Second Coronavirus Tax Relief Act: Tax relief on the one hand, significant effects for criminal tax law on the other

Coronavirus tax relief or lex cum/ex? The main point is, it is criminal tax law!

With a second law on the implementation of tax aid measures to overcome the coronavirus crisis (Second Coronavirus Tax Relief Act), the German government wants to ensure "that the economy quickly regains momentum" (RegE, S.1). In addition to a temporary VAT reduction, the draft provides for various other tax concessions. Through the back door, however, regulations are also to be created which have considerable implications under criminal tax law: A new section 375a German Fiscal Code (AO) to be inserted is to make possible a criminal collection even if the tax claim is already statute-barred (see 1.). In addition, amendments in section 376 AO provide for an extension and delaying of the limitation of time of tax offences (see 2.).

1. Criminal confiscation despite statute-barred tax claim

The "new" law on confiscation of proceeds of crime has been in force for almost three years now.

In this context, it was initially disputed to what extent tax claims which are statute-barred under tax law and thus expired (section 47 AO), which are based on a tax offence, can still be collected as proceeds from crime by way of a criminal confiscation of assets.

Pursuant to section 47 AO, claims arising from the tax debtor-creditor relationship expire in particular by termination of the limitation period. According to section 73e (1) German Criminal Code (StGB), a confiscation is excluded insofar as the injured party's claim to the return of the object obtained or compensation of the sum of money equal to the value of the object obtained to which the injured party is entitled as a consequence of the offence has expired.

Drawing on the wording of section 47 AO and section 73e (1) StGB, the Federal Court of Justice (BGH) decided in October 2019 (decision of 19 October 2019 -1 StR 173/19) that, despite the absence of a risk of double claims, a confiscation in case of statute-barred tax claims is not possible in the current legal situation, as the terms "expiration" in section 47 AO and section 73e StGB must be interpreted uniformly.

The legislator now wants to make confiscation possible also in cases in which the tax claim has already become statute-barred and thus expired. Section 375a of the Draft Amendment to the German Fiscal Code (AO-E) provides therefore that the expiration of a claim from a tax debtor-creditor relationship due to limitation of time pursuant to section 47 AO does not prevent a confiscation of unlawfully obtained proceeds of crime under section 73 StGB.

Thus, in future confiscation would also be possible not only if the underlying tax offence is statute-barred under criminal law (cf. section 76a (2) sentence 1 StGB) but also the related claim under tax law.

This change in legislation will also gain importance in proceedings against companies if they are in future subject to a corporate sanctions law (VerSanG) in accordance with the current draft bill, and the charged corporate act constitutes tax evasion (section 370 AO).

In such proceedings, "the confiscation of the object obtained through the corporate act [...] shall" be carried out "in addition to the corporate sanction under sections 73 et seq. StGB" (RefE d. VerSanG of 20 April 2020, p. 77).

The planned amendment is to be flanked by an application regulation and, in accordance with Article 97 section 33 Introductory Act to the German Fiscal Code (EGAO-E), is to apply to all tax claims not yet time-barred when the amendment comes into force.

2. Amendments with regard to the criminal limitation of time for tax evasion in a particularly serious case

The planned amendments to section 376 AO influence the course of the period of limitation (see 2.1), and the period of the absolute statute of limitations for prosecution of crimes is extended (see 2.2).

2.1 Suspension for proceedings before regional courts (section 376 (1) half sentence 2 AO-E)

In accordance with section 376 (1) AO the limitation period in particularly serious cases of tax evasion as specified in section 370 (3) sentence 2 no. 1 to 6 AO is ten years. A second half sentence is to be attached to this, which will regulate a corresponding application of section 78b (4) StGB (section 376 (1) hs 2 AO-E).

According to section 78b (4) StGB the limitation of time is suspended in cases where provision is made for an aggregate sentence of imprisonment of more than five years in especially serious cases and if the main proceedings have been opened before the regional court, from the time of the opening of the main proceedings, but no longer than for a period of five years.

The application of this suspension is intended to ensure that sufficient time is available to process even complex criminal tax proceedings (RegE, p. 31).

2.2 Extension of the absolute statute of limitations for prosecution of crimes (section 376 (3) AO-E)

With the insertion of a new paragraph 3 in section 376 AO, the absolute statute of limitations for the prosecution of crimes is also to be extended to 25 years in cases of particularly serious tax evasion. Insofar section 376 (3) AO-E regulates that the prosecution ‑ in deviation of section 78c (3) sentence 2 StGB in the cases of particularly serious tax evasion specified in section 370 (3) sentence 2 no. 1 to 6 StGB ‑ will become statute barred at the latest if since the time specified in section 78a StGB two and a half times of the statutory period of limitation has elapsed.

According to section 78a StGB, the limitation period begins to run as soon as the offence is completed. That would be the case, for example, in case of failure to submit an advance VAT return or annual VAT return when the deadline for submission has expired.

Pursuant to section 78c (3) sentence 2 StGB, as a rule, prosecution is barred by limitation once double the statutory limitation period has elapsed since the offence is completed. In the case of particularly serious tax evasion, the period of limitation pursuant to section 376 (1) AO is ten years and the absolute limitation period for prosecution is therefore currently 20 years. A particularly serious tax evasion is, for example, if taxes are deliberately understated on a large scale (section 370 (3) sentence 2 no. 1 AO), which is the case according to the Federal Court of Justice if the evaded amount exceeds EUR 50,000.

It would be extended to 25 years in the future with the planned section 376 (3) AO-E.

Unlike the previous draft of the Federal Ministry of Finance, the government draft does not say a word about the fact that this is a lex cum/ex (see also DER SPIEGEL)

3. Conclusion

At first glance, the government's draft of the Second Coronavirus Tax Relief Act appears to offer a large number of tax relief measures, but through the back door it introduces not only insignificant tightening of the law on fiscal offences.

In particular, the regulation on asset confiscation will have an effect in practice through more extensive levies on benefits in the future. Those affected must consider the fact that there will still be levies on benefits even in the case of statute-barred tax offences and expired tax claims.

In view of the planned new regulations in section 376 AO it must be stated that these are due to the soon elapsing limitation periods in a large number of cum/ex proceedings and thus ultimately constitute a lex cum/ex. It remains to be seen what is more purposeful with regard to complex large-scale proceedings under criminal tax law: an extension of limitation periods or investments in the equipment of the judiciary. In any case, according to the amendment plans, it will be possible in the future to confiscate obtained benefits even after ‑ fiscal and criminal ‑ limitation periods have elapsed.

Timo Handel