Subsidy Fraud in Germany

Subsidy fraud is regulated in Section 264 German Criminal Code and is a special offence of fraud. The purpose of this offence is to prevent the misappropriation and misuse of public funds.

A person is liable to prosecution for subsidy fraud under Section 264 (1) of the Criminal Code, that

• provides the subsidy provider with incorrect or incomplete information about facts relevant to the subsidy, which are advantageous to the subsidy provider or the other person,
• uses an object or a monetary benefit, the use of which is restricted with regard to a subsidy, contrary to its restriction of use,
• fails to inform the subsidy provider of facts relevant to the subsidy, or
• makes use in a subsidy procedure of a certificate of entitlement to a subsidy or of facts relevant to the subsidy obtained by means of incorrect or incomplete information.

It should be noted that it is sufficient for subsidy fraud if incorrect or incomplete information is provided. However, it is irrelevant whether the subsidy provider is thereby deceived and whether the subsidy is actually granted. Moreover, according to Section 264 (4) of the Criminal Code, anyone who merely attempts to use a subsidy contrary to its restriction of use is already liable to prosecution.

The term subsidy is defined in § 264(8) StGB. According to this definition, a subsidy is a payment from public funds under federal or state law to businesses or enterprises that is granted at least in part without market consideration and is intended to promote the economy. In addition, a subsidy is a benefit from public funds under European Union law that is granted at least in part without market consideration. A benefit is usually a monetary payment.

All facts that have been designated as such by law or on the basis of a law by the provider of the subsidy are relevant to the subsidy (§ 264 (9) no. 1 StGB). In addition, facts are relevant to the subsidy on which the granting, award, recovery, continuation or retention of a subsidy or a subsidy advantage depends (§ 264(9) no. 2 StGB). The subsidy recipient is therefore obliged to disclose all these facts.

Criminal liability for subsidy fraud continues to require intent, i.e. that the offender acted with knowledge and intent with regard to the realisation of the offence. The perpetrator must therefore at least have considered it possible and nevertheless have accepted it.

It should be noted that subsidy fraud can also exist if the offender only acted recklessly (§ 264 (5) StGB). For example, anyone who has carelessly provided incorrect or incomplete information when applying for a subsidy or who has carelessly used a subsidy contrary to its restriction of use is liable to prosecution. Recklessness requires particular indifference or gross carelessness. A person who, for example, erroneously assumes that the information he or she has provided is correct or who fails to recognise the restrictions on the use of the subsidy may also be convicted of recklessness.

Subsidy fraud in Germany is generally punishable by a prison sentence of up to five years or a fine. The sentence depends on the individual case and in particular on whether and in what amount the subsidy has been paid out. In the case of repayment of the subsidy, the reparation of damage shall be positively taken into account (§ 46 (2) StGB).

In particularly serious cases, a custodial sentence of six months to ten years is imposed. According to § 264 (2) sentence 2 German Criminal Code, a particularly serious case generally exists if the offender

• obtains an unjustified subsidy on a large scale for himself or another out of gross self-interest or by using counterfeited or falsified documents
• abuses his or her authority or position as a public official, or
• takes advantage of the assistance of a public official who abuses his powers or position.

However, anyone who voluntarily prevents the subsidy from being granted as a result of the offence is not punished (§ 264 (6) sentence 1 StGB). Active repentance thus constitutes a ground for annulment of the sentence. However, if the subsidy is not granted without the perpetrator’s intervention, they will be exempt from punishment if they voluntarily and seriously endeavour to prevent the granting of the subsidy (§ 264 (6) sentence 2 StGB).

Insofar as criminal liability for subsidy fraud cannot be ruled out, it is advisable to seek the assistance of an expert lawyer in German criminal law in view of the high threat of punishment. Finally, it should also be noted that one is considered to have a criminal record from a fine of 90 daily rates.

Beyond a custodial sentence or a fine, a conviction for subsidy fraud may have other consequences. For example, in addition to a custodial sentence of at least one year, the court may deprive the person of the ability to hold public office and to obtain rights from public elections (§ 264 (7) sentence 1 German Criminal Code).

In addition, a conviction to a custodial sentence of at least one year constitutes a statutory ground for disqualification from holding an executive board or managing director position. For example, the position as managing director of a limited liability company (GmbH) is excluded for a period of five years from the date of the final sentence pursuant to §§ 6 (2) (2) & (3e) GmbHG. The same applies to the position as executive board member of a public limited company.

For certain professions, a conviction for subsidy fraud may also result in a ban from the profession (§ 70 StGB). This is possible e.g. for doctors, tax consultants, lawyers as well as members of the health professions.

The Coronavirus emergency aid is a subsidy intended to support micro-enterprises and self-employed sole traders in need. Accordingly, the applicants must state the reasons for their existence-threatening economic situation due to the coronavirus pandemic. In doing so, they must affirm that they have experienced economic difficulties as a result of the coronavirus pandemic that threaten their existence. It is sufficient that the Corona pandemic was at least a contributing cause.

However, if it turns out that the coronavirus emergency aid was wrongly paid, it may not only have to be repaid. Furthermore, an investigation could be initiated to examine whether the applicant has committed a criminal offence. This is because an initial suspicion of subsidy fraud already exists if incorrect or incomplete information about subsidy-relevant facts is provided in the context of the application for coronavirus emergency aid. A corresponding reference to this offence is included in the application forms.

Caution is also required when using the emergency aid received. It may also constitute subsidy fraud if the emergency aid is used contrary to the restrictions on its use.