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Stricter rules for tax evaders

Penalties for tax evasion are increasing and foreign banks are no longer bound by banking secrecy from 2015. Anyone who is thinking about making a voluntary disclosure should do so this year.

The numbers are skyrocketing: According to a survey by the news magazine “Der Spiegel” in 16 federal states, the tax authorities received more than 22,600 voluntary declarations with reference to foreign capital income by the end of June this year. In contrast, the number in the same period last year was around 9,200. The reason for the increased number of self-disclosures is likely to be, on the one hand, prominent cases such as Uli Hoeneß or Alice Schwarzer, and on the other hand, the rules adopted to tighten self-disclosure.

Higher penalties

These come into force from January 1, 2015. Although it was decided to fundamentally maintain the voluntary disclosure exemption from punishment after a lengthy discussion, significantly higher penalty surcharges would then apply. While previously only a five percent penalty had to be paid from 50,000 euros, ten percent will then be due for amounts between 25,000 and 100,000 euros. If the evasion volume is more than 100,000 to one million euros, the surcharge is 15 percent, and even 20 percent above that.

Long edit

In addition, voluntary disclosure in accordance with Section 371 AO will in future only be possible if the amount of evasion is up to 25,000 euros. However, from this amount onwards, if the aforementioned penalty is paid at the same time, prosecution is waived. In addition, default interest of six percent per year must be paid. In the future, these must be paid immediately and are considered an additional effectiveness requirement for a voluntary disclosure that exempts you from punishment.

In this context, it should be noted that the taxes to be paid and also the interest on arrears are not to be paid immediately, i.e. when the voluntary declaration is submitted, but only after the amended tax assessments have been submitted within the statutory monthly period.

Experience has shown that due to the increased number of voluntary disclosures, a longer processing time at the tax office can be expected. Several months may pass. In all cases of tax evasion, the obligation to make corrections extends over a period of at least ten years. The statute of limitations for prosecution of simple tax evasion has been extended from five to ten years.

Bank secrecy falls

A voluntary disclosure is also recommended because Luxembourg will join an automatic exchange of information from January 1, 2015. Bank secrecy becomes obsolete. Other countries, including Austria and Switzerland, will follow. The German tax authorities will be informed about the interest income in the future. The tax office of residence can then check whether the citizen has declared foreign interest income in his tax return or not. This means that tax evaders are more likely to be discovered and will have to face consequences if they do not declare their foreign investment income now. Many foreign banks therefore ask their customers to submit a tax compliance declaration. Otherwise, customers must expect that the business relationship will be terminated.

Involve experts

Since the second half of 2014 has already begun, every taxpayer should seriously ask themselves whether they would like to submit a voluntary declaration this year in order to benefit from the previous legal regulations. It is strongly advisable to consult a tax advisor as early as possible.

Joachim Doll, specialist lawyer for tax law