The accusation of tax evasion is a serious charge in Germany. In the event of a criminal conviction, high fines and prison sentences cannot be ruled out. However, a precisely developed defence strategy can make a decisive contribution to saving the accused from a fine or prison sentence or at least significantly reducing the sentence.
Legal protection against tax evasion accusations requires comprehensive knowledge of all standards relevant to criminal tax law, as well as the latest case law and the practices of the tax and customs authorities. In this context, the team of lawyers at Schlun & Elseven offers professional support—whether in the event of a tax audit or when preparing a voluntary self-disclosure (Selbstanzeige). If required, we can represent you in dealing with the customs and tax authorities to achieve the best possible result for our clients.
Sentencing in Cases of Tax Evasion in Germany
Tax evasion is a criminal offence in Germany regulated in § 370 German Fiscal Code (AO). The amount of tax evaded is of particular importance for sentencing. In this context, the German Federal Court of Justice (Bundesgerichtshof, BGH) has developed certain threshold values. Accordingly, evaded tax amounts of more than 50,000 euros constitute large-scale tax evasion. A fine is generally no longer an option in such cases. However, a suspended custodial sentence may be possible under certain circumstances, provided the sentence does not exceed two years. A custodial sentence without a suspended sentence is generally only imposed for tax evasion of 1 million euros or more.
However, these thresholds are not final, as the amount of tax evasion is not the only decisive factor in determining the penalty. Instead, discretion is left to assess the circumstances of the individual case. For example, there may be deviations from the threshold values of the Federal Court of Justice due to aggravating or mitigating circumstances.
While the criminal defence strategy in tax evasion cases will focus on the mitigating circumstances of the specific case, the tax office or the public prosecutor’s office will tend to concentrate on the aggravating aspects. Aggravating circumstances are
- Relevant previous convictions,
- Tax evasion over a more extended period of time,
- A particularly reprehensible way of committing the offence, e.g. by removing evidence or submitting false or falsified documents,
- The establishment of permanent evasion schemes,
- Commercialised tax evasion and
- The evasion of taxes for which the offender is responsible in a fiduciary capacity.
Assessment of Financial Fines in Tax Evasion Cases
According to § 40 (1) sentence 1, StGB, a fine is set in daily rates. Therefore, the number and amount of the daily rates determine the amount of the fine. The number of daily rates must be at least five and no more than 360. In the case of a combination of offences, i.e. if different types of tax, different tax periods or different taxpayers are affected by the tax returns in question, up to 720 daily rates can be imposed cumulatively.
The number of daily rates is based on the offender’s culpability. The amount of tax evaded and mitigating or aggravating circumstances are taken into account. In practice, the established penalty tables of the criminal case offices of the tax authorities are often used to derive the number of daily rates for a certain amount of evaded taxes. These penalty tables can differ from state to state, so it is essential to determine which figures can be used in a specific case.
A deviation from these tables, both positive and negative, is entirely possible and necessary to consider the particularities of the individual case. In addition, the amount of the daily rates must be determined considering the offender’s personal and financial circumstances. A daily rate can be a minimum of 1 euro and a maximum of 30,000 euros. The amount of the daily rate is generally based on the average daily net income. The time of the conviction is decisive, not the time of the offence. In practice, the most recent income tax assessment is regularly used. If the offender provides no or insufficient information about their income, the income, assets and other assessment bases for the daily rate can be estimated. When calculating the amount of the daily rate, the offender’s maintenance obligations and extraordinary expenses, for example, must be considered appropriately by deduction.
Mitigating Circumstances in Tax Evasion Cases in Germany
A range of reasons can be considered to mitigate a sentence for tax evasion in Germany. According to § 46 (2) StGB, the motives and objectives of the offender, the attitude expressed in the offence, the extent of the breach of duty, the manner in which the offence was committed, and the consequences caused by the offence as well as the behaviour of the offender in the subsequent period must be taken into account when determining the penalty. The following are further examples of mitigating circumstances:
- Inexperience with the German tax system,
- Facilitating tax evasion through negligent behaviour on the part of the tax office or by not intervening against recognisable tax evasion,
- Tax evasion through delay – i.e. a merely delayed tax assessment,
- Termination of tax evasion on one’s own initiative,
- An early confession and remorse,
- Active cooperation in the investigation of tax evasion,
- Attempted tax evasion,
- No previous convictions,
- Lengthy proceedings and delays in proceedings for which the offender is not responsible,
- A previously failed voluntary disclosure per § 371 AO, for example, due to incompleteness,
- The endeavour to compensate for the loss by paying the evaded taxes promptly.
Record in the Police Clearance Certificate in Germany
Entry in the police certificate of good conduct is not made for fines of less than 90 daily rates or corresponding custodial sentences. If applicable, the criminal defence should try to avoid an entry in the police record by applying for a lower sentence. However, this presupposes that the criminal record does not yet contain an entry at this time. If an entry has already been made, a second entry will be made despite a sentence of less than 90 daily rates.
Finally, if there is no entry in the police record despite a conviction, you may henceforth refer to yourself as not having a criminal record in accordance with § 53 BZRG.
Schlun & Elseven: Legal Assistance in Tax and Commercial Criminal Law
If you have been accused of tax evasion in Germany or any other related tax offence, do not hesitate to contact our law firm. House searches and confiscations may be carried out at the very beginning of the investigation, and in serious cases, you may even be remanded in custody.
Working closely with our team of German tax lawyers enables us to develop a strategy that is customised to your case. With the help of a lawyer, it is often possible to fend off accusations of a tax offence and thus avoid court proceedings. We are committed to ensuring that your rights and interests are always protected and that the best possible result is achieved for you.
Practice Group: German Criminal Tax Law
Practice Group:
German Criminal Tax Law Cases
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