Federal Court of Justice clarifies threshold for "large scale" tax evasion through incorrect tax returns

In its ruling of October 14, 2025 (1 StR 445/24), the Federal Court of Justice clarified the requirements for the standard example of a particularly serious case of tax evasion (Section 370 (3) sentence 2 no. 1 alt. 2 AO) for constellations of incorrect tax returns. The standard example may also apply if the actual tax evasion is less than EUR 50,000, provided that the income attributable to a group of persons in favor of the parties involved in the assessment deviates by at least EUR 140,000 from the income actually earned.

Facts

The defendants operated a dental practice as part of a corporate structure consisting of several partnerships and, starting in the 2010 assessment period, systematically manipulated the income attributable to the partners by not recording cash receipts and falsifying operating expenses. To conceal this, foreign companies were founded with the involvement of a financial advisor. In the declarations for the separate and uniform determination of profits for the years 2010 to 2013, the defendants made inaccurate statements regarding the income attributable to the shareholders. In total, income of around EUR 1.83 million was underreported, resulting in an income tax reduction of over EUR 700,000.

Legal background

If income is incorrectly declared to the tax authorities in the assessment procedure for a partnership, this results in a fundamentally incorrect basic assessment notice. This inaccuracy has a direct impact on subsequent notices, as the individual tax assessments of the shareholders are based on an understated assessment basis. Under criminal law, it is recognized that the elements of § 370 AO (German Fiscal Code) can already be fulfilled by the incorrect determination of income and that obtaining an unjustified tax advantage pursuant to § 370 (4) AO is to be considered an independent criminal offense.
The question of what threshold for unjustified tax advantages must be exceeded in assessment notices in order to fulfill the qualifying criterion of large scale has not yet been clarified by the highest court. The practical relevance arises from the significant legal consequences: the penalty range is extended to up to ten years' imprisonment, while the statute of limitations for prosecution is extended to fifteen years pursuant to Section 376 (1) sentence 1 AO.

The ruling of the Federal Court of Justice

According to established case law, the threshold for "large scale" tax evasion pursuant to Section 370 (3) sentence 2 no. 1 Alt. 1 AO is EUR 50,000. However, the Federal Court of Justice does not apply this standard schematically to cases of unjustified tax advantages through incorrect declarations of assessment, but determines an independent value limit: According to this, a "large extent" exists if income of at least EUR 140,000 is assessed in favor of the parties involved in the assessment, deviating from the income actually earned. The Senate bases this determination on the risk character of Section 370 of the German Fiscal Code (AO) and links it to the maximum risk to the tax claim. To derive this, the Federal Court of Justice (BGH) uses a flat maximum tax rate of 42% and a safety margin of 15%, which results in a potential tax reduction of EUR 50,000 in the event of an incorrect assessment of EUR 140,000.

Consequences for practice

From the perspective of criminal tax defense, the supreme court's determination of a specific value limit for the "large scale" of tax evasion through incorrect declarations is to be welcomed, as it creates legal certainty, particularly with regard to sentencing and the statute of limitations.

In this context, the following should be noted in particular for the defense: In cases where, despite obtaining a tax advantage of more than EUR 140,000, the actual tax evasion is significantly less than EUR 50,000 in view of the personal tax characteristics of the parties involved in the assessment, the actual tax reduction can be taken into account when deciding on the application of the standard example or the specific sentencing in order to avoid undue hardship, thus taking sufficient account of the special circumstances of the individual case. For the question of the statute of limitations, however, it is not important whether the standard example is actually applied in the specific case, but only whether the facts of the case fulfill the requirements.