. . Germany - the taxman cometh

[darmstadt]

The thing is, is that this is nothing new. I know people who were audited back in the 90's for tax purposes and have taken their cases all the way to the European courts and still lost (there were some slight differences to these cases but the basis is the same.)

[BlightyBoy]

Busted

Well, that's me busted. Using an (at that time) supposedly legitimate solution I am also facing the wrath of the local tax authorities pertaining to work carried out between 2003/4 and 2008.

What is sneaky (but seemingly legally legitimate) here is that you start off getting "friendly" letters asking for details of contract chains; the preamble outlines a potential solution used by many ex-pat. contractors involving third-party (payroll) companies, umbrella companies etc. and that this provides an "opportunity" for payments to be made that are not visible to the German tax authorities; i.e. Switzerland, Luxembourg etc.

Anyhow, under German law you are legally obliged to answer these questions truthfully and comprehensively and provide, where appropriate, the information requested. Of course, once you answer that you were working here or there or anywhere for Agency X using Management/Payroll Company Y, alarm bells start ringing in their office. They may follow up with a further letter asking for more information until you have nicely incriminated yourself and provided them with essentially all the evidence they need to start legal proceedings against you.

Once this happens, you are generally informed that a prosecution against you has been started and at this point you have the right to keep your mouth shut and seek legal counsel (but it's already too late). Once criminal proceedings against you have been started, it is too late to do a "Selbstanzeige" - or at least the courts may not consider such a Selbstanzeige to be valid - and that means you face a criminal record with fine and potential for a non-custodial suspended sentence (but with which you can wave bye-bye to any possibility for new or renewed security clearance.

My situation is that I had two letters; the first asking for contract chains whilst I was working for an end-client between 2005 and 2010. I wasn't there the whole time so answered as best as I could (memory and records allowing). A second later came shortly after asking where I had then worked (again, include contract chains etc.) up to and including 2010.

I had been using a management company but had stopped some years ago once it was clear that the statement from the Agency (and a particular german tax accountant) that this was a legitimate construct was in fact - bullcrap. Upon the advice of legal counsel I submitted a Selbstanzeige (although it could still already be too late) with estimates of the potential tax that could possibly be owing. I am waiting to here back from them as to what their "estimates" are and then try and meet them somewhere in the middle (original contracts are not available and I am currently "chasing" agencies for copies).

Essentially the "point" behind the story is that with each case "solved" by the Finanzamt they gain more and more "intelligence" into who was working where and for whom. If these are German end-clients (which, naturally, they will be) these companies will be approached and asked to give details of how much was paid for the services of contactor so-and-so. Once they have this information they can examine tax records and see if the income declared by an individual is representative of the amount of money paid by the end-client. The authorities are already aware that a certain percentage is lost to management fees etc. but they have a pretty good idea how much someone should have declared.

Subsequently they examine the individuals entire records and see that they were also working there, or somewhere else and so those companies are also approached and hey-ho more names pop out, including amounts paid and so the investigations continue.

So, in short, anyone left who has ever at some point used such a billing mechanism has two choices:

1. Pack your bags and go home.
2. Approach a reputable lawyer specialising in Steuerstrafrecht and get a Selbstanzeige in ASAP.

Good luck!

[BlightyBoy]

Postscript

I am aware that I have "blustered" elsewhere in this forum thread about keeping stumm and that people may have signed copies of contracts with a rate stated that indeed matches the rate invoiced. However, there comes a time when the amount of evidence, circumstantial or otherwise, renders this philosophy defunct. When the Finanzamt have individuals essentially "bang to rights" then the game is over and it's time to face the music.

At this point, for any outstanding cases it is purely an exercise in "damage limitation" and nothing more; anyone who has not yet been approached by the authorities has not gotten away with anything, you have simply yet to be "discovered".

Given how largely incestuous this industry is, they will get around to you sooner or later, and my advice to you would be to take action before that happens.

[BlasterBates]

I would add here that a "Selbstanzeige" only works if they hadn´t started an investigation. Once the first letter from the Finanzamt has arrived it is often too late.

Before anyone goes ahead with a "Selbstanzeige" they should consult a lawyer. Unless you can immediatley pay your tax liability there is no point. If you do go through with a "Selbstanzeige" the condition is that you also settle the liability at the same time. This will absolve you from criminal prosecution and fines.

There is a prominent case in the news of the president of Bayern Munich going through the process of a "Selbstanzeige" in this particular case the reporters are saying it won´t absolve him from a prosecution but it should help with his sentence, which will probably be a huge fine and a suspended jail sentence. If they´d have caught him it would have been worse.

I don´t understand why they are going ahead with prosecution but I suppose it is because they had some information on him.

[BlightyBoy]

I would add here that a "Selbstanzeige" only works if they hadn´t started an investigation. Once the first letter from the Finanzamt has arrived it is often too late.

Before anyone goes ahead with a "Selbstanzeige" they should consult a lawyer. Unless you can immediatley pay your tax liability there is no point. If you do go through with a "Selbstanzeige" the condition is that you also settle the liability at the same time. This will absolve you from criminal prosecution and fines.

There is a prominent case in the news of the president of Bayern Munich going through the process of a "Selbstanzeige" in this particular case the reporters are saying it won´t absolve him from a prosecution but it should help with his sentence, which will probably be a huge fine and a suspended jail sentence. If they´d have caught him it would have ben worse.

I don´t understand why they are going ahead with prosecution but I suppose it is because they had some information on him.

The information that I received from legal counsel was that even if I was unable to pay any outstanding tax right away, a Selbstanzeige would still be valid. I do, however, agree that before making any decision official, professional legal advice is highly recommended.

The issue with Höneß is that the Staatsanwalt are arguing that he only made the Selbstanzeige to remain "Straffrei" because he believed that he was about to be discovered (something to do with co-operation between some Swiss Bank(s) and the Finanzamt). My lawyer informed me that if you [one] knows or suspects that a process has been started, then a Selbstanzeige is completely invalid. However, in the long term it can still have positive impact on the ultimate outcome of individual cases because it shows a willing (his words, not mine) to rectify the situation - even if a criminal prosecution does anyway take place.

In such cases (where a case against you has been opened, but you are unaware) then it is for the Finanzamt to argue that the litigant was aware (again, my lawyers words, not mine) - which is often difficult to prove if the litigant has not been in receipt of the dreaded "yellow letter"

[admirals speedport]

Bags

Well, that's me busted. Using an (at that time) supposedly legitimate solution I am also facing the wrath of the local tax authorities pertaining to work carried out between 2003/4 and 2008.

What is sneaky (but seemingly legally legitimate) here is that you start off getting "friendly" letters asking for details of contract chains; the preamble outlines a potential solution used by many ex-pat. contractors involving third-party (payroll) companies, umbrella companies etc. and that this provides an "opportunity" for payments to be made that are not visible to the German tax authorities; i.e. Switzerland, Luxembourg etc.

Anyhow, under German law you are legally obliged to answer these questions truthfully and comprehensively and provide, where appropriate, the information requested. Of course, once you answer that you were working here or there or anywhere for Agency X using Management/Payroll Company Y, alarm bells start ringing in their office. They may follow up with a further letter asking for more information until you have nicely incriminated yourself and provided them with essentially all the evidence they need to start legal proceedings against you.

Once this happens, you are generally informed that a prosecution against you has been started and at this point you have the right to keep your mouth shut and seek legal counsel (but it's already too late). Once criminal proceedings against you have been started, it is too late to do a "Selbstanzeige" - or at least the courts may not consider such a Selbstanzeige to be valid - and that means you face a criminal record with fine and potential for a non-custodial suspended sentence (but with which you can wave bye-bye to any possibility for new or renewed security clearance.

My situation is that I had two letters; the first asking for contract chains whilst I was working for an end-client between 2005 and 2010. I wasn't there the whole time so answered as best as I could (memory and records allowing). A second later came shortly after asking where I had then worked (again, include contract chains etc.) up to and including 2010.

I had been using a management company but had stopped some years ago once it was clear that the statement from the Agency (and a particular german tax accountant) that this was a legitimate construct was in fact - bullcrap. Upon the advice of legal counsel I submitted a Selbstanzeige (although it could still already be too late) with estimates of the potential tax that could possibly be owing. I am waiting to here back from them as to what their "estimates" are and then try and meet them somewhere in the middle (original contracts are not available and I am currently "chasing" agencies for copies).

Essentially the "point" behind the story is that with each case "solved" by the Finanzamt they gain more and more "intelligence" into who was working where and for whom. If these are German end-clients (which, naturally, they will be) these companies will be approached and asked to give details of how much was paid for the services of contactor so-and-so. Once they have this information they can examine tax records and see if the income declared by an individual is representative of the amount of money paid by the end-client. The authorities are already aware that a certain percentage is lost to management fees etc. but they have a pretty good idea how much someone should have declared.

Subsequently they examine the individuals entire records and see that they were also working there, or somewhere else and so those companies are also approached and hey-ho more names pop out, including amounts paid and so the investigations continue.

So, in short, anyone left who has ever at some point used such a billing mechanism has two choices:

1. Pack your bags and go home.
2. Approach a reputable lawyer specialising in Steuerstrafrecht and get a Selbstanzeige in ASAP.

Good luck!

Can you just pack your bags and go home, then ?

[BlightyBoy]

Flight or fight?

Can you just pack your bags and go home, then ?

Err.... no.

And I am not sure it would help (in the long run). I have heard rumours (so I accept no responsibility for the accuracy or otherwise of such) that even those who managed to extract themselves back to the UK prior to (or indeed during) any investigations, have been approached by the authorities in the UK (e.g. Border Control Agency - although I am not sure what *they* would have to do with it) and so have not managed to avoid any "unpleasantness".

I also think that (assuming the above information is correct) that this could possibly be an ill-conceived idea anyway; presume that the cross-border jurisdiction is supported by the UK authorities and that someone is under investigation for tax evasion in Germany but has fled back "home". In order for that person to suitably defend themselves it would be necessary for them to have legal counsel from Germany - which could create some nightmare scenarios in terms of discussing issues with the lawyer and additional awkwardness if a court appearance is required.

The only benefit that I would see from such a move (fleeing back to the UK) would be that the process could be stalled somewhat - but it would only be a futile effort in delaying the inevitable.

[admirals speedport]

Seemingly affected as well after all this time...

I worked in Germany for a number of years for different end clients through different companies. One of these companies has been forced to hand over payment details for the last few years. I haven't heard anything as yet from the tax authorities, as I don't think they have a correct address for me.

However, they have written to my former tax advisor, who, in turn, has contacted me by email. The initial request was for a breakdown of my earnings for the years from 2007 to 2009. My tax advisor asked if it was OK to release this information, otherwise they would get it anyway via court order. I saw no reason to withhold these details, as they are simply the monthly invoices that led to the annual sums declared.

He has now got back to me with their response, that being that there are substantial amounts unaccounted for for these years. I never personally received any other payments, as all amounts were paid to another company. I am interested in knowing where I stand on the issue and what powers they have. Obviously, it's very early on in the investigation and it's uncertain what path it may take.

After another longer conversation with the tax advisor, the possible courses of the investigation were outlined to me. The gist was that if there were, indeed, no other amounts available to me, then they probably wouldn't have much of a case. The advice given was to go to America if this wasn't the case, as there is apparently no mutual agreement on tax assistance (his words, so I'm not sure what specific agreement is meant). Switzerland was also mentioned as being partially safe.

In any event, I have already being living well away fom Europe for some time. I am not quite sure how to react, but it looks as if the investigation will take some time and we're adopting a wait and see attitude. Depending on what happens, they may try to issue an amended tax assessment, at which point we could submit an appeal. It was reckoned that the UK authorities would possibly provide assistance in some capacity, depending on the nature and extent of the case. I am interested in comparing other people's experiences and in generally being as well informed as possible of possible outcomes.

[Anonymous]

The nightmare continues

New to this board.
I am resident in Germany for many years.
It started with an audit for 2006. They followed every thread of payments into and out of my current account and asked for statements from my UK/Isle of Man accounts... Seeing discrepancies they persued further. Many sleepless nights ensued. Last year they raided my house, checking every nook and crany and taking every file, folder and my PC away. This gave evidence for a criminal prosecution so I came clean. Including the 6% interest (thank God it's not compound), they say I owe €180K. All my assets (car, house etc.) are in my wife's name. I go to court soon and will keep you posted.

Be sure, if you are in Germany any length of time they will check you out thoroughly, especially if you are in an area or business where there are many expats working as contractors.

Fine ended up at €90K...With the interest on tax and other problems, I now owe the German authorities €330K. What a wonderful life!

[cheakyp]

He still comeths

After working in Germany in 2005/06, I received a MARD this week. I was totally oblivious to the illegality of these split-income schemes when I was working there. Due to the number of management companies employing these schemes AND the fact that ALL my contractor colleagues were doing the same, I thought it was ok (and my german accountant C***H*** told me it was legit).

Only after receiving the MARD did I do some research and find this thread.

I left in May 2006 and have been working in the UK ever since. I've lived at the same address since mid-2007 yet the Finanzamt made little effort to trace me (can't be particularly difficult).

So what's done is done, and I'm paying up the tax + interest within the next week or two. This will totally clear me out and affect the next 20 years of my working life.

But now I've been warned I may be in receipt of a "strafbefehl". I've not got the money to fight it, nor the money to pay it. So what happens if I can't pay? Can they try to get the money from me in the UK? I've got the address of a german tax lawyer whom I'm going to contact soon.

I just wondered what other peoples experiences were of dealing with a strafbefehl from the UK.