Germany: Self-disclosure rule amendments bring good and bad news for corporates

International Tax Review is part of Legal Benchmarking Limited, 1-2 Paris Garden, London, SE1 8ND

Copyright © Legal Benchmarking Limited and its affiliated companies 2025

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Germany: Self-disclosure rule amendments bring good and bad news for corporates

welbers.jpg

Hartwig Welbers

Self-disclosure allows tax evaders to avoid prosecution by coming forward of their own volition and paying the tax evaded. In principle, this opportunity is to be retained, although many believe that the current rules need to be tightened. The Ministry of Finance has now published draft amending legislation to that end. This subject is relevant to corporates in respect of their mass data filings of monthly VAT and payroll withholding. Because it is not easy for the authorities to distinguish between an error and a wilful attempt to defraud, there is a growing tendency to see corrected returns as failed self-disclosures (because they often cannot meet all the formal requirements) and to open criminal proceedings. The new ministerial draft now published tackles this issue by re-introducing partial self-disclosure for monthly or quarterly VAT or payroll withholding tax returns. A corrected return will not fail in respect of the corrections.

The bad news is that the tax audit preclusion of self-disclosure is to be tightened. Up to now, self-disclosure is no longer possible once a tax auditor sets foot on the premises. This point in time is to be brought forward to the notification to the company of the coming audit and audit concept is to be extended to include VAT, withholding tax and other specifically targeted reviews and examinations. The implications of this on very large corporations with a tax auditor more or less permanently in residence remain, however, open.

The Ministry of Finance does not see the new rules as burdensome on compliant businesses. This, however, overlooks the reality of the effort needed to prepare and substantiate a self-disclosure statement of more than errors in monthly or quarterly VAT or payroll withholding tax returns, say, to protect corporate officers from prosecution for having taken a risky position. This is, in particular, true as the limitations period will be extended to 10 years. One also needs to bear in mind the continuing discussion on a possible corporate criminal law to sanction a corporation for wrong-doing, rather than just the employees acting on the company's behalf. All things considered, effective supervision of a company's compliance is becoming more and more essential.

Hartwig Welbers (hartwig.welbers@de.pwc.com)

PwC

Tel: +49 711 25034 3165

Website: www.pwc.de

more across site & shared bottom lb ros

More from across our site

The president’s tariff regime has already caused misery for taxpayers. Losing at the Supreme Court would mean it was all for nothing
The US itself was the biggest loser of tax revenue to American multinationals’ profit shifting, the Tax Justice Network reported; in other news, firms made key tax hires
Identifying who will bear the costs and concerns around confidentiality are issues yet to be resolved, advisers say
As multinationals embed tax technology into their TP functions, a new breed of systems – built on multi-model databases – is quietly transforming intercompany pricing logic
The president described it as ‘one of the most important cases in the history of our country’; in other news, Portugal established a VAT group regime
Clients are facing increased TP audit scrutiny in Hungary. DLA Piper Hungary is therefore using AI and advanced analytics to augment its advice, the firm’s head of TP says
Simpson Thacher & Bartlett and MinterEllisonRuddWatts were among the firms that advised on the deal
AI will mean fewer entry-level roles in tax but also the emergence of new jobs, according to tax expert Isabella Barreto
As World Tax unveils its much-anticipated rankings for 2026, we focus on standout performances by PwC, KPMG and Deloitte across the Asia-Pacific region
The partnership model was looking antiquated even before the UK chancellor’s expected tax raid on LLPs was revealed. An additional tax burden may finally kill it off
Gift this article