Tax fraud, also called tax evasion, is a criminal offence in Germany regulated by §§ 369 ff. of the Fiscal Code of Germany (Abgabenordnung – AO). The penalty that can be expected for tax evasion, whether committed or attempted, cannot be described in general terms. The fact is that the penalty depends on several factors and must be assessed differently from case to case. Individual sentencing is carried out, in which the court weighs up the circumstances that argue for and against the offender.
This page will outline the law relating to voluntary tax fraud and related penalties in Germany. If you require our legal assistance, please do not hesitate to contact us directly if you require specialised assistance.
Aggravating Circumstances in Tax Evasion Cases
The amount of evaded taxes is of particular importance for determining a penalty. The German Federal Court of Justice (Bundesgerichtshof – BGH) has developed certain thresholds for assessing penalties in tax evasion cases. In cases of evaded taxes of up to 50,000 euros, generally, only a fine shall be imposed.
According to the current jurisprudence of the German Federal Court of Justice, evaded tax amounts of more than 50,000 euros constitute tax evasion on a large scale (BGH, judgement of 27.10.2015 – 1 StR 373/15). Therefore, a fine is regularly no longer considered in these cases. However, a suspension of the imprisonment sentence on probation is undoubtedly possible, provided that it is a sentence not exceeding two years. An imprisonment sentence without suspension on probation is generally considered appropriate for tax evasion of 1 million euros or more.
However, these thresholds are not rigid because the amount of tax evasion is not the only decisive factor for assessing the penalty. Instead, they leave room for evaluating the circumstances of the specific case. Thus, deviations from the BGH’s thresholds may occur due to aggravating or mitigating circumstances.
While the criminal defence will focus on the mitigating circumstances of the specific case, the tax office or the public prosecutor’s office will probably concentrate more on the aggravating aspects. The following are some of the circumstances that can be considered aggravating circumstances:
- Corresponding previous convictions
- Tax evasion over an extended period
- A particularly objectionable way of committing, e.g. by removing evidence or producing incorrect or falsified documents
- The establishment of permanent evasion systems
- Commercially operated tax evasion
- Evading taxes for which the offender is fiduciary responsible
On the other hand, the penalty may not be increased if no subsequent payment of the evaded taxes, i.e. no compensation for damages, has yet been made.
Assessment of Fines
According to § 40 para. 1 p. 1 StGB, a fine is imposed in daily rates. The number and amount of the daily rates thus determine its amount. The daily rates may be at least five and at most 360. In the case of joinder offences, i.e. if different types of tax, different tax periods or different taxpayers are affected by the tax returns in question,