Stricter VAT penalties in Germany for voluntary disclosures

The German Ministry of Finance has announced that they intend to impose tighter penalties where voluntary disclosure is involved.

Generally, if a business detects errors in their German VAT returns, they may file a voluntary disclosure by which they will correct such errors. This usually results in lower fines.

Current German VAT penalty regime

Late filing: Fine of 10% of VAT due up to a cap of €25,000 at full discretion of the Tax Administration. Unpaid VAT Due: Monthly interest at 1% on the unpaid VAT. There is also a further interest charge on the penalty of 0.5% per month.

Future German VAT penalty regime

As it stands, a business may file a voluntary disclosure for errors detected up to 10 years after the event. However, this will now be reduced to 5 years.

In addition, the maximum fine caps will be extended beyond the current cap of €25,000, and there will be a potential further 10% charge of the tax due beyond this limit on late returns. This will rise to 15% above €100,000 and 20% above €1 million.

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