Automatic exchange of (financial) information (AEOI) – Timely voluntary disclosure for tax evasion

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Financial information was automatically exchanged once again on September 30, 2019. Those with unreported income in foreign accounts can still submit a voluntary declaration leading to immunity from tax evasion charges.

The automatic exchange of (financial) information (AEOI) occurs regularly at the end of September, with Germany’s Federal Ministry of Finance (Bundesfinanzministerium) exchanging financial information with around 100 countries this year as well. For the authorities, the AEOI is a powerful weapon in the fight against tax evasion. Its reach is not limited to countries such as Liechtenstein, Luxembourg, Austria or Switzerland; many other countries that were once considered tax havens take part in the exchange.

In doing so, the German tax authorities receive vast amounts of data and information concerning foreign accounts, income, interest, and dividends. Tax evaders who have deposited untaxed income in foreign accounts, on the other hand, are now scarcely able to conceal their tax evasion from the German tax authorities. We at the commercial law firm MTR Rechtsanwälte note that submitting a voluntary declaration leading to immunity from tax evasion charges still represents a way out of this situation.

Given the ever-increasing risk that the tax evasion will be uncovered, tax evaders should not kick voluntary disclosure into the long grass. Voluntary disclosure can only succeed if there are no grounds impeding its success. This means that the tax evasion must not yet have been discovered by the authorities.

However, it is equally important for a voluntary declaration to be well prepared and not hastily put together on one’s own or with the help of standard templates, as a voluntary declaration can only lead to immunity if it is complete and error-free. It must include all relevant information from the past ten years. Complying with these requirements is a tall order for a layperson. Those who nonetheless decide to take their chances and forgo expert legal advice risk voluntary disclosure failing. Even minor errors can lead to an invalid voluntary declaration.

To prevent this from happening, lawyers with experience in the field of tax law ought to be consulted when dealing with voluntary disclosure. They can assess each case individually and know what information needs to be included in the voluntary declaration for it to be capable of leading to immunity.

https://www.mtrlegal.com/en/legal-advice/tax-law/voluntary-disclosure.html

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