Income from Bitcoins: Investigations Involving Collective Requests for Information?

The topic of Bitcoins is now also relevant in terms of taxation since more and more investors invest in cryptocurrencies and since this, ultimately, results in many tax issues. This is increasingly the case with clients. However, not every inaccurate tax declaration is equivalent to tax evasion. After all, in view of the frequently controversial legal situation, premeditation is probably not always clear. Nonetheless, there is no reason for complacency. 

In practice, investigating authorities have switched to harvesting "abundant information" with relatively little effort in numerous industries. In many fields, this is done by means of so-called collective requests for information submitted to agencies (such as for doctors as freelancers) and trading platforms on the internet. A collective request for information is a request by an investigating authority towards a third party (e.g. a trading platform) regarding the provision of information on taxpayers present there. This group of persons is usually identified by a "common denominator" (e.g.: "Which customer generated more than EUR Y in sales (or fees) in the year X"). Our lawyer Dirk Beyer looked into the preconditions for collective requests for information (cf. Beyer, NWB 2013, 2360; NWB 2015, 974).

Moreover, in the field of cryptocurrencies (such as Bitcoins), tax authorities will start to think about using collective requests for information sooner or later. This will, however, raise the question of the conditions under which this is permissible.

 Investigations - not a shot in the dark

There must be sufficient cause for a collective request for information. However, reasonable suspicion is not necessary for this. Instead, it is sufficient if there is the possibility of a tax reduction in the framework of a forecast decision on the basis of concrete indications (e.g. on account of the special characteristics of the business settlement, cf. BFH ruling of 5/10/2006, VII R 63/05). However, the general suspicion which is justified by general experience in life that taxes are reduced more than infrequently in any connection is not sufficient (cf. BFH ruling of 16/ 1/ 2009, VII R 25/08 regarding inquiries on bank customers submitted to banking institutions). This would be an illegal investigation - or a shot in the dark.

The question of whether a collective request for information must include a certain threshold amount (and which amount) has not been legally resolved so far: It is unknown whether, e.g., the following example of the wording is sufficient: "Bitcoin investors with turnover of at least EUR 10,000 (after conversion) in 2017"? Further jurisprudence in this respect remains to be seen.

Note by the LHP tax lawyers: If the offence has not been detected yet, a voluntary disclosure exempting the taxpayer from punishment or penalties might be applicable (if tax evasion applies) in specific cases. In individual cases, we can discuss whether the preconditions for a voluntary self-disclosure exempting the taxpayer from punishment according to section 371 and 378 AO are fulfilled and blocking reasons do not apply. This is different from the taxation correction obligation under section 153 AO if an investor at some point becomes positively aware that his/her previous tax return was incomplete or incorrect.