21. Apr 15

Luxembourg declares war on tax evasion – Voluntary disclosure as an alternative

Even Luxembourg is now taking the fight against tax evasion seriously. Income from interest will soon be reported to the German exchequer. Those affected ought to consider a voluntary declaration.

GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London - www.grprainer.com/en conclude: More and more tax havens are being bled dry and are prepared to collaborate with the German tax authorities. It is becoming increasingly difficult to conceal illicit earnings in foreign accounts from the German exchequer. Thus, Wirtschaftswoche reported on its website that even Luxembourg will no longer be anonymously and automatically raising withholding tax at a rate of 35 per cent after 2014. From 2015 onwards, income from interest shall be credited before taxes. Luxembourg banks will then report the income from interest to the German tax authorities in the second quarter of 2016. A flat-rate withholding tax will be due on this income.

The German exchequer will then, at the latest, be aware of the accounts in Luxembourg. Should untaxed illicit earnings be lying in these accounts, those concerned ought to look into voluntary disclosure. This can pave the way back to a state of tax compliance as long as the authorities have not yet commenced any investigations. A voluntary declaration should therefore be submitted by the beginning of 2016 at the latest. Having said that, the rules for voluntary disclosure are already set to be considerably tightened as of 2015, with the result that it may make sense to draw up the voluntary declaration this year.

The voluntary declaration not only has to be submitted on time, it must also be complete. Currently, it must include all tax-relevant documents from the last five years. This will likely apply to the past ten years from 2015. Even small mistakes in the voluntary declaration can result in it becoming ineffective and the threat of a conviction for tax evasion. For this reason, a voluntary declaration ought not to be prepared alone or with the help of standard templates. It is safer to consult lawyers and tax advisors who are competent in the field of tax law. They are able to assess each case individually and know which documents the voluntary declaration needs to contain for it to be complete. A voluntary declaration is presently capable of leading to complete immunity for sums of evaded taxes of up to 50,000 euros. In cases involving larger amounts, a penalty will fall due. The threshold is expected to decrease to 25,000 euros and the penalties increase from 2015.

For more informations: http://www.grprainer.com/en/legal-advice/tax-law/voluntary-disclosure.html

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