Voluntary Disclosure for Tax Evasion: Risks, Opportunities & Correct Procedure

What is a voluntary disclosure for tax evasion?

The voluntary disclosure exempting from punishment is a legally regulated instrument under Section 371 of the Tax Code (AO). It allows for the subsequent disclosure of committed tax evasion in order to avoid criminal prosecution.

Objective: Exemption from punishment despite committed tax evasion

An effective voluntary disclosure within the meaning of Section 371 AO provides the possibility of remaining exempt from punishment despite committed tax evasion.

Requirements for an effective voluntary disclosure

For a voluntary disclosure to have an exempting effect, all of the following requirements must be met:

• • Timeliness: The voluntary disclosure must be made before the offense was discovered or before there is initial suspicion.
  • Completeness: The disclosures must cover all non-statute-barred tax offenses of one tax type, or at least all tax offenses of one tax type within the last ten calendar years.
  • Correctness: All information must be complete and truthful.
  • Back payment: The evaded taxes must be paid in full, including interest, within the prescribed deadline.

Even small errors or forgotten information can render the voluntary disclosure ineffective.

When Is Voluntary Disclosure No Longer Possible?

There are legally regulated grounds for exclusion that prevent an exempting voluntary disclosure:

• • An audit by the tax office has already been announced or is underway.
  • The offense has already been discovered and the perpetrator is aware of the imminent discovery.
  • The voluntary disclosure does not cover all relevant tax types or periods.

In certain cases, a voluntary disclosure (that is no longer effective) may be taken into account in sentencing – it does not lead to exemption from punishment, but possibly to a milder sentence.

How does voluntary disclosure work in practice?

Step-by-step:

1. 1. Consultation with a specialized attorney (absolutely necessary)
   2. Review of all documents and determination of relevant tax types & years
   3. Calculation of back payment including interest
   4. Preparation and submission of the voluntary disclosure to the competent tax office
   5. Timely payment of all amounts
   6. Proof of payment to the authorities

When is a voluntary disclosure worthwhile?

A voluntary disclosure is always advisable when:

• • Errors in the tax return are identified (even years later)
  • previously untaxed income exists (e.g., rental income, foreign accounts, crypto gains)
  • A tax audit is imminent or insider knowledge becomes known

Early action secures opportunities for exemption from punishment!

Common errors in voluntary disclosure

Type of error	Consequence
Incomplete information	Voluntary disclosure not effective
Tax type/period forgotten	Voluntary disclosure not effective
Payment not made on time	Voluntary disclosure not effective
Without legal advice	Formal errors, risks due to ignorance

Our services for you

Our firm specializes in tax criminal law and economic criminal law. We offer nationwide:

• • Review of your individual situation
  • Preparation of a legally sound voluntary disclosure
  • Communication with tax authorities & tax investigation
  • Defense in criminal proceedings (if necessary)
  • Tax law advice for risk minimization

Whether private individual or business owner: We provide comprehensive, discreet, and targeted advice.

What happens after the voluntary disclosure?

• • The tax office reviews the information and may request additional documents.
  • With complete disclosure and timely payment, no criminal proceedings will be initiated.
  • There is no public hearing, no entry in the criminal record – and no punishment.

Examples from practice

Many clients come to us when there is uncertainty or when the tax office makes initial inquiries. Typical cases from our advisory practice:

• • A business owner discovered during an internal audit that income from foreign transactions had not been fully reported in tax returns for several prior years. Before the tax authorities became aware of this, he contacted us. Together with him, we prepared a complete and timely voluntary disclosure covering all affected years and tax types. After timely payment of the evaded taxes including interest, the proceedings were discontinued – exemption from punishment under Section 371 AO was granted. Criminal prosecution was thus completely avoided.
  • A crypto investor realized substantial gains through Bitcoin & Co. but had never reported them for tax purposes. When the first exchanges began transmitting data, he decided to file a voluntary disclosure. The criminal proceedings were discontinued.
  • A client inherited an account in an EU country. Interest was never taxed – due to lack of knowledge. After being informed by her bank, she came to us. We prepared the complete voluntary disclosure and accompanied the proceedings to completion.