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Criminal Tax Law in Germany: Confiscation of Proceeds of A Crime Only in Case of Asset Advantage

Criminal Tax Law in Germany: Confiscation of Proceeds of A Crime Only in Case of Asset AdvantageIn addition to fines or imprisonment, German courts may also order the confiscation of proceeds of a crime. That is, the offender is deprived of what was gained in committing the crime. Non-cash benefits, such as services or expenses saved, are also subject to confiscation. Since these are not material objects, the court may instead order the confiscation of a sum of money equal to the value of what was obtained.

In the case of tax evasion, it is also possible to confiscate a sum of money equal to the amount of the offence. In this case, the obtained object may be the tax evaded because the offender has saved themselves the expense of these taxes. However, it continues to be relevant here that a measurable financial advantage in the assets of the offender is revealed. Only then did the offender also benefit financially through the saved (tax) expenses.

Limits to confiscation also applicable to German tax law

The German Federal Court of Justice (BGH) ruled on this in a decision dated June 05, 2019 (file reference: 1 StR 208/19) which clarified demonstratively in the example of a chain of sales tax evasion. As part of this sales evasion scheme, the defendants had issued fictitious invoices displaying sales tax, thus enabling the (fictitious) invoice recipients to unjustifiably claim the indicated sales tax as input tax. The defendant did not submit the quarterly advance sales tax return by the due date thereby ensuring – as the defendant knew – that the assessment of the advance sales tax payment for this period would be too low.

According to the Federal Court, no pecuniary advantage transfer occurred for the issuer of the fictitious invoices in this case. A pecuniary advantage does not already occur with the unauthorized reporting of sales tax or the offender’s failure to declare the sales tax amount, but rather only in the case of the invoice recipient if the latter has unauthorizedly claimed the reported sales tax with assessment effect as input tax.

Preventing unlawful collection

Therefore, even if a criminal tax offence can be proven, this does not necessarily justify confiscation. The prerequisite is always that a measurable tax saving has been reflected in the offender’s assets. Only a criminal defense that recognizes this fact can prevent a “double punishment” in this case. Our criminal tax lawyers will be happy to assist you in this process.

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Stefan Winheller

Attorney Stefan Winheller has specialized in tax law for about 20 years, especially in the areas of cryptocurrencies, foundations/nonprofits and international tax law.

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