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Higher charges on the way for German tax amnesty users

Thursday, 17 July, 2014

German taxpayers are likely to find the country's tax amnesty conditions much more expensive if they apply after 1 January 2015.

Voluntary disclosure of unpaid tax will still bring immunity from criminal prosecution, but after that date applicants will have to disclose income for the past ten years instead of only five as the current rules state. This is because the limitation period for prosecution is being extended to ten years in all cases of tax evasion, not just in the most serious cases.

The existing 6 per cent interest charge will be maintained, though it must be paid as soon as the application for amnesty is submitted – much earlier than is currently the case.

Extra penalty charges will be imposed on top of that. These will be set at graduated levels. A 10 per cent penalty will be applied where the taxes owed exceed EUR25,000; 15 per cent where they exceed EUR100,000; and 20 per cent where the unpaid tax was more than EUR1 million. These penalties – and the actual taxes owed – will also be due immediately.

As usual in such amnesties, a taxpayer cannot escape prosecution by applying for the amnesty after he knew or should have known that the authorities were already investigating him.

The amended amnesty conditions were proposed by the finance ministers of Germany's Laender (states) in May. They are a direct consequence of ongoing media coverage of prominent tax evaders in Germany, according to Andreas Richter and Maximilian Haag of Berlin tax advisors Poellath & Partners.

A draft bill enacting the changes will soon be considered by the legislature. If the finance ministers get their way, the so-called ‘golden bridge’ back to tax compliance will be much more expensive from next January, say advisors at Norton Rose Fulbright in Munich.