Voluntary Disclosure of Tax Evasion Can Protect Against Severe Penalties
Tax evasion is consistently penalized. Anyone who fails to report taxable income to the tax authorities faces sanctions, which may include fines or even imprisonment. However, those who wish to avoid such consequences can still file a voluntary disclosure of tax evasion to achieve immunity from prosecution.
National and international tax authorities have declared war on tax evasion. The days when Switzerland, Austria, or Liechtenstein served as tax havens, shielding undeclared funds from domestic tax authorities, are long gone. States now cooperate to uncover tax evasion. A powerful tool in this effort is the Automatic Exchange of Information (AEOI), which saw participation from 111 countries in 2024 for the first time. Through this system, extensive financial data from foreign accounts—such as account balances, income from capital gains, or proceeds from the sale of stocks, bonds, and other securities—are transmitted to German tax authorities. If the income was not properly taxed, it no longer escapes detection. Additionally, the purchase of tax CDs and similar measures further reduces the likelihood of concealing tax evasion.
Back Taxes, Fines, Imprisonment
If income in Germany is not properly reported to the relevant tax office, the taxpayer faces not only back tax claims but also accusations of tax evasion. Tax evasion can result in fines and imprisonment. One way out of this situation is the still-available option of filing a voluntary disclosure that leads to immunity from prosecution, as highlighted by MTR Legal Rechtsanwälte, a law firm with extensive experience in drafting effective voluntary disclosures within the framework of tax law.
The strict approach to tax evasion is evident in statistics from the Federal Ministry of Finance. According to these, 9,837 tax crime cases were finally adjudicated in 2022. Of these, 5,968 cases resulted in convictions or penalty orders for tax evasion, as reported by Handelsblatt online on September 2, 2024. Overall, courts imposed a total of 1,616 years of imprisonment and fines amounting to €34.9 million.
Intent in Tax Offenses
To constitute a tax offense, intent must be present—i.e., the deliberate concealment of taxable income or submission of false information to the tax office. However, even negligence without intent constitutes tax evasion, classified as a regulatory tax offense, which can result in fines of up to €50,000.
In cases of tax offenses, significantly higher fines or imprisonment may apply. For instance, tax evasion of €100,000 or more can lead to a prison sentence, which may still be suspended. Once the evasion amount exceeds €1 million, suspension of the sentence is typically no longer possible.
Requirements for Voluntary Disclosure
A voluntary disclosure of tax evasion can still pave the way to immunity from prosecution. However, for it to be effective, certain conditions must be met. It must be comprehensive, covering all relevant tax matters of the past ten years, and it must be submitted in a timely manner. Timely submission means that the tax evasion must not yet have been discovered by the authorities. Whether discovery can already be assumed when a taxpayer’s name appears on a tax CD, investigations are conducted on a business partner, or the tax office orders an external audit is legally disputed and must be examined on a case-by-case basis.
The legislator has intentionally set high barriers for effective voluntary disclosure. Even small errors can render it invalid. To ensure this does not happen, experienced legal counsel in tax law and criminal tax law should be engaged. These professionals understand the criteria for voluntary disclosure and can draft it effectively. Even if immunity from prosecution is no longer possible, voluntary disclosure can still lead to a reduction in penalties.
MTR Legal Rechtsanwälte has extensive experience in tax law and offers discreet support in drafting a legally compliant voluntary disclosure.
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