A Major Shift in German Criminal Law for Tax Offenses

In the recent German case BGH Case 1 StR 387/25, the Federal Court of Justice majorly reshaped the criminal law landscape for tax offences in Germany. In this case, it was ruled that the filing of German advance VAT returns and the filing of German annual VAT returns are no longer treated as a single act under German law. Previously, these VAT filings would have been treated as one singular act, and one singular tax offence, for the purposes of German criminal law.

Instead, each VAT filing is now considered a separate act going forward under German law. As a result, these separate offences carry separate, cumulative punishments, rather than one single punishment which had been the case historically.

In addition, in this case the Federal Court of Justice also confirmed that the filing of a correct annual VAT return does not rectify an incorrect advance VAT return, and vice versa. Therefore, this ruling confirms that either an incorrect advance VAT return or annual VAT return is sufficient to constitute an offence of tax evasion under German criminal law.

What do these changes mean?

 These changes significantly reshape the German criminal law landscape to increase the potential risks and punishments which may be imposed under German law going forward for VAT offences such as tax evasion. Therefore, ensuring accurate and consistent VAT reporting throughout the year is of even greater importance for businesses to avoid serious legal consequences.

How to account for these changes

 Ensuring accurate VAT reporting has never been more important in Germany, as errors in filing may now trigger harsher legal consequences. To assist with this, businesses may consider taking some of the following steps:

• Implement stronger review procedures for both advance VAT returns and the annual VAT return to ensure accuracy and consistency across filings.
• Regularly reconcile VAT data throughout the year so that errors in advance returns are identified and corrected promptly.
• Maintain clear documentation and audit trails supporting VAT positions taken in each declaration.
• Engage with VAT specialists to oversee VAT compliance and identify potential risks before filings are submitted to prevent breaches of German VAT law.

Support from VAT compliance specialists helps to ensure that your German VAT filings are accurate, consistent and fully compliant with German VAT law. Meridian has extensive experience in supporting businesses in managing German VAT compliance and avoiding unforeseen legal consequences.

If you require any assistance in managing your German VAT compliance, or have any questions, please feel free to get in touch and we would be delighted to help!