Automatic exchange of information and voluntary disclosure exempt from criminal liability
In September 2018, the Automatic Exchange of Information (AEOI) carried out with foreign states and the Federal Central Tax Office. It is worth noting that data from Switzerland has been transmitted for the first time. In view of this, the question arises as to whether a voluntary disclosure exempting the taxpayer from prosecution is still possible following this exchange of data. According to the provision of the Section 371(2)(2) of the German Fiscal Code (AO) comes no exemption from punishment in the case of a voluntary disclosure, this is more likely to be considered if the The offence had already been discovered.
According to the case law of the Federal Court of Justice (BGH), the threshold for such a discovery of an offence is set rather low. Accordingly, it is sufficient for the tax authorities to be aware of a source of tax revenue and for the offender, upon a reasonable assessment of the circumstances, to have had to expect the offence to be discovered.
In this context, the question therefore arises as to whether, from now on, the mere notification by the foreign authorities to the German tax authorities is sufficient to constitute discovery of the offence. This question has not yet been clarified. In our view, however, a substantive review of the data is required, particularly on a case-by-case basis. Unfortunately, it is to be expected that decisions will be made to the detriment of the taxpayer in cases where, for example, attempts have been made to evade detection through the use of numbered accounts, shell companies, foundations and similar arrangements, as well as the transfer of assets to so-called tax havens; furthermore, in cases involving undeclared income or money laundering. At present, however, this is all speculative.
Therefore, given that, according to the Federal Central Tax Office, the analysis of the data records and their forwarding to the relevant state tax authorities is not expected to take place before 2020, the disclosure of previously undeclared capital income held abroad should take place, so as not to permanently forfeit the opportunity for a voluntary disclosure that would exempt the taxpayer from penalties.
This is particularly true given that the German tax authorities are expected to make an increasing number of group and list enquiries to foreign countries.
Through such requests, the German tax authorities can obtain information on a large number of individuals whose names are not known to them, whom they have identified either through the description of a pattern of behaviour (group requests) or through an account or credit card link (list requests).
If you have any further questions regarding voluntary disclosure to avoid criminal prosecution, please contact our Specialist solicitors and tax advisers I’d be happy to help.