Tax evasion under section 370 of the German Fiscal Code (Abgabenordnung – AO) is the central criminal offence in German tax criminal law. It is designed to protect the public interest in the timely and complete collection of taxes.
Under criminal law, not only incorrect but also incomplete information provided to the tax office are relevant – for example, where received income is not declared. When assessing a criminal case, the applicable tax law provisions must always be taken into account. Only those who actually evade taxes or obtain unjustified tax advantages can be prosecuted for tax evasion.
The charge of tax evasion applies to all industries and any taxpayer – whether they were acting as a private individual or as someone responsible for a company. In suitable cases, an effective voluntary self-disclosure can be a crucial step towards exemption from punishment.
Tax Evasion – When does it constitute a Criminal Offence?
The offense of tax evasion under section 370 AO is committed by anyone who, in order to understate taxes or obtain unwarranted tax advantages, provides incorrect or incomplete information to the tax authorities or other authorities regarding tax-relevant facts, unlawfully fails to inform the tax authorities about tax-relevant facts, or unlawfully fails to use revenue stamps or revenue stamping machines.
The offence can be committed both by active conduct or by omission and is punishable already at the attempt stage.
All variants of the offence require intent: The perpetrator must be aware that the statutory elements of the criminal offense are fulfilled and act with the will to bring this about.
If intent is lacking, negligent tax evasion under section 378 AO may apply. This does not constitute a criminal offense, but an administrative offence.
Typical cases include incorrect or incomplete information provided in tax returns or tax declarations. Only natural persons can be held criminally liable. Legal entities such as a UG, GmbH or AG cannot themselves be perpetrators of tax evasion; liability attaches to the individuals acting on behalf of a company, such as its managing directors and board members.
Tax evasion does not occur if a taxpayer merely benefits from an error on the part of the tax authorities without having acted unlawfully themselves. The taxpayer is not obligated to correct errors made by the tax office if the tax office has received the necessary information from the tax return.
How is Tax Evasion Detected?
The risk that tax evasion will be detected has increased significantly as a result of digitalisation, various (international) reporting obligations and intensified enforcement by tax and law enforcement authorities in specific areas. Since the beginning of 2026, for example, cryptocurrency exchanges have an obligation under the EU Directive on Administrative Cooperation in the Field of Taxation (DAC8) to report user data and transactions to the tax authorities. One aim of these rules is to make tax evasion more difficult and to better trace profits from cryptocurrencies.
In addition, information exchange between tax authorities can lead to the detection of tax evasion if assets or income have not been properly declared. Data theft and the purchase of tax data (“tax CDs”) are also significant tools.
Risks also arise in inheritance cases where untaxed assets are discovered in the course of estate settlement and heirs are confronted with tax consequences.
Moreover, financial institutions are obliged under anti-money laundering regulations to report suspicious cash deposits or transactions, which can also bring tax-related matters to the attention of the authorities.
What are the Penalties for Tax Evasion?
Under section 370 (1) AO, tax evasion is punishable by a fine or imprisonment of up to five years. In particularly serious cases – for example, tax evasion on a large scale or the use of forged documents – the penalty can be imprisonment of up to ten years.
The imposed sentence depends on the specific circumstances of each case and is usually significantly lower than the maximum penalty stipulated by law. Sentencing factors include prior convictions, the amount of tax evaded, and the offender’s conduct after the crime, in particular restitution payments.
If criminal proceedings are discontinued, for example subject to an imposed condition according to section 153a of the German Code of Criminal Procedure (Strafprozessordnung – StPO), the individual can avoid a conviction and an entry into the criminal record. The condition is typically payment of a sum of money, often in conjunction with the requirement to settle outstanding tax liabilities.
Tax evasion proceedings can further result in the confiscation of the proceeds of crime. Through this measure, the offender or participant is deprived of what they obtained through the offence – for example, unpaid or wrongfully refunded taxes. Furthermore, the state can also order the confiscation of assets from individuals who are not themselves charged but have obtained something from the offense (so-called extended confiscation). The financial impact of confiscation can, in practice, be more severe than the criminal sanction. It is therefore important to recognise the possibility of confiscation at an early stage and to take appropriate legal action.
Can voluntary Self-Disclosure lead to Exemption from Punishment?
Anyone who fully corrects incorrect information, supplements incomplete information, or provides omitted information to the tax authorities regarding all tax offences for a type of tax shall not be punished for tax evasion.
Self-disclosure only grants exemption from punishment before tax authorities announce the initiation of criminal or administrative proceedings or order a tax audit for the offence. After proceedings have been announced, exemption from prosecution is excluded for the types of taxes and periods covered by the audit. Exemption through self-disclosure may, however, still be possible for unaffected years or types of taxes.
Furthermore, exemption requires the timely payment of the evaded taxes, including interest and other additional charges. Accordingly, a voluntary disclosure requires not only legal review but also careful financial preparation to ensure sufficient liquidity. In practice, the payment deadline set by the tax authorities is usually between one and six months.
The chances of success for self-disclosure depend on numerous factors. In summary, the following are crucial:
- timely submission of the declaration,
- full repayment of all amounts, and
- complete disclosure and correction of all incorrect or omitted information.
Even if complete exemption from punishment is no longer attainable, early cooperation and comprehensive disclosure often lead to significant mitigation of the sentence.
How We support You in Cases of alleged Tax Evasion
We are a team of lawyers specializing in tax and white-collar crime, advising and defending clients throughout Germany. Drawing on many years of experience we will develop tailored defence strategies based on a thorough assessment of your situation.
Our core areas of practice include:
- defence in tax criminal investigations and, where necessary, in court proceedings and hearings at all instances,
- representation in proceedings concerning tax-related administrative offences,
- defence against asset confiscation measures, and
- early-stage counselling to help avoid criminal liability in the first place.
We provide personalized, one-on-one consultations and are available at short notice. Please contact us by telephone or email to arrange an appointment.
FAQ – Frequently asked Questions about Tax Evasion
Tax evasion typically occurs where taxes are intentionally reduced or unjustified tax advantages are obtained, for example by providing incorrect or incomplete information to the tax authorities on tax-relevant facts or by unlawfully withholding tax-relevant facts. Both active conduct and unlawful omissions are punishable – even an attempt is sufficient. Negligent tax evasion under section 378 AO does not constitute a criminal offence, but an administrative offence.
Under section 370 (1) AO, tax evasion is punishable by fine or imprisonment of up to five years. In particularly serious cases within the purview of section 370 (3) AO, the penalty is imprisonment from six months to ten years.
According to the case law of the Federal Court of Justice, in cases involving particularly high amounts of evaded tax exceeding EUR 50,000, a fine will only be considered proportionate in view of the offender’s culpability if there are significant mitigating circumstances. In cases involving tax evasion in the millions, a suspended prison sentence is only considered where particularly weighty mitigating factors are present.
Yes. Various factors can lead to a reduction in sentence in the individual case, in particular restitution, early and comprehensive disclosure of the facts and cooperation with the authorities. Which measures are appropriate should always be discussed with an experienced criminal defence lawyer.
Voluntary self-disclosure can lead to immunity from prosecution if it is comprehensive, timely, and submitted before the offence has been discovered. The legal requirements are strict and depend on the circumstances of the individual case.
The limitation period is generally five years, and fifteen years in particularly serious cases. The point in time at which the offence is completed marks the beginning of the limitation period, for example the notification of the tax assessment. Various circumstances can lead to a significant extension of the limitation period.
All criminal proceedings begin with an initial suspicion, leading to the initiation of a formal investigation. The investigation phase concludes with an indictment, a penal order or the discontinuation of proceedings. If an indictment is filed, the court usually conducts a main hearing. The main hearing can end with a judgment or a discontinuation of proceedings. An appeal or other legal remedy may follow.
Proceedings may be discontinued, for example, if there is insufficient suspicion of a criminal offence or the public interest in prosecution is so limited that a conditional discontinuation is appropriate.
An experienced defence lawyer will examine the allegations and circumstances in detail, develop a realistic and targeted defence strategy, and assert your rights before the tax authorities, investigative authorities and the courts with the objective of achieving a discontinuation of proceedings or, where this is not possible, the mildest possible sanction.