prosecuted and whether additional tax claims can still be asserted.
Tax assessment limitation period:
- Regularly 4 years for most types of tax
- For tax evasion: 10 years
- For reckless tax evasion: 5 years
Tax payment limitation period:
- Generally 5 years
- For tax offences and administrative offences: 10 years
Statute of limitations for criminal prosecution:
- Simple tax evasion: 5 years
- Particularly serious tax evasion: 15 years (since 2021, retroactive for all offences not yet time-barred by 2021)
Effects of the statute of limitations on criminal liability
- Statute of limitations for assessment: After this period has expired, the tax office can no longer assess or amend taxes.
- Limitation period for payment: Tax claims that have already been assessed expire after this period.
- Prosecution limitation period: After this period has expired, the offence can no longer be prosecuted.
The correction period must be correctly determined for an effective voluntary disclosure. All tax offences of a tax type that are not time-barred, but at least all tax offences of a tax type within the last calendar years, must be disclosed. It is advisable to act as early as possible and to seek professional advice if tax offences are suspected.
- Minimum correction period: Determine the correction period taking into account the limitation periods.
- Full disclosure: Include all relevant time periods, even if you believe some may already be time-barred.
- Observe the start of the limitation period: The start of the limitation period for calculating the limitation period depends on the type of tax involved and whether it is a false return or a non-return. In the case of an incorrect income tax return as assessment tax, the limitation period begins when the tax assessment notice is issued.
- Consideration of interruptions: Certain actions can interrupt the limitation period and restart the limitation period.
In addition to the general limitation periods, there are also special regulations that must be observed.
- Suspension of the limitation period: There is a maximum suspension period of three years for the limitation period for assessment.
- Interruption of the limitation period: Various events can interrupt the limitation period, e.g. the initiation of criminal tax proceedings or the filing of charges.
- Absolute limitation period: In the case of criminal prosecution, there is an absolute limitation period which is twice the regular limitation period.
- Fictitious course: If tax returns have not been submitted, a fictitious course of events is assumed for the calculation of the time limit.
How our qualified advisors at Lüders Warneboldt can help you with your voluntary disclosure
At LW-P Lüders Warneboldt, we understand the complexity of the various limitation periods in tax law. Our experts carefully analyse your individual case, taking into account all relevant limitation periods. We develop strategies that protect your legal interests and at the same time enable a full return to tax honesty.
It is crucial to act early and seek professional advice in order to maximise the chances of a successful voluntary disclosure and minimise potential risks. Contact us for a comprehensive analysis of your situation and customised solutions.
Conclusion
Making a voluntary disclosure to the tax office is an opportunity for taxpayers to correct errors in their tax return and avoid possible penalties. It offers the chance to clear the air and return to tax legality.
However, this notification is not a sure-fire success. It requires careful preparation, full disclosure of all relevant information and the timely payment of the evaded taxes. It is also important to be aware of the intricacies of tax law and the potential pitfalls.
Lüders Warneboldt is at your side as an experienced partner to guide you through the entire voluntary disclosure process. We analyse your individual situation, develop a tailor-made strategy and ensure that you manage your tax affairs in a legally compliant and efficient manner.
Do not hesitate to contact us. We are here for you and will support you in securing your tax future.
FAQ
Tax evasion begins where deliberately false or incomplete information is provided in tax returns or where tax returns are not submitted in breach of duty. Concealing tax-relevant information can also constitute tax evasion. Intent is important: the taxpayer must know or at least accept that too little tax will be assessed as a result of their actions or omissions.
The penalty for tax evasion varies depending on the severity of the offence and the amount of tax evaded. In minor cases, a fine can be imposed depending on the offender’s income. In particularly serious cases, prison sentences of up to ten years may be imposed. The exact amount of the penalty is determined as part of criminal or fine proceedings, whereby mitigating circumstances such as a voluntary disclosure can be taken into account.
The limitation period for tax evasion is generally five to ten years, in particularly serious cases even fifteen years. The period begins at the end of the year in which the tax offence was committed.
There is no official template for a voluntary disclosure to the tax office. However, the voluntary disclosure should contain certain information, such as the type of tax, the amount of tax evaded and the reasons for the voluntary disclosure. It is advisable to consult a tax consultant or lawyer in order to draw up an effective voluntary disclosure.
