The Bundesgerichtshof (BGH, Federal Court of Justice) has clarified that a subsequently granted VAT exemption does not nullify tax evasion that has already been completed. However, retroactive tax exemption may be taken into account in the offender’s favour when determining the sentence (BGH, decision of 5 August 2026 – 1 StR 197/26).
Failure to Submit Recapitulative Statements for Intra-Community Supplies
Following a period of pre-trial detention on suspicion of evading VAT and beer tax, the management board member of a stock corporation operating in the beverage trade decided to restrict the company’s business activities to non-alcoholic beverages. In October 2022, the company resumed operations and supplied goods to France and Luxembourg. The management board member treated the transactions as VAT-exempt intra-Community supplies.
He did not submit any VAT returns. Nor were any accounting records kept. By September 2024, the stock corporation had generated revenue of approximately EUR 3.85 million in this manner.
Recapitulative Statements Submitted Only Before the Criminal Trial
To qualify for the claimed tax exemption, recapitulative statements would have had to be submitted to the Bundeszentralamt für Steuern (Federal Central Tax Office). The management board member also failed to submit these within the applicable deadlines. As a result, VAT totalling approximately EUR 636,000 was evaded.
It was only a few days before the criminal trial began in October 2025 that the management board member submitted the statements. In doing so, he sought to have the supplies treated retroactively as VAT-exempt and, at the same time, to avoid criminal liability.
Conviction for Tax Evasion in Five Cases
The Landgericht Mannheim (Mannheim Regional Court) convicted the management board member of tax evasion in five cases and imposed an aggregate prison sentence of two years and nine months. In the court’s view, although the statements submitted late could partially eliminate the VAT liability with retroactive effect, this did not affect the tax offences that had already been completed.
The First Criminal Division of the Bundesgerichtshof upheld this assessment. The convicted person’s appeal on points of law was unsuccessful.
Proper Reporting as a Requirement for Tax Exemption
The tax exemption for intra-Community supplies under § 4 Nr. 1 Buchst. b UStG (German Value Added Tax Act) requires the recapitulative statements pursuant to § 18a UStG to be submitted on time, in full and correctly. According to the decision, this is not merely a formal obligation but a substantive requirement for VAT exemption.
In particular, this provision is intended to prevent VAT fraud in cross-border trade in goods. Since the management board member had initially failed to submit the required statements, the supplies were not exempt from VAT when the respective filing deadlines expired. According to the court’s findings, the breach of his filing obligations meant that the tax evasion was completed in all five cases.
Statutory Basis Since the Jahressteuergesetz 2019
Through the Jahressteuergesetz 2019 (German Annual Tax Act 2019), the legislature implemented requirements under EU law. The newly inserted second half-sentence of § 4 Nr. 1 Buchst. b UStG made the tax exemption conditional on the submission of proper recapitulative statements pursuant to § 18a Abs. 1 Satz 1 UStG. The legislative materials in BT-Drs. 19/13436 (Bundestag printed paper 19/13436) are also cited in the decision.
These principles apply for the first time to intra-Community supplies made after 31 December 2019. According to the tax authorities’ interpretation set out in the Umsatzsteuer-Anwendungserlass (German VAT Application Decree), the requirements for tax exemption are not met if the taxable person, with respect to the recapitulative statement for the relevant period:
- does not submit it,
- submits it incomplete or
- submits it with incorrect information.
Whether the reporting obligation has been properly fulfilled can only be determined subsequently. This is because, as a general rule, the recapitulative statement must be submitted by the 25th day following the end of the respective reporting period.
Subsequent Tax Exemption Does Not Eliminate Criminal Liability
Based on the statements submitted late, the tax authorities granted the VAT exemption retroactively in three cases. According to the decision of the Bundesgerichtshof, this does not retrospectively nullify the tax evasion offences that had previously been completed.
§ 370 AO (German Fiscal Code) protects the public interest in timely and complete taxation. The criminal wrongdoing already lies in the risk posed to tax revenue by withholding information required for taxation. A tax exemption granted only at a later date cannot retrospectively eliminate a risk that has already materialised.
A different assessment would make it possible to disregard tax filing obligations initially and submit the required information only after the offences had been discovered. Nor had a voluntary disclosure granting immunity from prosecution under § 371 AO been made in the case at issue.
Retroactive Elimination of Tax Liability Affects Sentencing
Although the subsequent VAT exemption did not eliminate criminal liability, it was relevant to sentencing. If the tax liability is retroactively eliminated, the criminal court must take this circumstance into account in the offender’s favour.
If the offender personally creates the conditions for tax exemption by subsequently submitting the required statements, this may also constitute positive post-offence conduct. In the view of the Bundesgerichtshof, the Landgericht Mannheim had adequately taken into account both the retroactive elimination of the tax liability and the post-offence conduct when determining the sentence.
Importance of Proper VAT Returns
The decision highlights the independent significance under criminal law of providing timely and complete information in relation to intra-Community supplies. Although a retroactive tax correction may affect the amount of the remaining tax liability and the sentence, it does not retrospectively nullify tax evasion that had already been completed. The full text of the decision of the First Criminal Division is available in the official decisions database of the Bundesgerichtshof.
Companies, corporate officers and private individuals dealing with comparable issues relating to VAT or tax criminal law can obtain tax law advice from MTR Legal Rechtsanwälte.
