• Voluntary Disclosure Leading To Immunity: Planned Tightening From January 1, 2015
  • October 22, 2014 | Author: Michael Rainer
  • Law Firm: GRP Rainer LLP - Frankfurt am Main Office
  • The German government has approved a bill to tighten the rules for voluntary disclosure in the event of tax evasion. The law is expected to enter into force on January 1, 2015.

    GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London - www.grprainer.com/en conclude: With this bill, the German government is essentially following the resolution of the Conference of Federal and State Finance Ministers dated May 9, 2014. If the law enters into force on January 1, 2015, it will become considerably more difficult and expensive for tax evaders to return to a state of tax compliance by means of voluntary disclosure, yet this path will still remain open.

    Among the significant changes, voluntary disclosure will only lead to complete immunity in the event of tax evasion if the amount evaded does not exceed 25,000 EUR. To date, this limit still stands at 50,000 EUR. Where larger amounts are involved, penalty surcharges orientated towards the extent of evaded taxes shall become due. If the sum of evaded taxes amounts to more than 25,000 EUR, a penalty surcharge of 10 per cent shall be payable; if it is greater than 100,000 EUR, the penalty surcharge rises to 15 per cent; and for amounts starting from one million euros, a penalty surcharge of 20 per cent is due. Important: The tax liability plus interest of 6 per cent p.a. must be settled within a short period of time for voluntary disclosure to be able to take effect.

    Furthermore, the statute of limitations is extended to ten years in all tax evasion cases. This means that all information from the past ten years which is relevant from the perspective of tax law must be made known to the tax authorities. It will thus become substantially more difficult to submit a complete voluntary declaration, as it remains the case that only a complete and timely voluntary declaration can be effective. Moreover, certain undeclared foreign capital gains can be subject to tax for a period of time that stretches further back than was previously the case. The period under tax law for the statute of limitations shall only commence as from the day the crime was detected, but at the latest within ten years following the tax evasion.

    Given the planned change in the law, tax evaders should, if possible, submit a voluntary declaration before the end of this year. Having said this, even small mistakes can result in the voluntary declaration becoming ineffective. Experienced lawyers and tax advisors who treat each case discretely and individually should therefore be consulted.