Self-disclosure rules for taxpayers are to be tightened.

Federal Finance Minister Lars Klingbeil has announced plans to abolish the current rules for self-reporting tax evasion without penalty, arguing that they create perverse incentives. Instead, it must be clear that anyone who evades taxes must face the consequences.

Taxpayers should therefore use the time until the law is amended to fully declare any previously untaxed income, foreign accounts, capital gains, or crypto assets. Currently, a voluntary disclosure to the tax office allows taxpayers to disclose tax evasion and, under certain conditions, avoid prosecution. The most important factors are that the offense has not yet been discovered by the tax authorities and that the information provided covers all relevant periods and is not subject to the statute of limitations.

To avoid prosecution, the individual concerned must correct, supplement, or provide all information regarding a specific type of tax (income tax, sales tax, corporation tax, trade tax, and inheritance tax) to the tax office. This voluntary disclosure differs from a so-called amended tax return, in which incomplete or incorrect information is identified and corrected immediately after the tax return has been filed.

The notification of correction is particularly relevant in inheritance cases. If the heir discovers that the deceased made incorrect statements in their tax return, they must report this to the tax office and correct the deceased’s tax return.

However, if, for example, the taxpayer has been notified of an audit order for a tax audit or criminal proceedings have already been initiated, a voluntary disclosure is no longer possible.

For further questions regarding voluntary disclosure, please contact the experts at Altehoefer International Tax Consulting.