Tax Investigations under German Law

German Tax Lawyers

Tax Investigations under German Law

German Tax Lawyers

An audit by tax investigators, in the form of a search of premises, can concern businesses. It is not unusual to feel overwhelmed or anxious by the prospect of an investigation, even in cases where you believe everything should be in order. Such forms of tax audits can arise due to mistakes made by the tax authorities or through irregularities in their systems.

Regardless of how the tax audit arises, it is essential to remain calm. Do not provide any facts at this point; instead, make sure to contact a tax lawyer immediately. You are not prevented from accessing outside counsel. Even if you are confident that your transactions are above board, having legal counsel available will ensure the audit is carried out correctly.

At Schlun & Elseven Rechtsanwälte, we are a full-service law firm that supports private individuals and companies. We understand that tax investigations can be complex and overwhelming, and we are committed to guiding our clients through every step of the process to ensure the best possible outcome. Whether you are facing an audit, investigation, or litigation, we are here to help you protect your rights and interests.

For specialised guidance in a legal dispute, please do not hesitate to contact us directly.

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Tax Audits and Investigations

Tax audits occur to ensure the information provided by companies and individuals is accurate and complete. For this reason, keeping your records up to date and in good order is essential. Tax audits can have a scope of three years and generally involve the tax authorities checking the documents and tax returns your company has submitted. Where there is a suspicion of tax evasion or negligence in filing tax returns, the limitation period for investigation can be extended.

How strenuously and how often you will be audited depends on many factors, such as your company’s income, the industry your business is involved in and how your previous audits have been received. Larger corporations tend to be audited more often than smaller businesses. Such tax audits can take various forms and may not necessarily be a full search of premises. It is helpful to remain on the good side of the tax authorities, as should inconsistencies appear, it may be possible to resolve them without going before the courts.

Tax investigations can arise where there is a suspicion of tax evasion or other tax criminal offences. As we will see, such investigations can cause difficulty and stress. Tax investigations are allowed under § 208 German Fiscal Code.

The authorities can initiate tax investigations in Germany in several ways. One common trigger is a discrepancy or irregularity found during a routine tax audit. The tax authorities may also receive tips or information from whistleblowers or through international cooperation with other countries tax authorities.

Additionally, German tax law requires certain taxpayers, such as those with significant foreign assets or income, to provide further information or documentation to the tax authorities.

Once an investigation is initiated, the tax authorities may request further documentation, conduct interviews, and even conduct on-site assessments to gather evidence.

Individuals and businesses must seek legal counsel as soon as possible if they become aware of a tax investigation. Failure to cooperate or provide accurate information can lead to severe penalties and consequences.

How to Act during a Tax Investigation

Staying calm and relaxed is the most important action you can take. Even when the tax investigation takes you by surprise, treat the investigators respectfully and remain calm. Mistakes can be easily made with an aggressive response. Resistance is not advisable as it will not achieve anything if the investigators have a search warrant.

However, it is advisable to see the search warrant in question and get a copy. The search warrant outlines the exact parameters of the investigation. There is no “blank check” in such investigations; they must fulfil their set requirements; therefore, having a copy of the search warrant will allow you to see precisely what they are looking for.

When the tax investigator arrives, moving them into an office or another location away from the company’s primary business is best. From here, you can get in contact with our tax lawyers. It is not forbidden or against the law to receive outside counsel.

Please do not provide any additional information until our tax lawyers have consulted with you. Once the tax investigator is aware that your tax lawyers are informed of the matter, they will know to act with care. Professionals will scrutinise their actions.

If you are in the midst of a tax investigation, it is too late to file a voluntary self-disclosure. Ensure that your employees are instructed to keep their silence and inform them that the matter will be resolved by company management.

The tax investigators should also not be left alone within your premises during the investigation. They should, of course, not be prevented from doing their work, but having people stay with them throughout the investigation ensures that you know exactly what they have and have not seen.

Should they request documents or other evidence, ensure they are “seized”. Do not simply volunteer documents.

During the investigation, keeping records of the visit is strongly advised. When they visited, how they acted, what they seized and with as much detail as possible. Keep such documentation safe for our tax lawyers to look over and thus ensure that they have acted within their remit.

In summary, a tax investigation in Germany can be a complex and daunting process. However, by hiring a tax lawyer, reviewing your tax records, cooperating with the authorities, responding to all correspondence, keeping your cool, and following your lawyer’s advice, you can ensure that the investigation proceeds smoothly and in your favour.

Follow-Up to a Tax Investigation

Having followed the above instructions, our tax lawyers will focus on the following steps to be taken.

They will examine your protocols and records of the visit by the tax investigators and determine whether the investigators acted entirely within their legal rights. Should the tax investigators have seized documents that were not within their remit or worked in a manner above what was allowed to them according to their warrant, your tax lawyer will instruct you as to what actions can be taken.

Our lawyers will also examine the copies of the documents which were seized. Having such documents organised and ready to be analysed makes our tax lawyers’ job more straightforward.

The investigation may lead to a satisfactory conclusion on your part, with the tax investigators stating that everything is above board with your returns. They may also find that specific changes should be made to your return. If you do not accept these changes, tax litigation can ensue. Our tax lawyers will be ready if you require their advice and assistance in such circumstances.

Where possible, we will look to resolve tax disputes out of court, as this is a more cost-effective and time-saving route. Should the matter need to go before the courts, our lawyers will provide the representation you need. Contact us today to learn how we can help you during a tax investigation.

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Practice Group: German Tax Law