Penalty-Exempt Voluntary Disclosure

The penalty-exempt voluntary disclosure (strafbefreiende Selbstanzeige) is a privilege unique to German criminal tax law: anyone who declares all evaded amounts in time and in full, pays the back taxes and does not trigger any statutory block, walks away free from prosecution (§ 371 Abgabenordnung). It is the most important instrument for returning to tax honesty.

The disclosure must be a complete and correct re-declaration of all unbarred tax offences relating to one type of tax, covering at least the past ten calendar years. The evaded taxes and the interest on them must be paid within the deadline set by the tax office. Where the amount evaded per offence exceeds EUR 25,000, § 398a AO imposes a tiered monetary surcharge of 10 to 20 percent; in that case the law technically only refrains from prosecution rather than granting full immunity.

If the disclosure is submitted after an audit order has been announced, after a tax official has appeared on site or after the offence has been discovered, the immunity is lost. Because of the strict formal requirements, the considerable financial burden and the risk of an ineffective ("failed") disclosure, it should only be filed after thorough tax and criminal law analysis.