Sanctions and Voluntary Disclosure to Avoid Prosecution
Instead of a lengthy court procedure, a penalty order (Strafbefehl) may be issued in cases of tax evasion. This offers both advantages and disadvantages for the taxpayer. It may therefore be advisable to file an objection to the penalty order. Without objection, the penalty order becomes legally binding, meaning the individual is criminally convicted — which, in addition to paying a fine, can lead to further consequences.
The penalty order is an option to conclude tax criminal proceedings without a court hearing. This means the case is decided based solely on the written investigation file. No further investigations are carried out, nor are witnesses heard. A sufficient suspicion of a criminal offense is enough to impose a penalty on the alleged tax evader. The case can only be concluded by penalty order if a fine or a suspended prison sentence of up to one year is deemed adequate, according to MTR Legal Rechtsanwälte, who also advise in tax and tax criminal law.
Advantages and Disadvantages of a Penalty Order
A penalty order presents both pros and cons for the affected taxpayer. A key advantage is that the matter can be resolved quickly and discreetly without a public trial. Because no further in-depth investigations are conducted, not all tax offenses may be uncovered, potentially leading to a reduced sentence. However, a penalty order carries the same legal effect as a judgment. This means that after a final penalty order, the case can only be reopened under exceptional circumstances for the same offense.
However, individuals often underestimate the implications of a penalty order in cases of tax evasion. The fine may not be the only consequence. Additional outcomes may include the revocation of a business license or the loss of public contracts. For business owners, self-employed persons, and freelancers, the consequences can be severe. Furthermore, those affected must understand that they are considered to have a criminal record, and depending on the severity of the fine or prison sentence, the conviction may appear in the police clearance certificate.
Objecting to a Penalty Order
Filing an objection to the penalty order may be advisable. This leads to a legal review of the facts, and the individual has the opportunity to defend against the allegations. An effective defense may result in the proceedings being dismissed or the sentence reduced. The penalty order is based solely on the findings of the investigative authorities. Exculpatory factors are often not taken into account. In addition, claims by the tax office may have been miscalculated or may already be time-barred. Without filing an objection, however, all allegations are accepted, and the individual essentially admits guilt on all points.
Fines and Prison Sentences
The severity of the sentence depends on the amount of evaded taxes. For tax evasion up to €1,000, only a minor fine is typically imposed, and the proceedings may even be discontinued. For evaded amounts between €1,000 and €50,000, a fine is usually imposed along with an entry in the police clearance certificate. For higher amounts, prison sentences are also possible in addition to fines. For tax evasion of €100,000 or more, the Federal Court of Justice generally allows a prison sentence, which can still be suspended. However, for tax evasion of €1,000,000 or more, suspension is no longer an option.
Voluntary Disclosure to Avoid Prosecution
The possible severity of punishment highlights that allegations of tax evasion should not be taken lightly and that an effective defense strategy is essential. If the tax evasion has not yet been discovered by the authorities, voluntary disclosure to avoid prosecution may be an option.
In order for voluntary disclosure to have a penalty-exempting effect, it must be submitted not only in a timely manner but also in full. This means it must include all tax-relevant matters from the past ten years. Even minor errors can render the disclosure ineffective in avoiding punishment. However, even then, it may still lead to a reduced sentence.
MTR Legal Rechtsanwälte advise in matters of tax criminal law and support you in preparing a voluntary disclosure that can exempt you from punishment.
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