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Tax Fraud: Voluntary Self-Disclosure

Discreet advice by LHP Attorneys: Submitting a voluntary self-disclosure to the Tax Authority

A voluntary self-disclosure must hit the target and should not create additional problems.  You may trust our experience as tax law specialists and tax advisers. The area of voluntary self-disclosures, for example in cases of foreign accounts and for companies, has developed into an expert’s arena. A quiet and efficient solution can often be found with professional assistance. LHP Attorneys will assist you in all stages of making a voluntary self-disclosure. Peace of mind is ensured by 20 years of practical experience in dealing with the Tax Authorityand the up-to-date expert knowledge of our tax advisers and tax law specialists.

11 reasons for choosing LHP Attorneys for your voluntary self-disclosure

Due to ignorance and the urgency in certain situations - if, for example, another CD containing tax evader’ data has surfaced, or a company tax audit has been foreshadowed, a letter is sent to the Tax Authority, notifying them that further information will soon be forthcoming in respect of a particular circumstance, which is only explained briefly. This is inadequate for the purpose of exemption from prosecution by way of a voluntary self-disclosure, as is the use of template forms, and can lead to to the dreaded “shot in one's own foot”. In these cases, you can read on how to rescue such purportedly invalid self-disclosures here. Our law firm has also published information on “rescue missions” for voluntary self-disclosures in the professional literature (Heuel/Beyer, AO-StB 2013, Seite 140).

Facts about voluntary self-disclosures:

In the following, LHP Attorneys explain the prerequisites for a voluntary self-disclosure which exempts from prosecution, for which types of taxes it is possible and the consequences of making a valid voluntary self-disclosure. You may learn how even an invalid voluntary self-disclosure can still have mitigating effects in sentencing and you may follow the practice-relevant publications by our law firm on the current developments in the area of voluntary self-disclosures.

1. What are the general prerequisites for a voluntary self-disclosure which exempts from prosecution for tax fraud (including “penalty surcharge”)?

2. For which tax offences can a voluntary self-disclosure be made?

3. Contents of a voluntary self-disclosure - Obligation to completeness

4. What formalities must be observed when making a voluntary self-disclosure?

5. Where must a voluntary self-disclosure be submitted?

6. What are the possible estoppels? (Reasons barring a voluntary self-disclosure)

7. Voluntary self-disclosure: Payment of back taxes and interest in due time

8. Unfortunately inevitable: A letter from the Office of Fines and Criminal Matters

9. Voluntary self-disclosure for negligent tax evasion

10. Consequences of a voluntary self-disclosure

11. Does the more beneficial law apply to voluntary self-disclosures?

12. Safety net for invalid voluntary self-disclosures: Termination of criminal proceedings under § 153a Criminal Code (Strafprozessordnung, StPO)

13. Current publications by our law firm on the topic of voluntary self-disclosures

Important notes for voluntary self-disclosures for assets in a foreign country:

The majority of clients with assets in a foreign country have foreign investment funds in their investment portfolio, frequently without being aware. Even experienced tax advisers are usually unfamiliar with the applicable taxation of these investment funds under German law. The legal classification of the respective investment fund company in so-called white, grey or black investment funds or in transparent, partly-transparent or non-transparent investment funds under the Foreign Investment Act or the Investment Taxation act is problematic. The introduction of the half-income system and the discussions in constitutional law and European law in respect of penalty taxes for foreign investment funds has added further uncertainty.  A voluntary self-disclosure submitted in ignorance of these issues will usually be incomplete, which will in turn render it invalid, if detected by the Tax Authority.  In addition to the necessary expert knowledge, professional databases must be used (which attract a fee) for the correct assessment of capital gains.   

In the case of so-called non-transparent investment funds, which means investment funds that have not complied with the German reporting duties, a flat-rate tax will be applied (penalty tax): Under the statutory provisions of § 6 Investment Taxation Act (Investmentsteuergesetz, InvStG) the assessment base for taxation purposes is 70% of the price gain achieved between the first and the last published redemption value of a year, rather than the actually received profits; it must not be less than 6% of the last redemption price assessed for the calendar year (so-called non-transparent investment funds).  This statutory regulation has however been assessed as being unlawful by the European Court of Justice, because it excludes verification of the actual profits (which are frequently much lower). We will make sure, that verifiable, lower estimated amounts will form the assessment bases for a voluntary self-disclosure, in order to protect our clients from claims which are unlawful under European law.  

New regulation on voluntary self-disclosures from 1.1.2015: Practical experience makes a difference!

We have already discussed the new regulation pertaining to voluntary self-disclosures from 1.1.2015. Based on our practical experience and extensive publications in periodicals and for publishing houses, we know the importance of utilizing the particularities of the new regulation becoming law on 1.1.2015 for the benefit of our clients. The preceding modification of the law in May 2011 already resulted in further pitfalls for voluntary self-disclosures. The area of voluntary self-disclosures became an expert’s field and we strongly recommend to obtain sound advice before submitting a voluntary self-disclosure, regardless of the costs entailed. The new regulation on 1.1.2015 resulted in further tightening of the conditions for voluntary self-disclosures, but also provided for some relief, in particular for business owners.

The information provided on this page and on this website aims at providing an initial overview. It is certainly not possible to go into more details within the limited scope of a website, and individual cases must be discussed in a consultation with our experienced attorneys and tax advisers. We have explained some important terms which are frequently misrepresented in the media. These include the mandatory completeness of a voluntary self-disclosure as well as possible estoppels (such as the discovery of an offence or the receipt of an audit notice).

Despite all criticism directed at the new regulations for voluntary self-disclosures: The increasingly complex area of voluntary self-disclosures can be professionally managed by an experienced adviser. Regardless of what the media reports: Voluntary self-disclosures remain a possible option! Exceptional cases (such as the discovery of a tax fraud) must be discussed on a case-by-case basis. LHP Attorneys offer comprehensive services for voluntary self-disclosures.

LHP: Attorneys at Law, Tax Law Specialists, Tax Advisers PartmbB

Cologne

Theodor-Heuss-Ring 14, 50668 Cologne,
Telephone: +49 221 39 09 770

Zurich

Stockerstrasse 34, 8002 Zurich,
Telephone: +41 44 212 3535