1. Factual Situation: What is tax evasion?
The offense of tax evasion is regulated in § 370 AO (Fiscal Code). According to this section, tax evasion is committed by whoever intentionally brings about a tax reduction through an active act or a culpable omission, or obtains an otherwise unjustified tax advantage. Taxes are deemed to be reduced according to § 370 para. 4 sentence 1 AO, in particular, if they are not assessed, not assessed in full, or not assessed in due time.
Tax evasion through active conduct occurs when false or incomplete information is provided to the tax office in tax returns, tax declarations, or in applications and inquiries. Someone who obtains a financial advantage due to an error or oversight by the tax office does not commit tax evasion.
If, after filing a tax return, its incorrectness or incompleteness is recognized, there is a duty to correct it according to § 153 AO.
However, tax evasion can also be committed by omission. This method of commission is regulated in § 370 Abs. 2 Nr. 2 AO (Abgabenordnung - German Fiscal Code). The core of the regulation is the so-called "leaving tax authorities uninformed." Therefore, only those who are obligated to ascertain tax-relevant facts according to § 149 Abs. 1 Satz 1 AO can be perpetrators of tax evasion by omission.
2. Perpetrator: Who can commit tax evasion?
Only natural persons can be perpetrators. For companies, e.g., a GmbH, the managing director, employee(s), or tax advisor(s) are responsible. With our experience, we advise you in our law firm in Hamburg on tax evasion – whether you are a private individual or a company.
3. Burden of Proof / Burden of Assertion
In the context of a tax criminal proceeding, the principle of ex officio investigation applies, as it does in any criminal proceeding. Both the public prosecutor's office and the courts must, by virtue of their office, investigate the facts and determine the correct tax claim.
However, the criminal tax proceedings are preceded by the tax assessment procedure itself, from which the act of tax evasion first emerges. In the tax assessment procedure, the burden of proof is called the burden of determination. The tax office bears the burden of determination for facts that establish tax liability. Conversely, the taxpayer bears the burden of determination for facts that establish tax exemptions, tax reductions, or other tax benefits, or that cancel or limit the tax claim.
Simplified, this means that the tax office must prove the existence of tax claims, while the taxpayer must prove their extinguishment.
4. Is not paying taxes punishable by law?
No. One does not commit a criminal offense by not paying taxes. If one has correctly and timely declared their taxes but does not pay them after they have been assessed, no criminal offense has occurred.
The tax office is the creditor of the claim, and the taxpayer who has not paid is the debtor. However, once the tax assessment has been issued, the claim is already enforceable and can therefore be directly enforced based on the tax assessment notices.
5. Penalty Framework: What penalty can be expected for tax evasion?
Section 370, Paragraph 1, Sentence 1 regulates the penalty framework for tax evasion. This provides for a prison sentence of up to 5 years or a fine, and in a particularly severe case of tax evasion, even a prison sentence of up to 10 years. The amount of taxes evaded is decisive for determining the penalty. In addition to the guidelines developed by the Federal Court of Justice for sentencing in cases of tax evasion, individual reasons for aggravating or mitigating the penalty must always be taken into account. As experienced lawyers in the field of tax criminal law in Hamburg, we will advise you on what penalty can be expected in your specific case.
6. Termination of Proceedings for Tax Evasion
In criminal tax proceedings as well, a dismissal is possible under Section 153a of the Code of Criminal Procedure (StPO). The key requirement here is the minor nature of the offense, which in turn relates to the amount of taxes evaded. If the amount of tax evasion is up to €10,000, a dismissal under Section 153a of the Code of Criminal Procedure (StPO) is generally possible. Drawing on our many years of experience in criminal tax law, we always strive to achieve the most favorable outcome for you. A dismissal under Section 153a of the Code of Criminal Procedure is one of the desirable options we will examine to determine whether it applies to your case.
7. Voluntary Disclosure
Voluntary disclosure exempting one from punishment under § 371 AO is a special provision of criminal tax law; however, certain requirements must be met for it to apply. In any case, there must be no grounds for exclusion under § 371 AO. Although the requirements may seem straightforward at first glance based on the statutory provisions, they are not so simple in practice when the law is applied.
As experienced defense attorneys in the field of tax criminal law, we are examining whether a voluntary disclosure in your case has a penalty-exempting effect.
8. Statute of Limitations
When it comes to the statute of limitations, it is important to differentiate between tax law and tax criminal law.
In tax law, there are three different statutes of limitations, the calculation of which is complicated and depends on the individual case:
Tax assessment statute of limitations
After the statute of limitations for assessment has expired, the tax office can no longer issue, amend, or revoke a tax assessment.
The assessment period is regulated in § 169 (2) of the German Fiscal Code (AO) and is one year for excise duties and four years for all other taxes. Exceptions to this are import and export duties within the meaning of Article 5 numbers 20 and 21 of the Customs Code. The assessment period begins at the end of the year in which the tax arose. If a tax return or tax declaration is submitted, the period only begins at the end of the year in which it was submitted. According to § 170 AO, the starting impediment is a maximum of three years.
In cases of tax evasion, the statute of limitations can be extended by several years depending on the severity of the offense. The specific circumstances of each case are crucial here.
However, the start of the deadline can also vary on a case-by-case basis.
Based on our many years of experience as attorneys in tax criminal law, we will analyze your individual case and calculate the deadlines relevant to you.
b. Statute of limitations on tax payments
A tax claim that has already been assessed expires after 5 years, according to Section 228, Sentence 1 of the Fiscal Code (Abgabenordnung), and after 10 years for tax offenses and administrative offenses.
Although the beginning of the payment statute of limitations is regulated in § 229 (1) AO, an individual case analysis must also be carried out here, as the payment statute of limitations can be interrupted by certain events, and can even begin anew as a result.
c. Statute of limitations for criminal prosecution
If the so-called statute of limitations for prosecution sets in, the act can no longer be prosecuted criminally.
The statute of limitations for prosecution depends on the severity of the offense:
While the statute of limitations for simple tax evasion is 5 years according to § 78 para. 3 No. 4 StGB, for particularly serious tax evasion according to § 370 para. 3 No. 1-5 AO it is 15 years (§ 376 para. 1 AO). This tightening to 15 years, which came into force in 2021, applies retroactively to all offenses not yet time-barred by 2021.
The start of the limitation period also plays a crucial role in the statute of limitations for criminal prosecution. However, as expected, this depends on various factors, such as the type of tax, whether a tax return was filed or not, and also whether a tax assessment notice exists or not. Furthermore, the statute of limitations for criminal prosecution can be interrupted and also restarted by the actions listed in § 78 of the German Criminal Code (StGB).
The extension of the statute of limitations is limited by the absolute statute of limitations. and is twice the regular statute of limitations in each case.
Through our many years of expertise in tax criminal law, we recognize all deadlines relevant to your case and advise you individually on how to proceed at our firm in Hamburg.
Frequently asked questions
Tax evasion is committed by anyone who: provides the tax authorities or other authorities with incorrect or incomplete information on tax-relevant facts, fails to inform the tax authorities of tax-relevant facts in breach of duty or.
Fines or up to five years' imprisonment are provided for tax evasion. Serious cases involving more than 1 million euros in evaded taxes can lead to prison sentences of up to ten years. In addition, high fines are often imposed. In the case of tax evasion of up to €10,000, it may be possible to discontinue proceedings in accordance with Section 153a. Expert assistance from a criminal defense lawyer experienced in criminal tax law is advisable in any case.
The tax office initiates criminal tax proceedings if there is an initial suspicion. This can arise from a report (from a third party or voluntary disclosure), the results of a tax audit, investments abroad or implausible or questionable information in a tax return.
Due to the complexity of criminal tax proceedings, they can be expected to last around one year, although several years are also possible. If criminal tax proceedings have been opened, it is advisable to consult a lawyer specializing in criminal tax law.
The penalty amount depends on various factors. Fundamentally, the possible penalty can be divided into three stages, depending on the amount of taxes evaded:
- In cases of tax evasion amounting to €100,000 or more, prison sentences are regularly handed down. These can be suspended.
- Prison sentences are imposed for tax evasion of €600,000 or more. Suspended sentences are now only an exception in these cases.
- If taxes of €1,000,000 or more are evaded, imprisonment is unavoidable. The suspension of the prison sentence on probation is excluded.
If you have been informed that tax criminal proceedings have been initiated against you, you should seek legal assistance immediately. Legal counsel with extensive experience in tax criminal law is recommended. It is inadvisable to solely rely on a tax advisor or any other representative of the tax and business advisory professions for your defense.
The most important prerequisite for the discontinuation is also the low culpability here. This is determined, in turn, by the amount of tax evaded. As a general rule, up to an evasion amount of €10,000, it is assumed that a discontinuation pursuant to Section 153a of the Code of Criminal Procedure (StPO) is possible.
For a self-disclosure that exempts from punishment according to § 371 AO, certain prerequisites must be met. For example, there must be no blocking ground according to § 371 AO. Although the prerequisites are regulated, they are very complex.
As experienced defense attorneys in the field of tax criminal law, we can review whether a voluntary disclosure is sensible in your specific individual case based on our expertise in tax evasion.
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