Law firm for criminal tax law in Munich

Criminal tax law in Germany

German criminal tax law is mainly regulated in Sections 369 et seq. of the German Fiscal Code (AO). The basic offense is Section 370 AO, which regulates the criminal liability of tax evasion. Tax evasion is committed by anyone who reduces taxes. This is referred to as tax reduction, which is the benefit obtained by the taxpayer. Taxes are reduced if they are not assessed, not assessed in full or not assessed on time. This also means that even failing to submit tax bases or providing false tax bases is not a tax offense, as long as this does not result in a fiscal damage. In addition to tax evasion (Section 370 AO), criminal tax offenses include illegal import, export, or transit of goods (Section 372 AO), professional, violent or organised smuggling (Section 373 AO), receiving, holding or selling goods obtained by tax evasion (Section 374 AO) and counterfeiting of official stamps (Section 148 and 149 of the German Criminal Code StGB). In addition, criminal tax law norms can also be found in the German Value Added Tax Act (UStG), such as in Section 26 b UStG and Section 26 c UStG.

Systematic legal structure of German criminal tax law

The German law distinguishes between criminal offenses, which are regulated in Sections 369 et seqq. AO, and administrative offenses, which are regulated in Sections 377 et seqq. AO. It is typical of German criminal tax law that Sections 369 et seqq. AO, and in particular section 370 AO, refer back to substantive tax law when determining a tax offense. The starting point for any tax evasion is therefore the submission of a false or incomplete tax declaration or the failure to submit the declaration. What is significant and what is contrary to duty is determined by the individual provisions of special tax law, such as the Income Tax Act (EStG) or the Value Added Tax Act (UStG).

Self-disclosure with exemption from punishment in German criminal tax law

One of the most important offences in criminal tax law is Section 371 AO, which regulates self-disclosure with exemption from punishment. Even though German law has similar provisions regarding subsidy fraud, money laundering and the evasion of social security contributions, the offense of self-disclosure in criminal tax law is something special. According to this, a taxpayer is not punished if he effectively makes a so-called self-disclosure. This provision aims to enable the state to generate tax revenue. Self-disclosure is the highest expression of remorse in German criminal law. However, in practice, caution is required. Exemption from punishment can only occur if the self-disclosure is effective, i.e., in particular, complete. If the disclosure has not been submitted effectively, it only has a mitigating effect. In the case of self-disclosures exempting from punishment the reduced taxes, penalty surcharges and evasion interest must always be paid in arrears.

The case of Uli Hoeneß

One example of an ineffective self-disclosure of sad notoriety is the case of the former president of FC Bayern Munich, Uli Hoeneß, who ended up in the prison of Landsberg am Lech due to the tax evasion he had committed.

Sanctions under German criminal tax law

Criminal tax offenses are generally sanctioned with a fine or a prison sentence. Administrative tax offenses can be punished with a fine in accordance with Section 377 AO.

The case law of the Federal Court of Justice (BGH) regarding sanctions in German criminal tax law

The three-level theory of the Federal Court of Justice (BGH)

In 2008 (BGH ruling of 2.12.2008, 1 StR 416/08), the BGH redefined the sentencing guidelines to the detriment of defendants by initially determining the appropriate penalty for tax evasion on the basis of the amount of tax evaded. At the time, the BGH developed in its case law the so-called three-level theory.

The first level

According to this, the punishable tax evasion at the first level is still to be sanctioned with a fine if the evaded taxes per offense do not exceed the amount of 100,000 euros. In cases of a so-called VAT carousel, the BGH (BGH judgment of 15.12.2011, 1 StR 579/11) reduces this threshold to EUR 50,000 per offense.

The second level

If the tax evaded exceeds the threshold of the first level, a prison sentence is imposed for the tax evasion. The sentence may be suspended at the second level if the tax evaded does not exceed 1 million euros.

The third level

If the evaded tax exceeds the amount of 1 million euros, the sentence may only be suspended if there are very important reasons for mitigation.

The tightening of the three-level theory by the BGH

This case law was then tightened again in 2015 (BGH ruling of 27.10.2015, 1 StR 373/15) and adapted to the penalties for other property offenses such as fraud or breach of trust. Accordingly, the penalty for tax evasion can amount to four to five daily rates for every 500 euros of tax evaded. Even if a wide variety of mitigating factors have to be taken into account when determining the total penalty, it becomes apparent time and time again that the penalty can differ considerably from one Regional Tax Office (OFD) to another or from one Higher Regional Court (OLG) district to another – despite the cases being comparable.

The effects of the BGH case law in practice

Nevertheless, the case law developed by the BGH is not to be applied rigidly. Rather, it is the task of the criminal defense lawyer, proceeding from these starting points, to lead the accused to an optimal sentence within the framework of the general sentencing rules, provided that an acquittal or dismissal of the case is not to be expected. However, if the defendant is likely to be convicted, it is to be expected in practice that public prosecutors, criminal courts and tax authorities will strictly adhere to the principles laid down by the Federal Court of Justice. When sentencing, the courts will take into account criteria such as confession, length of proceedings or subsequent payment of the reduced tax. The courts must also set the tax damage caused by the offense in relation to the total tax burden.

Additional criminal consequences in criminal tax law

The additional criminal consequences resulting from criminal tax proceedings should not be underestimated. It is not uncommon for defendants to lose their license to practice medicine, their trade license or a concession in the event of a conviction.

Requiring a criminal defense lawyer despite being represented by a tax advisor

Usually, advice on tax law is provided by a tax consultant. Representation in criminal law is left to a criminal defense lawyer, who is often also a specialist lawyer for criminal law. However, if you are accused of tax evasion, it may make sense in individual cases to obtain a second opinion from another tax consultant. An expert in criminal tax law can advise you on this.

Typical cases in which proceedings are initiated

There are three typical cases that end in criminal tax proceedings. These are cases of data comparison (“tax CD” from Switzerland, offshore company – Panama Papers or Paradise Papers, data comparison for intra-Community supplies and services), the initiation of proceedings following a tax audit and cases in which third parties provide information to the tax authorities. This is often the abandoned spouse, the dismissed employee or a business partner (so-called whistleblowers). In so-called VAT carousel cases, the European data comparison of the authorities is working better and better, so that the tax authorities are also initiating more and more investigations on the basis of information obtained. In addition, it is often difficult for taxpayers to determine when their tax optimization crosses the line between legal tax shaping and punishable tax evasion. Not only is this boundary fluid in many cases, it is also constantly being reviewed and, if necessary, shifted by politics and case law.

Early representation by a lawyer specializing in criminal tax law for tax audits

If the tax office issues an extraordinary tax audit, you should consider contacting a lawyer who specializes in criminal tax law at an early stage. Initially, they can merely act in the background and only appear if an investigation is actually initiated. In a tax audit, the course is often already set for subsequent criminal tax proceedings. Ultimately, one focus of criminal defense in criminal tax matters is also the correct determination of the tax damage. For this purpose, it makes sense to cooperate with the tax consultant during the tax audit. The lower the tax loss determined, the lower the subsequent penalty in the criminal proceedings will be.

Engage a competent lawyer for criminal tax law

With regard to criminal defense, criminal tax law has some special features compared to general criminal law. It is essential for the criminal defense lawyer to have knowledge of tax law himself. Especially in criminal tax law, it is important to be defended by a lawyer who is familiar with both classic criminal defense and tax law. Substantive tax law is complex and the wording of the laws differs considerably from that of other laws. With this in mind, it is always advisable to engage a criminal defense lawyer who has special expertise and competence in both criminal law and tax law. In individual cases, it makes sense to work in a team with a tax consultant. Investigations are carried out by highly qualified tax officials from the tax investigation department and the so-called BuStra, the fines and criminal matters office of the tax office. Having the right professionals represent you effectively with the right defense strategy is essential in this regard.

Lawyer Salvatore Barba from Munich defends you in criminal tax matters

Lawyer Salvatore Barba from Munich regularly defends clients accused in criminal tax matters, and he is constantly updating his knowledge of criminal tax law. He now has more than 20 years of experience in the field of criminal defense. He is also a graduate of the course to obtain the title “Specialist Lawyer for Tax Law”. Already during his legal clerkship, lawyer Salvatore Barba studied at the Rotenburg an der Fulda Administrative College (now Hessische Hochschule für Finanzen und Rechtspflege in Rotenburg an der Fulda, HHFR). During his traineeship with his legal clerkship, lawyer Salvatore Barba worked for a law firm in Miami, FL (USA), which was mainly active in the so-called “gray capital market”. Please note that generally every case is an individual case. It should be avoided to draw conclusions from one case to another. For further information, please contact Salvatore Barba here. Although the law firm is based in Munich, lawyer Salvatore Barba represents clients nationwide thanks to his expertise.