Limitation periods in criminal tax law
The limitation period under criminal law (known as the ‘limitation period for prosecution’) must first be distinguished from the limitation period under tax law (known as the ‘assessment limitation period’), although this distinction is not always obvious to taxpayers and the media often refer to limitation periods in general terms. In this article, we would therefore like to provide you with an overview of the issue of limitation periods, focusing on the criminal offence of tax evasion, to help you better understand the legal framework.
To distinguish between the limitation period for prosecution and the limitation period for assessment:
The Statute of limitations on prosecution This concerns the question of whether tax evasion can still be prosecuted at all.
In the Limitation period for assessment The issue, however, is whether the tax office can still issue additional tax demands for certain tax periods or whether tax assessment notices (or amended notices) may still be issued.
Regarding the different deadlines:
The statutes of limitations in criminal law are set out in sections 78 et seq. of the Criminal Code (StGB) and sections 376 et seq. of the Tax Code (AO). They are determined by the seriousness of the offence in question; that is to say, they amount to simple tax evasion (Section 370(1) of the German Fiscal Code (AO)) five years and in particularly serious cases of tax evasion (Section 370(3) of the German Fiscal Code) up to 15 years.
The time limits for tax assessments are governed by sections 169 et seq. of the German Fiscal Code (AO). Where tax has been evaded in accordance with section 370 of the AO, the time limit for assessing the tax is ten years, although it does not end until the limitation period for prosecuting the tax offence has also expired (see Section 171(7) of the German Fiscal Code (AO)). The assessment period therefore in cases of particularly serious tax evasion also extended to 15 years.
On the commencement of the limitation period under criminal law:
The limitation period begins on End of the offence, i.e. the point in time at which the tax evasion took place or an unjustified tax advantage was obtained, and the wrongful act was effectively completed.
At Tax assessments (in particular income tax, corporation tax and trade tax) this is generally the date on which the tax was assessed at too low a rate due to incomplete or incorrect information, and the taxpayer was notified of this by the tax assessment notice issued. Only where the taxpayer has provided no information at all is the relevant date the date on which the taxpayer would hypothetically have been assessed at the latest. For this purpose, the date on which the tax office has essentially completed the assessment work (usually 95%) for the relevant type of tax and the relevant period is taken as the basis (in straightforward cases, this is generally no later than one year).
On the suspension and interruption of the criminal statute of limitations:
The suspension of the limitation period for prosecution under Section 78b of the German Criminal Code (StGB) means that the start of the limitation period is either postponed or the running of a period that has already begun is suspended.
Furthermore, the limitation period for prosecution may also be interrupted by certain measures – such as the initial questioning of the accused or notification that a preliminary investigation has been initiated – in accordance with Section 78c(1) of the German Criminal Code (StGB), in which case the limitation period begins anew after each interruption.
The absolute limitation period (and thus the latest possible date by which prosecution may lapse) is, in this respect, twice the statutory limitation period pursuant to section 78c(3), second sentence, of the German Criminal Code (StGB). With the insertion of section 376( 3 of the General Tax Code (AO) as part of the Second Corona Tax Assistance Act of 29 June 2020, this absolute limitation period for cases of particularly serious tax evasion was even increased to two and a half times the statutory period, and thus to 37.5 years.
Conclusion
It is essential for taxpayers to be aware of the limitation periods so that they can better assess their legal position.
The correct calculation of the limitation period for prosecution is particularly crucial to the completeness of a voluntary disclosure within the meaning of section 371 of the German Fiscal Code (AO) in cases of tax evasion under section 370 AO, as this is the only way – provided the other conditions are met – to ensure that the disclosure has the effect of exempting the taxpayer from criminal liability. In this respect, completeness requires that a correction must be made for all years for which the criminal limitation period has not yet expired.
The limitation period for assessment, on the other hand, determines the risk of having to pay additional tax for the taxpayer, as the further back in time the tax office can go with amended tax assessment notices, the higher the amount of tax to be paid (plus interest on tax evasion at a rate of 6 % per annum in accordance with Section 238(1) of the German Fiscal Code (AO)).
If you are unsure whether you have declared your income correctly for tax purposes, or if you are concerned that proceedings may be brought against you, Criminal proceedings could be initiated, our Specialist lawyers for tax law and Tax consultant We’re happy to be of assistance.