Criminal tax advice for private individuals

Criminal tax advice for private individuals – what to keep in mind

Criminal tax law for private individuals primarily deals with cases involving income tax, gift tax and inheritance tax. In addition, questions of procedural law can play a role.

With regard to criminal tax law for private individuals, it should be noted that any amount evaded in excess of 50,000 euros per offense constitutes a particularly serious case of tax evasion. Here, the offense is defined as being for the respective fiscal year, or respectively, the incorrect or omitted tax return. While the amount of 55,000 euros per offense is only reached or exceeded in exceptional cases in the case of income tax, it is quite possible to considerably exceed this amount in case of gift tax or inheritance tax.

Here’s an example of how criminal tax law applies to private individuals:

The parents would like to transfer assets to their daughter as part of an anticipated succession. They want to give her 1.5 million. After deduction of the exemption amount (Freibetrag) that each parent can gift tax-free, 700,000 euros remain that are taxable at a rate of 19%. Therefore, an inheritance tax of 133,000 euros will be levied.

If the parents were to file an incorrect or omitted tax return, this would add up to a particularly serious case of tax evasion. Under criminal tax law, a particularly serious case of tax evasion is punishable by a minimum sentence of 6 months imprisonment and leads to an entry in the Federal Central Criminal Register. Therefore, in this case one should avert criminal prosecution by filing a voluntary disclosure and, if need be, by paying a penal surcharge.

What is the purpose of a voluntary disclosure?

German criminal tax law offers private individuals the possibility of obtaining immunity from prosecution by filing a voluntary disclosure. If voluntary disclosure is not possible because the amount of 25,000 euros per offense has been exceeded, criminal prosecution can be avoided by paying a penal surcharge.

How can I file a voluntary disclosure?

The voluntary disclosure under criminal tax law is based on the principle of full disclosure. As a first step, the information disclosed to the tax authorities must be carefully examined to see whether any information is incorrect or missing.

As a second step, any information that was incorrect or omitted must be submitted to the tax authorities. The tax authorities will then initiate criminal proceedings for tax evasion and determine the taxes due.

As a third step, the evaded taxes and interests as defined by criminal tax law must be paid. Following payment of the taxes and interests owed, the criminal proceedings for tax evasion will be discontinued and the proceedings will be closed.

Grossly negligent understatement of taxes

Grossly negligent understatement of taxes differs from tax evasion in that tax evasion must be committed intentionally, whereas grossly negligent understatement of taxes constitutes an act of negligence. Furthermore, grossly negligent understatement of taxes is “merely” a regulatory offense punishable by a fine, whereas tax evasion is a crime that may be punished by a prison sentence. As in the case of tax evasion, if you have understated taxes you have the possibility of obtaining immunity from prosecution by filing a voluntary disclosure.

I have several years’ experience advising private individuals on criminal tax law. Thanks to the team at LSV Rechtsanwalts GmbH, it is possible to draw upon the assistance of tax advisors during extensive legal proceedings. You will thus obtain comprehensive customized criminal tax law advice from one source. Should you wish to consult your own tax advisors, I will collaborate with them on a confidential basis.