Stricter Legal Regulations for Voluntary Disclosure of Tax Evasion to Avoid a Penalty as of 1 January 2015


The law amending the Fiscal Code and its introductory act was published in the Federal Law Gazette on 30 December 2014 (BGBl. Part I, 2014, no. 63, page 2415) and thereby came into force on 1 January 2015. From now on the voluntary disclosure of tax evasion must fulfill the particularly complex and stricter requirements of section 371 of the Fiscal Code in its new version in order to lead to an exemption of punishment. The new legal situation will impose even higher demands on the professionalism of advisors for fiscal offenses, on the intensity and duration of the preparation and – especially – on the assets of the taxable individual who is willing to make a voluntary disclosure, prompting some to say that by complicating it and increasing its cost it has been de facto abolished. This view is probably exaggerated, but the ‘highlights’ of the ‘reform’ are clear: section 371 para. 1 requires a time period of (at least) ten years for a voluntary disclosure (instead of five years, as required previously). The time period for foreign capital gains to be increased by up to ten years (section 170 para. 6 of the new version), also making subsequent taxation extending back much farther than before a possible result of a voluntary disclosure. The provisions excluding voluntary disclosures (section 371 para. 2 of the Fiscal Code) will be extended to include many of the parties involved in tax offenses and will be structured in such a complex way by giving exceptions and counter-exceptions that only advisors qualified in criminal tax law will, after carefully assessing the facts of the individual case, be able to give reliable advice on as to whether a voluntary declaration still makes sense. Obviously for fiscal reasons a voluntary disclosure in ongoing tax audits shall be possible for time periods which are not part of the review. To a limited extent – only in the cases of the income and sales tax – the ‘partial voluntary disclosure’ by correcting income and sales tax registrations or annual returns, which to-date has not been permitted, is permitted once again (section 371 para. 2a). The targeted rise in cost of the voluntary declaration cannot be overlooked: the obligation to make back payments (section 371 para. 3) is now being extended – many years back – additionally including interest rates on evaded taxes of 6 per cent per annum. The co-payment obligations for serious cases of tax evasion (section 398a of the Fiscal Code) will significantly increase from 5 per cent starting from an evasion of 50,000 Euros to 10 per cent starting from 25,000 Euros, 15 per cent starting from 100,000 Euros and 20 per cent starting from 1,000,000 Euros worth of evasions.

If you are interested in more information on the new laws on voluntary disclosures of tax evasions you can read our comprehensive expert paper in the online journal ‘WiJ’ (Journal of the commercial law association) here:änderung-der-abgabenordnung-vom-2782014-und-der-regierungsentwurf-vom-2492014

Despite all of this, voluntary disclosures will in many cases remain the best option to avoid criminal penalties in cases of past tax irregularities. However, the qualification of one’s advisors in criminal tax law will become even more important than before when it comes to taking the right decisions regarding ‘if’, ‘how’ and ‘when’.