Reform of voluntary disclosure: no change but clarifications by the parliamentary finance committee

The legislative process reforming voluntary disclosure is almost complete. The bill was approved by the parliamentary finance committee with broad agreement and without amendments. Not only the ruling parties of CDU/CSU and SPD voted for it but also the BÜNDNIS 90/DIE GRÜNEN. As expected, the federal parliament has passed the act on 4 December 2014, while the necessary approval by the federal council is expected on 19 December 2014. Both are regarded as certain since the federation and the federal states pursue common interests in this matter.

Even though no changes were made to the bill, the finance committee of the parliament provided some clarifications interesting in practice.

Application provision for the new rules from 1 January 2015

The finance committee sees no reason for an express transitional provision in the Act. However, it is clarified that due to the amendment coming into force on 1 January 2015, the intensification of the conditions for voluntary disclosure (§§ 371, 398a Tax Code) apply automatically only for voluntary disclosures submitted after 31 December 2014. Those filed before 1 January 2015 and about the validity of which no final decision has yet been made, will be adjudicated according to the least onerous provision from the point of view of the affected persons.

Annual penalty

It is also clarified that the penalty will only become due if the amount of tax evaded exceeds 25,000 euros per year. The penalty therefore has to be calculated by years.

No extension of special provisions to partial voluntary disclosure

The planned special provisions for VAT returns and income tax returns are not intended to be extended – as most recently demanded by many experts – to other tax returns. This applies both for the VAT annual return and other returns (e.g. capital yield tax).

Distinction between mere correction and voluntary disclosure

It is intended that the need of practitioners for more legal certainty with regard to the distinction between mere correction of declarations (Sec. 153 Tax Code) and voluntary disclosure with the effect of exemption from criminal proceedings will be provided soon by directions of the tax authorities.

Payment of interest on tax evaded as a condition

It is also again made clear that in future, in order to obtain exemption from criminal proceedings, interest as well as the amount of evaded tax must be paid within a certain reasonable period. The participants in the act must pay the tax evaded and interest thereon within a certain reasonable period, the personal and financial situation of the taxpayer with regard to the provision of the necessary liquidity, being taken into account

Extension of the late declaration obligation to 10 years

By the extension of the obligation to correct tax declarations for the last ten calendar years in the case of simple tax evasion, firstly the declaration obligation for tax crimes is made independent of the question of the period of limitation, and secondly in future in cases of simple tax evasion not only is the tax for ten years to be paid but also interest thereon.

Protection of tax secrecy in tax evasion cases

The finance committee is also in favour of forbidding unauthorised disclosure of personal tax data. This is intended to be achieved by limiting the number of those with right of access to tax data as well as by the reliable maintenance of tax office records of access of individual tax officials to the tax files in all federal states.

Extension of the period for assessment of certain foreign capital yields

The finance committee also clarifies that all yields in the meaning of Sec. 43 Income Tax Act are covered by the intensification of the period for assessment for certain foreign capital yields. The provision therefore applies to all capital yields achieved by a legal person or which may be classified as business income.