Correction of Final Tax Assessments after the Completion of a Tax Audit: Scope for Review and Current Federal Fiscal Court (BFH) Case Law
The legal question of whether already final tax assessments can be amended after a tax audit regularly concerns both companies and high-net-worth individuals. This issue becomes particularly significant when tax-related circumstances are subsequently reassessed or previously unknown facts are revealed. In its ruling of 10.07.2024 (Case No.: III R 14/22), the Federal Fiscal Court (BFH) clarified the circumstances and criteria under which such tax assessments may be amended.
Significance of Finality and Its Limits
Once tax assessments become formally and materially final, they generally have a binding effect for both the tax authorities and the taxpayers. This legal certainty is one of the fundamental principles of tax law and serves to prevent arbitrariness and unforeseeable subsequent claims.
Nevertheless, the Fiscal Code (AO) and, in particular, the regulations set out in §§ 173 et seq. AO open up the possibility, under narrowly defined conditions, of subsequently amending even final tax assessments. In practice, the so-called ‘disclosed fact’ within the context of a tax audit often applies.
Requirements for Amendment under § 173 AO
New Facts or Evidence
Central to the possibility of amendment under § 173 para. 1 no. 1 AO is that subsequently ‘new facts or evidence’ come to light which, if properly considered, would have resulted in a different tax assessment. Thus, the authority to amend mainly applies to circumstances that are revealed for the first time or previously unknown.
Breach of Duty of Care
According to case law, an amendment is generally excluded if the new facts failed to be included in the original assessment as a result of the taxpayer’s fault, such as due to incomplete information or belated disclosures. However, the tax authority can also be held liable for breaching its duty to investigate and advise, especially where there are significant deficiencies in the investigation.
Relevance of the Tax Audit for the Power of Amendment
Scope and Powers of the Tax Audit
The tax audit serves to comprehensively review a taxpayer’s fiscal circumstances. It grants the tax administration extensive investigative powers and enables access to relevant accounting records, contracts, and other documents. Facts discovered during this process that were previously unknown can justify the subsequent correction of final assessments—but the tax authorities are subject to strict requirements in this regard.
BFH Judgment of 10.07.2024 (III R 14/22): Key Points and Practical Implications
In its recent ruling, the BFH emphasized that a correction under § 173 AO is only permissible if the new facts were genuinely neither recorded in the files nor recognizable prior to the completion of the tax audit. The senate made clear that the tax authorities’ power to amend does not generally extend to all circumstances discovered during an audit, but always requires careful and differentiated consideration.
The BFH specifically noted that the tax administration, as part of its investigative procedure, has a proactive duty to clarify and exercise due care. If relevant circumstances are left unexplained despite clear indications, this may preclude subsequent amendment of final tax assessments.
Impact on Companies, Investors, and Private Individuals
The BFH’s decision reinforces the principle of reliability and predictability of tax assessments. The tax authorities must demonstrate and substantiate that an amendment is based solely on facts that were neither known nor, with due diligence, could have been known at the time the assessment was issued or during the ongoing proceeding.
For companies, investors, and high-net-worth individuals, this means a more precise ability to calculate tax risks, but also the necessity, during a tax audit, to disclose all tax-relevant circumstances and documents transparently and comprehensively in order to avoid disadvantageous additional claims.
Interaction with Other Correction Provisions
It should be emphasized that in addition to § 173 AO, further correction provisions—such as those regarding apparent errors (§ 129 AO) or the presence of tax evasion (§ 370 AO)—may also apply in individual cases. Here too, careful examination of the respective factual requirements and the interplay between different correction options is needed.
Conclusion
The BFH judgment of 10.07.2024 underscores that the subsequent correction of final tax assessments is restricted to narrow statutory prerequisites. The practical relevance of this principle ranges from tax audits to the advanced application of law in complex corporate structures. Careful documentation and legally secure procedural design remain of central importance.
For further legal clarification regarding the amendability of tax assessments following a tax audit and risk management during audit proceedings, the lawyers at MTR Legal are pleased to assist you.
