Accusations of tax fraud can be distressing for individuals. The process of voluntary self-disclosure under § 371 German Fiscal Code can therefore seem like a good option available to those who become aware that they may be in breach of the law. The process of voluntary self-disclosure can lead to the prevention of criminal sanctions on an individual. However, as some recent cases involving specific high-profile individuals in Germany have demonstrated, there are other occasions where voluntary self-disclosure does not fully protect the person making the disclosure.
This page will outline the law relating to voluntary self-disclosure in Germany and assess the options available to individuals. It will consider the benefits of voluntary self-disclosure as well as the limitations of the law. Please do not hesitate to contact us directly if you require specialised assistance.
Voluntary Self-Disclosure under German Law
Voluntary self-disclosure is governed by § 371 of the German Fiscal Code (AO), which establishes strict requirements that must be met to qualify for exemption from prosecution.
Three Essential Requirements
To benefit from voluntary self-disclosure protection, all three conditions must be satisfied:
- No Current Investigation The tax offense must not be under investigation when you submit your disclosure. According to § 371 (2)(1) AO, exemption from punishment does not apply if “the person involved in the act or his representative has been notified of the initiation of criminal proceedings or administrative fine proceedings.”
- Complete Disclosure You must declare your entire income, including all previously undeclared amounts. Partial disclosures are insufficient and will not provide legal protection.
- Full Repayment with Surcharges You must make complete repayment within the specified timeframe, including applicable surcharges:
- 10% surcharge for amounts up to €100,000
- 15% surcharge for amounts between €100,000 and €1,000,000
- 20% surcharge for amounts exceeding €1,000,000
Note: Surcharges apply only to amounts of €25,000 and above.
Critical Timing Considerations
The first requirement deserves special attention. If you attempt voluntary self-disclosure after learning of a tax authority investigation, you risk providing evidence that could be used against you in tax evasion proceedings. In such cases, voluntary self-disclosure offers no protection from sanctions.
Consequences of Tax Evasion
Under § 370 AO, tax evasion—which involves submitting false information or omitting financial details for tax purposes—carries severe penalties:
- Standard cases: Fines or imprisonment up to 5 years
- Aggravated cases: Up to 10 years imprisonment for offenses involving falsified documents or abuse of public office
Tax evasion charges can also extend to third parties who knowingly assisted in the evasion.
Risks of Improper Self-Disclosure
Failing to meet the statutory requirements while attempting voluntary self-disclosure exposes you to the same criminal sanctions as tax evasion. Additionally, you may face professional consequences including:
- Commercial activity bans
- Prohibition from holding director positions
- Industry-specific disciplinary actions
The Bottom Line
Voluntary self-disclosure offers significant protection, but only when executed correctly and timely. Given the severe consequences of improper implementation, professional legal guidance is essential before proceeding.
Submitting a Voluntary Self-Disclosure
If you’re considering a voluntary self-disclosure of your tax affairs, time is critical. Contact our experienced tax lawyers immediately to ensure your disclosure is submitted properly and on schedule.
Why Speed Matters
To benefit from the current amnesty provisions, you must act swiftly. Any delay risks the tax authorities discovering irregularities independently, which would eliminate the advantages of voluntary disclosure. Once authorities announce an investigation or begin office or property searches, it’s typically too late to submit a voluntary disclosure.
Submission Requirements
Voluntary self-disclosures can be submitted either in writing or orally (by phone or in person). While written submissions aren’t mandatory, we strongly recommend this approach. Written disclosures are more reliable, allow for thorough review, and provide better documentation. Your disclosure must be complete—any omissions can render the entire submission ineffective. The taxpayer must take full responsibility by either signing the disclosure personally or authorizing their tax advisor to sign on their behalf. In practice, the disclosure should resemble a comprehensive tax return.
While it may seem logical to explain why taxes were previously unpaid – particularly in cases involving misunderstandings or oversights – we advise against providing such explanations. These details aren’t legally required and often create unnecessary complications that could harm your case later.
Professional Guidance is Essential
Our lawyers will work with you to draft a compliant disclosure that meets all legal requirements. Before proceeding with any voluntary self-disclosure, consult with a qualified tax lawyer to fully understand the legal consequences of your decision.
Practice Group: German Criminal Tax Law
Practice Group:
German Criminal Tax Law Cases
Contact our German Tax Lawyers
Please use the contact form to contact our law firm regarding voluntary self-disclosures in tax law in Germany. After receiving your request, we will make a short preliminary assessment based on the information provided and give you a cost estimation.
