Tax criminal law

Tax criminal law consists of tax and customs offences. In addition to tax evasion, further criminal offences are set out in tax laws. In addition, there are a large number of tax offences which are punishable with a fine.

Tax evasion – central provision of criminal tax law

The offence of tax evasion is the core provision of criminal tax law. Whoever violates declaration obligations can be punished. It general, it can lead to criminal investigations if tax returns are not submitted, submitted late or contain incorrect or incomplete information.

Tax law is very complex and constantly changing. One of the reasons for this is the growing influence of European law. Even for experienced executives it is often not evident whether a certain conduct, perhaps even recommended by banks or consultants, is permissible for tax purposes or not.

In principle, the taxpayer may always take the most favourable legal position for tax purposes. However, there is a thin line between legal tax structuring or tax optimization on the one hand and illegal structuring on the other. What today is considered a loophole or permissible tax savings model can be seen critically in the future. This is reflected, for example, in the investigations regarding tax-motivated share transactions around the dividend date (so-called “Cum/Ex” or “Cum/Cum” transactions).

Higher penalties for tax offences

Tax offences are increasingly severely punished. The sentencing has been considerably tightened in recent years. In addition, the legislator has raised the hurdles for correcting tax errors so high that even experts often cannot provide a valid recommendation. If tax evasion is detected, fines or imprisonment may be imposed. If the tax loss exceeds certain limits, courts and authorities usually assume a particular serious case. In companies the relevant thresholds are easily reached, e.g. in the case of VAT. In addition, auditors are obliged to involve the criminal department of the tax office if there are indications for tax irregularities. This usually leads to a formal tax investigation.

Financial authorities are watching closely

The requirements of the tax authorities for due care are constantly increasing. Suitable and appropriate measures to avoid tax errors (tax compliance systems) are standard also for small and medium-sized enterprises. The Federal Court of Justice emphasises that suitable internal control systems can protect against sanctions. However, the lack of appropriate measures is considered an indication of a lack of care.

Criminal tax proceedings can involve complex risks beyond penalties and fines. From an economic point of view, the side effects are often even more serious. They include, but are not limited to:

  • the loss of tax rights (e.g. input tax deduction),
  • additional tax claims for up to ten years,
  • confiscation of assets,
  • the interest on additional tax claims,
  • liability for third-party tax liabilities or the loss of official approvals, which require a special reliability (e.g. trade licence, professional licences etc.)
Economic existence at risk

These side effects can endanger the economic existence. In addition, there are the burdens which are typically connected with criminal tax proceedings lasting several years. In particular, a search of private or business premises or public criminal trial can damage reputation. In criminal tax proceedings, media interest is often particularly high. This is especially true if the case involves companies or persons of public interest. And even if a suspicion is not substantiated, the headlines remain. Therefore, the first signs of criminal tax investigations or possible tax errors should be responded to quickly and with criminal law experience.

Our service

We offer qualified advice and defence at all stages of criminal tax proceedings. From the announcement of the investigation, a search or – in the worst case – an order of remand, we support our clients. Our goal is always to finish an investigation as efficiently and discreetly as possible. However, our experience as defence lawyers enables us to litigate a tax case professionally in court, if required.

We do not offer tax advice.