Tax evasion in Germany: penalties and voluntary disclosure

The offence is described in § 370 Abs. 1 AO: incorrect or incomplete statements about facts of substance for taxation, failing in breach of duty to inform the revenue authorities, or failing in breach of duty to use tax stamps, in each case with the result that taxes are evaded or unwarranted tax advantages are obtained. The attempt is also punishable (§ 370 Abs. 2 AO).

For particularly serious cases, § 370 Abs. 3 Satz 2 AO names standard examples, among them evasion on a large scale and continued evasion using forged or falsified documents. The law names no amount from which evasion is on a large scale; that is a question of interpretation by the courts.

How high a penalty turns out to be is governed by § 46 StGB: the basis is the offender's guilt, and the matters to be weighed include the degree of the breach of duty, the person's previous record, their financial circumstances and their efforts to make good the loss. A fine is imposed in Tagessätze (daily units), the amount of which is set according to the personal and financial circumstances (§ 40 Abs. 1 und 2 StGB).

Where there is a suspicion of a tax offence, the Finanzbehörde (the revenue authority) investigates; these are the main customs office, the tax office, the Federal Central Tax Office and the family benefits office (§ 386 Abs. 1 AO). Where the act constitutes exclusively a tax offence, the authority conducts the investigation independently (§ 386 Abs. 2 AO), but no longer once a Haftbefehl (a written detention order) or a committal order has been issued (§ 386 Abs. 3 AO). The Finanzbehörde may hand the matter over to the Staatsanwaltschaft (the public prosecution office) at any time, and the Staatsanwaltschaft may take it over at any time (§ 386 Abs. 4 AO). In all other respects the Code of Criminal Procedure applies (§ 385 Abs. 1 AO).

Criminal proceedings are initiated as soon as a measure is taken which is recognisably aimed at proceeding against someone in criminal law for a tax offence (§ 397 Abs. 1 AO). At the latest, the initiation must be communicated when the accused is called on to set out facts or to produce documents connected with the offence (§ 397 Abs. 3 AO).

In the taxation procedure, coercive measures are not permissible where the taxpayer would thereby be forced to incriminate themselves in relation to a tax offence; this applies in every case in so far as criminal proceedings have been initiated on that account (§ 393 Abs. 1 Satz 2 und 3 AO). The duties to cooperate under tax law themselves remain unaffected.

Where exemption from punishment fails solely because of § 371 Abs. 2 Satz 1 Nr. 3 oder Nr. 4 AO, § 398a AO provides a second route. Prosecution is dispensed with where the person involved pays the evaded taxes and the interest named within a reasonable period set for them (§ 398a Abs. 1 Nr. 1 AO) and in addition pays a sum of money in favour of the public purse (§ 398a Abs. 1 Nr. 2 AO): 10 per cent of the evaded tax where the amount evaded does not exceed 100,000 euros, 15 per cent where it is more than 100,000 euros up to 1,000,000 euros, and 20 per cent where it is more than 1,000,000 euros.

Two points on this. Where the Finanzbehörde discovers that the information was incomplete or incorrect, the proceedings may be resumed (§ 398a Abs. 3 AO). And the sum of money paid is not refunded if the legal consequence does not follow; the court may set it off against a fine (§ 398a Abs. 4 AO).

Whether a correction makes sense depends on which types of tax and which years are affected and on how far the authority has got. Thresholds and time limits in tax criminal law have changed several times; the version in force at the relevant time is the one that applies. You will find an overview on the page on tax criminal law.