18. May 16

Illicit funds in offshore accounts: Avert prosecution with timely voluntary declaration

Hesse’s Finance Minister, Dr. Thomas Schäfer, has announced that the fight against tax evasion will continue. Voluntary disclosure is still the only way out for tax dodgers.

GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London conclude: Tax evaders cannot expect the Federal and state governments to ease off in their efforts to combat tax evasion. On March 29, 2016, Hesse’s Finance Minister, Dr. Thomas Schäfer, announced that tax evasion would continue to be vigorously pursued. According to the Finance Minister, tax evasion can only be effectively combated with a resolute approach to criminal prosecutions and perseverance on the part of the authorities. The Minister stated that only those who come clean about everything in a voluntary declaration submitted to the tax authorities can avoid criminal prosecution. He went on to say that while in Hesse the number of voluntary declarations in response to tax evasion went down again in February, the exchequer is expected to have collected additional taxes amounting to around 3.7 million euros, twice as much as in the previous month.

Despite the decreasing number of voluntary declarations, it is to be expected that there are still many German citizens with untaxed income from capital deposited in foreign accounts; the additional taxes are one indication of this. That being said, these illicit funds are likely to be increasingly preying on the minds of those concerned, as the risk of tax evasion being discovered and the subsequent threat of high fines or custodial sentences continues to increase. Once the automatic exchange of financial information commences as of 2017, it will scarcely be possible for untaxed income in offshore accounts to remain undetected by the exchequer. It is only by means of a voluntary declaration leading to immunity that one can return to a state of tax compliance. However, this can only succeed if the voluntary declaration is submitted on time and is both complete and error-free.

It is almost impossible for a layperson to satisfy the exacting standards set by the legislature for voluntary disclosure. Anyone who nonetheless attempts to prepare a voluntary declaration alone or with the help of standard templates should expect voluntary disclosure to come to nothing, since complex processes and events cannot be properly recorded in doing so and the voluntary declaration will consequently fail.

It is safer to enlist the services of lawyers and tax advisors who are competent in the field of tax law. They know what information the voluntary declaration needs to include and are able to prepare it in such a way that it leads to immunity.

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