Undeclared work can become costly – get help from an experienced attorney
The accusation of undeclared work should not be underestimated and can lead to significant fines or prison sentences. Undeclared work occurs, for example, when services or works are performed, but contributions to social security or taxes are not duly paid. If there is an accusation of undeclared work, employers, entrepreneurs, self-employed individuals, or employees should immediately seek support from a lawyer experienced in economic criminal law. After all, undeclared work is anything but a minor offense and is therefore strictly sanctioned.
Characteristic of undeclared work is the failure to pay taxes or social security contributions, thus violating social security reporting, contribution, or record-keeping obligations, as well as tax obligations. Employers, entrepreneurs, self-employed individuals required to pay insurance, or employees receiving social benefits can be held criminally responsible, according to lawyer Michael Rainer, contact person in economic criminal law at the business law firm MTR Legal Attorneys.
Undeclared Work and Illegal Employment
Customs combats undeclared work based on the Act to Combat Undeclared Work (SchwarzArbG). It is thus a criminal offense if social security contributions are not properly paid or tax obligations are not met. In addition to employers, entrepreneurs, and self-employed individuals, employees who receive social benefits and do not report their activities to the social security office can also be liable.
Furthermore, business owners who have not properly registered their trade or craft can also face criminal charges.
However, there are exceptions. For instance, there is no undeclared work if the activity is not aimed at sustainable profit. This is the case, for example, when the work is carried out by relatives or life partners. Even favors, neighborly help, or self-help do not constitute undeclared work. These activities are not reportable even if they are paid minimally. What matters is that these activities are neither profit-oriented nor carried out regularly.
Illegal employment is referred to when employees are employed without a work permit. This also applies if the minimum wage is not met.
Misdemeanor and Crime
In the case of undeclared work, there can be a crime or a misdemeanor. While criminal law can only sanction natural persons, company sanctions are possible under misdemeanor law. In the case of minor misdemeanors, a warning may suffice. Otherwise, a fine or confiscation order may also be imposed.
Withholding employment compensation, which includes social security contributions, is considered a crime. Primarily, the employer is culpable if they fail to properly pay the employee’s social security contributions. This mainly affects contributions to health and nursing care insurance, pension insurance, and unemployment insurance. Incomplete or false statements to the social insurance carrier are also punishable. Withholding employment compensation can result in a fine or a prison sentence of up to five years, and in severe cases, up to ten years.
The severity of the punishment depends on the amount of employment compensation withheld and the duration of the withholding. Ideally, it can be demonstrated that the employer acted negligently, and a fine is sufficient.
Withholding employment compensation also regularly involves tax evasion, as the employer has not properly paid the wage tax for the employee.
Caution with Sham Self-Employment
Sham self-employment can also lead to social contributions not being properly paid. Sham self-employment occurs when a contractor acts as self-employed but is actually classified as a dependent employee. Due to the self-employed status, contributions to social security are not paid. This can also lead to significant back payments.
Behavior in Case of Accusation of Undeclared Work
If customs knock on your door and confront you with an accusation of undeclared work, the accusation should definitely be taken seriously. Given the possible fines and prison sentences, severe consequences loom. In addition, considerable back payments for social security and wage tax can be expected. This requires prudent action and an effective defense strategy to refute the accusations and avoid harsh penalties. Therefore, statements should only be made in the presence of a lawyer, as thoughtless statements can potentially incriminate the accused.
MTR Legal Attorneys advises on accusations of undeclared work and other areas of economic criminal law.
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