Dubai Leaks: Federal Central Tax Office acquires data from the Dubai Land Department (DLD)
The Federal Central Tax Office (BZSt) has acquired data, current as at 2018, on more than 1 million property owners and approximately 900,000 property shares in Dubai.
The DLD is the equivalent of the German Land Registry and has even broader responsibilities.
The data obtained consists of property holdings, each of which is associated with the owner’s name, date of birth, passport number, nationality, address, contact details, the size of the property and its intended use.
However, it is not only data up to 2018 that will be relevant under criminal law. A Another leak contains data up to 2020, which are being analysed by a non-profit organisation in Washington D.C. and may be handed over to the relevant state authorities in the coming months and years.
Under the double taxation agreement between Germany and the United Arab Emirates, the right to tax income from letting and leasing lies with the country in which the property is situated. If a person subject to unlimited tax liability in Germany derives income from letting and leasing in Dubai, this income is initially taxable in Dubai. However, as no income tax is levied there, the income is effectively subject to full taxation in Germany.
Contrary to the obligation to pay tax on this income in Germany, an analysis of the data records has revealed that, in many cases, no details or only incomplete details regarding the property were provided, and that the income was not declared for tax purposes either.
The BZSt has passed the data on to the state tax authorities, which are now assessing whether the data appears to be valid. If the review gives rise to suspicion of a criminal tax offence, the matter will be referred to the tax investigation department / the department for fines and criminal matters, which will initiate criminal proceedings without first contacting the taxpayer.
However, if the relevant tax office makes a request for clarification of the facts, this does not yet constitute a discovery of the offence within the meaning of. Section 371(2), first sentence, point 2 of the German Fiscal Code (AO) . It is likely that a voluntary disclosure, which would exempt the individual from penalty, can still be made here regarding the undeclared income from letting and leasing or the source of funds.
However, care should be taken to ensure that a Voluntary disclosure leading to immunity from prosecution is only valid is when they, according to Section 371(1) of the German Fiscal Code (AO) is complete. This includes all instances of tax evasion of the same type for which the limitation period has not yet expired. In order to make an effective voluntary disclosure that exempts the taxpayer from criminal liability, professional help and advice should be sought.
If you are unsure whether you have declared your income correctly for tax purposes, or if you are concerned that criminal proceedings might be brought against you, our specialist solicitors and tax advisers will be happy to advise you.