Voluntary disclosure enables return to tax compliance
Voluntary disclosure for tax evasion can protect against penalties and pave the way back to tax compliance. However, this can only succeed if the disclosure is professionally prepared and meets the requirements set by the legislator.
Tax evasion is strictly sanctioned and the days of tax havens are largely over. Anyone who has deposited untaxed income in foreign accounts must sooner or later expect to be discovered. Voluntary disclosure can protect against penalties for tax evasion, but it should be submitted at an early stage. If the tax evasion has already been discovered by the tax authorities, the path to immunity from punishment may be blocked, according to the business law firm MTR Legal Rechtsanwälte, which also provides advice in tax criminal law and the preparation of legally effective voluntary disclosures.
With voluntary disclosure, tax-relevant facts that have previously been unlawfully concealed are disclosed to the tax office. If the disclosure meets the necessary requirements, prosecution for tax evasion can be avoided.
Voluntary disclosure must be complete
To achieve immunity from prosecution, the disclosure must be complete and accurate. It must include all tax-relevant facts for all non-barred tax offenses of a particular tax type. If only part of the tax offenses is disclosed, immunity is not granted.
The offender must also be able to fully pay the evaded taxes within a deadline set by the tax office. If the amount of evasion exceeds 25,000 euros per type of tax, a surcharge of up to 10 percent will apply.
File voluntary disclosure in time
Voluntary disclosure must also be filed in due time. There must be no grounds for exclusion. For example, voluntary disclosure is no longer possible if the offense has already been discovered by the tax authorities or if the taxpayer should have anticipated its discovery. This can be the case during ongoing tax audits or investigations. Whether discovery can already be assumed if the taxpayer’s name appears on a tax CD, if tax investigations are carried out on a business partner, or if the tax office orders an external audit, is legally disputed and should be assessed individually. If the tax evasion has already been fully or partially uncovered, voluntary disclosure is no longer possible.
Small errors can lead to invalidity
The requirements set by the legislator for an exempting voluntary disclosure are high. Even minor errors can render the disclosure entirely invalid. The exempting effect is already lost in the case of formal or substantive deficiencies. However, even an invalid voluntary disclosure can in certain cases still have a mitigating effect on punishment. For example, if it is interpreted as an expression of genuine remorse, it can mitigate the penalty.
To avoid such errors, a voluntary disclosure should not be prepared independently, but with the assistance of qualified experts. Lawyers with experience in tax law and tax criminal law know which details a voluntary disclosure must include and what formal requirements must be met for the disclosure to be effective.
Advantages of voluntary disclosure
Although high demands are placed on a legally effective voluntary disclosure, the effort is worthwhile in many cases. Those who come clean with the tax office in a timely and complete manner can avoid criminal prosecution for tax evasion altogether. In addition, voluntary disclosure can help prevent embarrassing and burdensome searches, seizures, and other measures if submitted before such proceedings are initiated.
Particularly for entrepreneurs, self-employed individuals, and public figures, a criminal tax complaint can cause massive reputational damage. A successful voluntary disclosure can protect against a public criminal trial and damage to one’s reputation.
Tax offense only with intent
It should be noted that intent is required for a tax offense. In other words, taxable income must have been deliberately concealed or false information given to the tax office. However, even if only negligence and not intent was present, tax evasion is still deemed to have occurred, which can be punished as a tax regulatory offense with a fine of up to 50,000 euros.
MTR Legal Rechtsanwälte has extensive experience in tax criminal law and in the preparation of an effective voluntary disclosure.
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