The Tax Evasion Prevention Act and the Exchange of Information on financial accounts
The Act to Combat Tax Evasion has amended the Tax Code in a number of respects…
Due to the Tax Evasion Prevention Act The Tax Code has been amended in a number of respects to facilitate the detection of tax evasion, particularly in cases with a foreign dimension. Among other things, it has been clarified that, where there are sufficient grounds, tax authorities may request information on an unknown number of cases from parties other than those directly involved. In this context, it is worth noting the increased obligation on credit institutions to provide information to the tax authorities, including through the removal of the Section 30a of the German Fiscal Code (AO), which previously governed the tax authorities’ obligation to take particular account of the relationship of trust between credit institutions and their customers during investigations. In addition, the tax authorities’ powers to access account information have been significantly extended. In addition to a number of amendments that are already applicable from 1 January 2018, credit institutions are mandatory from 1 January 2020, to provide, on request, the address and tax details of the account holder, as well as those of other persons authorised to operate the account and those with a beneficial interest in it. Information on safe-deposit boxes is also included.
In addition, the reporting obligations for taxpayers resident in Germany with economic links to foreign countries have been extended, for example with regard to the disclosure of the nature of the economic activity of the foreign company. A suspension of the limitation period for the assessment of taxes on income or proceeds from economic relations with companies in third countries that have been concealed from the tax authorities, as well as a ten-year limitation period for payment in cases of Sections 370, 373 or 374 of the German Fiscal Code (AO) represent further innovations.
In future, a particularly serious case of tax evasion – carrying an extended ten-year limitation period for prosecution – will also be deemed to exist where the taxpayer uses companies in third countries over which he can exercise a controlling influence to conceal facts relevant for tax purposes and, in this way, continuously evades tax or obtains unjustified tax advantages.
Furthermore, on 30 September 2017, the first automatic exchange of information on financial accounts between Germany and 49 countries and territories began in accordance with the OECD’s Common Reporting Standard. Fifty-one countries have now committed to the Common Reporting Standard.
Further information is available directly from the Federal Ministry of Finance at: https://www.bundesfinanzministerium.de/Content/DE/Downloads/BMF_Schreiben/Internationales_Steuerrecht/Allgemeine_Informationen/2017-06-22-automatischer-austausch-von-informationen-ueber-finanzkonten-in-steuersachen-nach-dem-finanzkonten-informationsaustauschgesetz-FKAustG-3009217.html can be accessed.
At present, however, it is unclear when the analysis of the data can actually begin and when the relevant findings will be available to the tax offices responsible for the taxpayers concerned.
In this respect, there is still scope to recognise income that has not yet been declared as part of a voluntary disclosure to explain the matter and secure immunity from prosecution.
Furthermore, the state tax investigation authorities continue to purchase Tax CDs as was recently the case with the state of North Rhine-Westphalia regarding customer relations at the major Swiss bank UBS.
Even in these cases, preventive measures are still possible.
For further information, please contact our specialist solicitors and tax advisers.