As part of the ongoing fight against tax evasion, the German tax authorities can expect to receive information regarding foreign accounts at the end of September, with the country of Turkey having signed up for the first time last year. And yet it is still possible to submit a voluntary declaration.
Financial data is routinely shared among the participating countries in late September within the framework of the automatic exchange of information (AEOI). More than 100 countries have signed up to this regime, which sees them receive financial information relating to their taxpayers who maintain foreign accounts. Last year was the first year in which Turkey sent data to the German tax authorities. Anyone who is liable to pay tax in Germany and yet fails to declare income in foreign accounts – for instance, in Turkey – is guilty of tax evasion. While it is no longer possible to conceal this untaxed income from the German tax authorities thanks to the automatic exchange of information, we at the commercial law firm MTR Rechtsanwälte can report that it is still possible to submit a voluntary declaration in order to avoid penalties.
The AEOI facilitates the transfer of extensive data pertaining to bank customers who are resident abroad. In addition to the name, address, and tax identification number of the individuals concerned, this also notably covers the account balance, income from returns on capital, and proceeds from the sale of shares, bonds, and other securities. In Germany, the data is initially transmitted to the Federal Central Tax Office (the Bundeszentralamt für Steuern) before being passed on to the relevant tax offices.
Those who have failed to correctly declare this income in Germany may not only have to contend with demands for retrospective payment but also with charges of tax evasion, which can lead to severe penalties such as fines and even custodial sentences.
Anyone who has untaxed income in foreign accounts can avoid these penalties by submitting a voluntary declaration. However, for this to be effective, the declaration must be both comprehensive and have been submitted in a timely manner, i.e., before the offenses are discovered by the tax authorities. Comprehensive means that the voluntary declaration must include any and all information from the past ten years that is relevant from a tax perspective.
The requirements that need to be fulfilled in order for a voluntary declaration to lead to an exemption from punishment are demanding, it being almost impossible for those without expert knowledge and experience to meet them on their own. At the same time, it is worth noting that even minor errors can render a voluntary declaration ineffective.
Lawyers with experience in the field of tax law know what information the voluntary declaration needs to include for it to be effective, and they can take the necessary steps with this end in mind.
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