Criminal Tax Law in Germany

Tax offences under German law are laid down in particular in Sections 369 ff of the German Fiscal Code (AO). Section 370 AO regulates the most practically relevant offence of tax evasion. According to this, …

• anyone who makes incorrect or incomplete statements about tax-relevant facts,
• fails to inform the tax authorities of tax-relevant facts in breach of duty or
• neglects to use tax stamps or tax markers in breach of duty …

and thereby reduces taxes or obtains unjustified tax advantages for themselves or another person, is liable to prosecution. The provision also applies if the offence was only attempted and regardless of whether the offence was committed within the jurisdiction of this Act – i.e. in Germany.

The AO also contains an offence under Section 372 of the AO, according to which anyone who imports, exports or carries out goods contrary to a prohibition is liable to prosecution. However, Section 372 AO is rarely applied in practice, as import and export bans from other provisions, such as Section 29 BtMG with regard to the import and export of narcotics, take precedence in this respect. There is also commercial, violent and gang smuggling in accordance with Section 373 AO and receiving goods from tax evaders in accordance with Section 374 AO.

Beyond the AO, for example, Section 26c of the German Value Added Tax Act (UStG) contains the criminal offence of commercial and gang-related damage to VAT revenue with a penalty of up to 5 years imprisonment.

In addition to criminal tax offences, which are generally punishable by a fine or prison sentence, there are also administrative tax offences. These can be found in Sections 377 ff AO. According to Section 378 AO, for example, anyone who recklessly commits one of the offences listed in Section 370 I AO is committing an administrative offence. A reckless offence is committed if someone breaches their duty of care to a particularly high degree and is particularly culpable for this breach because they could have easily foreseen and avoided the consequences. The fine for such reckless tax evasion in Germany can be up to €50,000.

Tax offences and fine proceedings are initiated by the tax offices and only passed on to the public prosecutor’s offices if necessary. Therefore, essentially the tax offices alone decide whether to discontinue proceedings, issue penalty notices or apply for a penalty order.

Being accused of tax evasion in Germany is a serious charge. In particularly serious cases, the penalty can be up to 10 years’ imprisonment – but fines can also be considerable and place an immense burden on the person concerned. The sentence is usually determined by the amount of tax evaded and whether there are aggravating or mitigating circumstances. Such aggravating circumstances can be, for example, that

• the tax evasion was committed over a longer period of time,
• the person concerned has already been convicted of tax evasion in the past or
• the offence was committed in a particularly reprehensible manner.

However, mitigating circumstances may be that

• the person has made an early confession and shown remorse or
• actively participated in the investigation of the tax evasion.

If there is urgent suspicion and a risk of flight, concealment or repetition, an arrest warrant may be issued, and the person may be remanded in custody on suspicion of tax evasion. Our German criminal defence lawyers are at your side to effectively defend you against the accusation of tax evasion and to protect your interests in the best possible way, regardless of whether you have already been accused, are in pre-trial detention or are considering the possibility of making a voluntary disclosure to avoid prosecution.

Section 371 AO enables individuals to correct information provided to the tax authorities and thus not be penalised under Section 370 AO (tax evasion). The prerequisite for this is that the tax offence is not time-barred, and that the correction or rectification of information is complete. In addition, the liable party must pay the evaded taxes on time, including interest on evasion. Finally, there must be no grounds for exclusion in accordance with Section 371 II AO. According to this, among other things, there is no exemption from punishment if:

• the person involved in the offence, or their representative has been notified of the initiation of criminal or fine proceedings,
• a public official has appeared for the investigation of a tax offence or an administrative tax offence,
• the tax benefit exceeds a certain amount or
• there is a particularly serious case.

The details and requirements of a voluntary disclosure with exemption from punishment are extremely complex and have an immense influence on whether the voluntary disclosure becomes effective and thus whether exemption from punishment occurs. It is therefore extremely important not to act hastily and to seek specialised legal advice.

A conviction for a tax offence in Germany can have considerable and long-lasting consequences. Therefore, such a conviction should be counteracted as quickly and effectively as possible. Our criminal law and tax law practice group advises clients comprehensively on their options for action and chances of success. With experienced legal advice, it is possible in many cases to avoid court proceedings and significantly reduce or completely prevent penalties.