23. Apr 15

Tax evasion: Voluntary disclosure, interest and penalties

Voluntary disclosure in cases of tax evasion remains a possibility in 2015, but tax evaders will be asked by the exchequer to pay a heavy price.

GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London - www.grprainer.com/en conclude: Those who wish to amend their tax return by means of a voluntary declaration should have sufficient financial reserves; it is not only the evaded taxes that subsequently have to be paid within a short timeframe but also the interest and, as the case may be, a penalty.

From January 1, 2015, tougher rules are set to apply to voluntary disclosure. The German Federal Government has already introduced draft legislation to this effect. It is generally assumed that the law will be passed before Christmas and the new rules shall then apply as of January 1, 2015.

For tax evaders who wish to return to a state of tax compliance with a voluntary declaration, this means that they ought to have sufficient financial means at their disposal, as the interest due for the evaded taxes also needs to be paid within a short timeframe from 2015. An adjustment period of ten years and an interest rate of 6 per cent p.a. can give rise to substantial sums.

It makes more financial sense to submit the voluntary declaration this year. It must, however, be timely, i.e. before the offence(s) is/are discovered by the authorities, and complete, which is to say that all tax-relevant information from the past five years has to be included. If mistakes are made in the process, the voluntary declaration may fail and there is the threat of a conviction for tax evasion. A voluntary declaration should not therefore be prepared alone or with the help of standard templates. The first step should always be to consult lawyers and tax advisors who are experienced in the field of tax law.

They know what information the voluntary declaration needs to contain, can estimate the costs and ensure that the voluntary declaration is effective. In cases involving amounts of up to 50,000 euros in evaded taxes, it can lead to complete immunity. Where larger amounts are involved, a flat-rate penalty of 5 per cent shall fall due.

It will probably be more expensive from 2015. Exemption from punishment shall then only be possible for amounts of up to 25,000 euros. If more taxes have been evaded, penalties of between ten and twenty per cent will fall due.

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

Do you have any questions?
Make an appointment at one of our locations in Cologne, Berlin, Dusseldorf, Frankfurt, Hamburg, Munich or Stuttgart! For International inquiries, please contact us at our offices in London or Singapore!