Tax Evasion – Extension of the Assessment Period

BFH, Judgment of April 9, 2025 – Ref. II R 39/21

The assessment period determines how long the tax office is allowed to issue or amend a tax assessment notice. In cases of tax evasion this period can extend to ten years. The Federal Fiscal Court (BFH) specified in its judgment of April 9, 2025 (Ref. II R 39/21) under what conditions this extended period can be applied – and when a mere suspicion is not sufficient.

Overview of the time limits according to the Fiscal Code (AO):

• Standard period: 4 years (§ 169 para. 2 sentence 1 no. 2 AO)
• Negligent tax reduction: 5 years (§ 169 para. 2 sentence 2 AO)
• Tax evasion: 10 years (§ 169 para. 2 sentence 2 AO)

The longer period is often crucial in practice – for example, if the tax office learns late of previously undeclared matters. The BFH judgment clarifies: The 10-year period requires confirmed tax evasion, not just a suspicion.

10 years only in case of actual tax evasion (§ 370 AO)

For the assessment period to be extended to ten years, tax evasion as defined in § 370 AO must be present. To do so, two elements of the offense must be reliably established:

• Objective element of the offense: There must be a tax reduction or an unjustified tax advantage resulting (e.g., through incomplete or incorrect information, or through neglect of duty).
• Subjective element of the offense: The taxpayer must have acted intentionally – that is, knowingly and willfully breached a tax-related duty.

Important: A mere suspicion or unexplained irregularities are not sufficient to automatically apply the 10-year period. The Federal Fiscal Court explicitly emphasizes this point in its decision.

No extended assessment period in case of mere suspicion

The tax authorities may not satisfy themselves with the fact that a situation “could appear relevant under criminal law” when applying the 10-year period. Instead, the question of tax evasion requires a factual examination in the assessment procedure. In the process, the essential circumstances must be established in such a way that it is comprehensible:

• which tax-relevant facts were incorrectly or incompletely declared (or impermissibly not declared),
• which tax was reduced as a result (provable both in principle and, in general, also in terms of amount),
• why intent is to be assumed (e.g., knowledge, deliberate action, indications of conscious concealment).

This prevents the significantly longer intervention period of ten years from being based solely on an unclear suspicion.

The decided case: Missing assets in the estate inventory (inheritance tax)

The ruling was based on an inheritance tax case. The plaintiff and his wife had already named each other as sole heirs in their wills in 1991. The wife was also the sole beneficiary of a foundation she had established and had corresponding assets. Shortly before her death, she transferred the majority of the securities into a life insurance policy concluded jointly with the plaintiff.

After her death in 2007, it was found that certain assets—particularly securities and a life insurance policy—were not correctly declared in the estate inventory to the probate court. These declarations could be relevant for determining the inheritance tax.

The tax office then assessed additional inheritance tax and applied a ten-year period for the assessment, as it assumed tax evasion. Initially, the Nuremberg Fiscal Court confirmed this in an interim ruling. However, at that time, there were no definitive findings on the extent (and partly on the exact amount) of the alleged tax reduction.

BFH: Tax evasion must be conclusively established – Intermediate judgment only in exceptional cases

The plaintiff filed an appeal – successfully. The BFH partially overturned the intermediate judgment.

According to the decision, an intermediate judgment under § 99 Abs. 2 FGO regarding whether the extended assessment period due to tax evasion applies is only permissible if sufficiently concrete findings are present in the proceeding that support the objective and subjective elements of tax evasion. This includes clarifying the basis and extent of the tax claim to the point where the assumption “tax evasion exists” does not remain vague.

An intermediate judgment that affirms the 10-year period “in advance” even though the relevant facts have not yet been sufficiently clarified does not meet the requirements according to BFH jurisprudence.

Vague indications are not enough

The BFH emphasizes: The extended assessment period must not depend on mere indications, suppositions, or unresolved suspicions. This applies regardless of whether a criminal tax investigation is being conducted simultaneously or not.

Consequence: The tax authority must substantiate the conditions of tax evasion in the assessment procedure substantively and legally determine the assessment period correctly on this basis. As long as this is not possible, the 10‑year period cannot be applied “precautionarily.”

Practical significance for taxpayers

The judgment is particularly relevant when the tax office revisits facts years later, such as in cases involving:

• unreported capital investments or insurance models,
• insufficient information in probate or inheritance tax matters,
• incomplete declarations with foreign elements,
• assets discovered retroactively.

In such scenarios, it is often disputed whether there is “just” an error in declaration (possibly negligent) or whether intent is actually present. This precisely determines whether a four, five, or ten-year assessment period applies.

Note: Besides the assessment period, there are other periods and frameworks (e.g., suspensions of commencement and procedural Suspension Periods), which in individual cases may influence the start or end of the period (e.g., §§ 170, 171 AO). Determining which specific period applies regularly requires an examination of the individual case.

Legal Classification and Warning Safety

The article presents general information regarding the BFH decision and does not contain any accusations against specific individuals. No names, identifying details, or factual assertions about private third parties are published that go beyond the described, anonymously reproduced procedural course. The presentation follows the principle that the 10-year period only applies in the case of determined tax evasion.

Consultation in Tax Criminal Law

MTR Legal Attorneys advises clients in tax criminal law and tax procedural law, particularly on questions concerning the assessment period, the classification of breaches of duty (intent/negligence), and communication with tax authorities.

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