Federal Court of Justice: Incorrect information in a declaration of assessment and income tax return are two separate acts of tax evasion

In its ruling of April 30, 2025 (1 StR 39/25), the Federal Court of Justice clarified that incorrect information in a declaration for the separate and uniform determination of the basis of taxation (Section 181 (2) No. 1 of the German Fiscal Code (AO)) and those in an income tax return relating to the same assessment period (Section 25 (1) of the Income Tax Act (EStG), Section 56 of the Income Tax Implementation Regulation (EStDV)) are also independent acts in both a substantive and procedural sense if the incorrect information in both declarations relates to the same tax bases and the basis decision issued pursuant to Section 180(1) sentence 1 no. 2 letter a AO has binding effect for the income tax assessment pursuant to Section 182(1) sentence 1 AO. The same applies to the relationship between the acts if declarations have not been made in breach of duty.

Facts

The decision is based on the following facts: From 2009 to 2017, the defendant operated a self-service car wash and, from 2011, also a waste paper business. In the context of the waste paper business, he worked with a logistics company from 2012, whereby the profits generated were not properly taxed. Tax returns containing incorrect information were submitted for the years 2009 to 2011, and no tax returns or declarations for the separate and uniform determination of the basis of taxation were submitted at all for the years 2012 to 2017. Overall, a considerable amount of tax was evaded.

Legal background

In the case of income involving several persons, the issuance of a tax assessment notice is preceded by a notice for the separate and uniform determination of income in accordance with Section 180 (1) No. 2 lit. a AO. The content of the assessment notice is then binding for the tax assessment in accordance with Section 182 AO.

According to the established case law of the Federal Court of Justice, the advantage inherent in the determination of incorrect tax bases with binding effect is of a specific tax nature, which is based on the action of the tax authorities and is therefore an unjustified tax advantage within the meaning of tax evasion pursuant to Section 370 (1) AO.

In view of the binding effect of § 182 (1) sentence 1 AO on subsequent notices, including income tax notices for taxpayers participating in the profit, the issuance of an incorrect assessment notice already constitutes a concrete threat to the state's tax claim. Therefore, the act is already completed upon issuance of the assessment notice. The tax reduction resulting from the consideration of the incorrect tax bases determined in the subsequent notices of assessment merely constitutes a further consequence of the offense, which is particularly relevant for the date of completion of the offense and thus for the commencement of the limitation period for tax evasion.

The decision of the Federal Court of Justice

Against the background of this binding effect, the Federal Court of Justice has made an important clarification for practice in its recent decision:

The aforementioned binding effect of declaratory decisions on subsequent decisions does not mean that incorrect or negligent failure to submit declarations for the separate and uniform determination of the basis of taxation and incorrect income tax returns merge into a single act in the substantive legal sense or constitute a single act in the procedural sense. The Senate expressly does not adhere to any case law that deviates from this.

The Federal Court of Justice justifies this as follows:

• First, despite the binding effect of Section 182(1) sentence 1 of the German Fiscal Code (AO), the obligations to submit complete and truthful declarations and income tax returns are independent of each other. Thus, neither the submission of the declaration of assessment nor the obligation to do so exempts the taxpayer from providing complete and truthful information on facts relevant for tax purposes in his income tax return.
• Nor does the fact that only the consideration of the incorrectly determined basis of taxation in the subsequent tax assessment notices leads to the termination of tax evasion mean that the breach of the declaration obligations can be merged into one act. This is because every incorrect declaration or tax return, as well as every breach of duty to declare, constitutes a separate wrongful act.
• The assumption of a unit of assessment is not required either on the basis of Article 103(2) of the Basic Law or because of the requirement of punishment commensurate with the offense. These constitutional requirements do not require that, when determining the factual success of an unjustified tax advantage within the meaning of Section 370(1) of the German Fiscal Code (AO), the completion of the act be made dependent on the (future) effects on the state's tax claim being calculated on the basis of the specifically quantified tax advantage. Nor is it necessary for the determination of the penalty to quantify precisely the effects of tax advantages resulting from incorrect assessment notices on the taxation of the beneficiaries.

Consequences for practice

The decision of the Federal Court of Justice has significant consequences for the practice of criminal tax defense.

The assumption of multiple offenses also has significant implications for determining the large scale within the meaning of Section 370(3) sentence 2 no. 1 of the German Fiscal Code (AO). According to the case law of the Federal Court of Justice (judgment of October 27, 2015 – 1 StR 373/15), a particularly serious case of tax evasion pursuant to Section 370 (3) sentence 2 no. 1 AO lies where the tax evaded exceeds EUR 50,000 per offense. The Federal Court of Justice clarified that in the case of multiple acts constituting tax evasion, the "extent" of the respective offense must be added together, since in such cases there is a single act within the meaning of Section 52 of the German Criminal Code (StGB), which requires a uniform assessment for the purpose of determining the sentence. Until now, the amounts evaded as a result of incorrect or omitted declarations and the amounts resulting from incorrect or omitted income tax returns were added together on the basis of the assumption of a single offense.

With the current clarification by the Federal Court of Justice that this constitutes multiple offenses, the respective amounts of tax evasion must now be considered separately. As a result, the individual amounts of tax evasion may no longer be added together, but must be examined in isolation with regard to whether the threshold value of EUR 50,000 has been reached.

On the one hand, this means that if the amount of tax evaded is less than EUR 50,000, the assumption of two tax offenses committed as multiple offenses cannot exceed the threshold for a particularly serious case by adding the respective amounts of tax evaded. However, if the amount of tax evaded exceeds EUR 50,000, there are two particularly serious cases. This can have a significant impact on the sentencing.

When determining the sentence, a total sentence must be imposed due to the multiple offenses pursuant to Section 53 of the German Criminal Code (StGB). However, the Federal Court of Justice does not see any risk of double punishment for the same offense in these cases.

It expressly states:

• Insofar as the income tax return merely repeats facts that were already incorrectly or incompletely stated in the assessment notice, this constitutes a subsequent offense that is subject to punishment. This is because neither is a new legal interest violated, nor is the damage qualitatively extended beyond the extent caused by the previous offense.
• However, if further facts relevant for tax purposes are incorrectly stated in the income tax return, the taxpayer is guilty of a further act of tax evasion. The fact that the wrongdoing has already been or will be partially remedied by the punishment of another offense can be taken into account when determining the sentence.
• If the declaration for the separate and uniform determination of the basis of taxation is only submitted after the income tax return has been filed, a previously incorrect or incomplete income tax return may be considered a predicate offense that is also punishable.

The decision also has an impact on the statute of limitations for the offenses, as a separate limitation period applies to each offense. As an advisor, it is therefore necessary to explicitly check whether individual offenses are already time-barred.

From the defense's point of view, care must now always be taken to ensure that the public prosecutor's indictment specifically identifies the two separate offenses on the basis of the multiple offenses and clearly distinguishes between the two breaches of duty. This differs significantly from the concept of a single offense, where a uniform set of facts in the indictment is sufficient. If a clear distinction is not made, a different legal assessment in the main proceedings can only be made in accordance with the duty to provide information under Section 265 StPO.

Care must also be taken when making a voluntary disclosure with regard to the required completeness, as both statements must be corrected comprehensively.

Conclusion

With this decision, the Federal Court of Justice has clarified the situation: declarations of income and income tax returns relating to the same assessment period are independent acts – with far-reaching consequences for proceedings, sentencing, the statute of limitations, and voluntary disclosures.