21. Jul 16

Tax investigators trawl through Panama Papers – Submitting a voluntary declaration

Tax investigators have apparently been sifting through the Panama Papers in the hope of rumbling suspected tax dodgers. There is still time to submit a voluntary declaration that can lead to immunity.

GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London conclude: The Süddeutsche Zeitung reports that tax investigators want there to be better connections between countries for the purposes of evaluating the information contained within the Panama Papers and getting wise to suspected tax cheats. Accordingly, the investigators hope to obtain information not only concerning tax evaders but also those assisting them.

In order to avoid criminal prosecution and a potential conviction for tax evasion, those concerned are still able to submit a voluntary declaration that can lead to immunity. However, this ought to happen soon, because as soon as the tax evasion has been discovered by the authorities voluntary disclosure is no longer an option. Anybody who still has untaxed earnings deposited in foreign accounts should increasingly expect to be detected as the automatic exchange of financial information is set to commence in the coming year, with former tax havens such as Switzerland and Austria, and now also Panama, wishing to participate. Time is thus slowly running out for voluntary disclosure.

Having said all of that, it is important to note that a voluntary declaration needs not only to be submitted on time but also complete and error free for it to be capable of leading to immunity. To this end, one needs to come completely clean with the tax office and disclose, among other things, any and all documents from the past ten years that may be relevant from a tax perspective. For a layperson, it is almost impossible to fulfil these strict requirements that have been set by the legislature. That is why a voluntary declaration ought not to be prepared on one’s own or with the help of standard templates, it generally not being possible to account for complex events and processes in this way. The result of this is that mistakes are practically inevitable, which leads to voluntary disclosure failing and then there still remains the risk of a conviction for tax evasion.

To prevent this from happening, lawyers and tax advisors who are competent in the field of tax law ought to be consulted. They can provide a detailed assessment of the circumstances of each individual case and know what information and documents need to be included in the voluntary declaration for it to be able to lead to immunity.

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