Criminal tax law continues to apply to requests for tax deferral during the coronavirus crisis

Michael RainerManaging Partner, MTR Rechtsanwälte

Tax evasion is constituted by sharing inaccurate or incomplete information with the authorities. This also holds true during the coronavirus crisis, tax relief notwithstanding.

To help weather the economic impact of the crisis surrounding the coronavirus, Germany’s federal government has decided to pass tax relief that allows companies and the self-employed to, among other things, defer payment of income tax, corporation tax, and sales tax without incurring interest. It will now also be possible to adjust advance payments. The relevant applications can be submitted to the competent tax office. However, this does not amount to a free ride. We at the commercial law firm MTR Rechtsanwälte note that the information needs to be accurate and complete, otherwise those responsible may be guilty of an offense.

Section 370 of the German Fiscal Code (Abgabenordnung, AO) citesas behavior constituting tax evasion, among other things, sharing inaccurate or incomplete information about facts of material relevance from a tax perspective with the tax authorities or other government agencies, or failure to disclose facts of this nature to the authorities, resulting in lower taxes or other unjustified benefits. The legislation also provides that merely attempting to do so is punishable. Possible consequences arising from a tax offense include fines as well as custodial sentences

Naturally, this provision equally applies to requests for tax deferral stemming from the coronavirus crisis. Deferring taxes is also viewed as a tax benefit. At the very least, a frivolous understatement of tax as defined in section 378 AO is on the cards. Fines are a possibility here as well.

Anyone accused of committing a tax offense ought to take action immediately, as tax offenses are systemically punished with fines or custodial sentences. In particularly egregious cases, a prison term of anywhere between six months and ten years is possible. Germany’s Federal Supreme Court – the Bundesgerichtshof (“BGH” for short) – starts from the premise that a case is particularly egregious from as little as 50,000 euros in evaded taxes, though the prison sentence may ultimately be suspended.

Having said all that, the first thing that needs to be assessed is whether the charge is, in fact, justified. Should proceedings ensue, an attorney-client relationship based on trust and discretion is essential to coordinating an effective approach.

The extent of the tax evasion also has a major influence on sentencing. If accusations are made on the back of company audits or tax investigations in connection with requests for tax deferrals stemming from the coronavirus crisis, lawyers with experience in the field of criminal tax law should be consulted as soon as possible.


Contributing Advisors

Marc KlaasLawyer (Rechtsanwalt), MTR Rechtsanwälte