Reporting oneself to the tax authorities over inaccurate or incomplete tax returns continues to be a path for tax dodgers to return to a state of compliance. But in order for the voluntary declaration to actually lead to immunity from punishment, a number of conditions have to be met.
One of the outstanding features of German tax law is the possibility of reporting oneself to the tax authorities as a means of obtaining an exemption from prosecution for tax evasion. Drawing on its expertise in tax law and its experience in preparing voluntary declarations, commercial law firm MTR Legal Rechtsanwälte notes, however, that a declaration needs to fulfil certain requirements for it to be capable of leading to immunity.
For instance, it can only have the desired effect if the tax evasion has yet to be discovered or the taxpayer has not yet had to reckon with their offenses being discovered. The declaration must also be complete, which is to say that it must contain any and all information from the past ten years that is relevant from a tax perspective. Tax evaders are thus presented with a chance to make up for failing to submit all the relevant tax information that they were required by law to provide earlier on, or to correct or supplement the information they have already provided.
What’s more, there must not be grounds precluding voluntary disclosure, e.g., the tax authorities have already discovered the offense, or the tax dodger is facing the prospect of their offenses being discovered. Whether this can already be said to be the case if the name of the tax evader might appear on a CD alongside other tax evaders, or if tax audits have been ordered, or if a business partner has been hit by tax investigations, is legally controversial and needs to be addressed on a case-by-case basis. All the more reason to submit a voluntary declaration as early as possible, even if there is not yet an imminent risk of the tax evasion being uncovered.
The requirements that need to be satisfied for voluntary disclosure to be effective are demanding, and even minor errors have the potential to render a declaration ineffective, which is why it is a good idea to consult with attorneys versed in tax law and criminal law as it relates to tax offenses. They will know what information needs to be included in the voluntary declaration for it to be capable of leading to immunity, and they can discretely assist in making the necessary preparations.
Voluntary disclosure remains the best way of avoiding a conviction for tax evasion, the end result of which may be a fine or even a custodial sentence.
Tax law experts at MTR Legal Rechtsanwälte can advise on voluntary disclosure.
