Tax Authority Inquiries at airbnb: Lessors Should Consider Voluntary Self-Disclosure

Lessors who have not disclosed all their income from letting via airbnb are uncertain about what to do. Experience shows that short-term voluntary self-disclosures are often the best solution in order to get off "at low cost". 

Little effort and a lot of benefit 

Written group inquiries or collective requests for information have become a tried and tested method for the fiscal administration to obtain tax audit material efficiently and effectively. As the inquiry to Ireland shows national borders are not an obstacle for tax investigations, in particular, in the EU. Moreover, Germany has concluded double taxation agreements (DTA) with numerous other countries providing for a so-called extensive information provision, which frequently permits so-called group inquiries. Originally, the political sector intended these group inquiries for inquiries for banks abroad regarding the names of German financial investors. However, they are also suitable as a tool to inquire about other matters. Under national law, group inquiries are also known under the term "collective request for information".

Other industries are also concerned: Freelance doctors, services via agencies 

In the recent past, German tax investigation offices also, e.g., submitted inquiries to agencies for freelance doctors. The aim: data regarding doctors whose placement is arranged through the agency. This auditing material is then distributed to the tax authorities in charge of the respective doctors. Afterwards, these tax authorities then contact the doctors if their fees were not clearly reported in their tax returns. As a result, addressees of the collective requests for information cannot only be banking institutions but all companies and, if applicable, private persons who have similar business relationships with a large number of companies or persons.

What are the risks for the landlords concerned?

Landlords who might be affected should know what the next steps of the tax authorities are. As auditing material, the airbnb data comprising the names and addresses of landlords are forwarded to the respective tax authorities in charge of the individual landlords via the Federal Central Tax Office (BZSt) in Saarlouis. Then, the data is compared with the corresponding tax return. If no difference is found, the landlord will not hear anything more about this. If, however, significant differences are found, he/she has to expect a tax request by his tax authority. In cases which are relevant in terms of the amount concerned, the institution of criminal tax proceedings and, in individual cases, further criminal procedure measures have to be expected (e.g. searches of private residences and confiscation of documents regarding letting). The destruction of documents is pointless. In specific cases, airbnb can confirm the exact letting data.

Lifeline: Voluntary self-disclosure

Landlords who have not reported their full income from letting should think about the option of submitting a self-disclosure granting exemption from punishment according to art. 371 AO. To ensure that a voluntary self-disclosure avoids penalty, the preconditions for a self-disclosure must be fulfilled. This, e.g., includes the so-called requirement of completeness according to art. 371 section 1 sentence 2 AO with a minimum correction period of 10 years. Moreover, the tax plus 6% interest per annum and, if applicable, a penal surcharge must be paid and there must be no blocking reasons preventing the voluntary self-disclosure (art. 371 section 2 AO). In the present case, blocking reasons can include, in particular, the detection of the offence (art. 371 section 2 sentence 1 no. 2 AO).

The question of whether there is a time window and, if applicable, which time window applies to a voluntary self-disclosure until the detection of the offence remains open. The tax authorities might still accept a voluntary self-disclosure within a certain time frame. However, it is not the fiscal administration but the respective prosecutor or criminal judge who decides on the effectiveness of a voluntary self-disclosure. Moreover, there can be further blocking reasons (e.g. announcement of an audit order or the appearance of a public official for an audit at the premises). If a voluntary self-disclosure is ineffective, it still often results in a certain reduction of the sentence provided it facilitates the easy subsequent taxation and avoids conflicts. These cases can mostly be resolved in return for the payment of an acceptable fine according to art. 153a StPO [German Code of Criminal Procedure] which is recorded in the criminal record. Without a voluntary self-disclosure, fines which are astonishingly high (for the parties concerned) and investigation measures under criminal law (e.g. confiscations) are possible.

The LHP law firm from Cologne recommends that the possibility of a voluntary self-disclosure be examined as soon as possible.