Tax Audits: The Employer’s Obligations to Cooperate

In connection with the total social security contribution, pension insurance providers may review whether an employer has fulfilled its reporting and other obligations. In the course of such a review, the employer is required to provide assistance. Your tax advisor in Düsseldorf and Oberhausen has summarized what is expected in this context.

The Employer’s Assistance with the Audit

Pension insurance providers generally have the authority to audit whether employers are complying with their reporting obligations and other duties related to the total social security contribution. In particular, they verify whether contribution payments and reports are accurate. This occurs at least every four years.

Employers are subject to obligations to provide information, evidence, and documentation. These apply to all details necessary for the collection of contributions in individual cases. The primary focus here is on the public interest in the timely and complete collection of contributions. Employers are required to submit all documents containing information regarding employment. In addition, they must provide information on all facts necessary for the collection of contributions.

To meet these requirements, employers should therefore maintain remuneration records for each employee, organized by calendar year, within the scope of SGB IV in German. These records should be kept in an orderly manner until the end of the calendar year following the last audit. It is important to ensure that the employer’s record-keeping obligations are properly fulfilled. This is not the case if the required records are incomplete, incorrect, or not timely. It may also be the case that the manner in which the records are kept does not provide an expert third party with an overview of the payroll within a reasonable time.

Breach of Record-Keeping and Cooperation Obligations – The Consequences

In principle, it is possible for an employer to violate their record-keeping, documentation, and/or cooperation obligations. If such a violation is identified, the auditors of the pension insurance provider have the following legal options:

• A so-called “total contribution notice” may be issued if there is no basis for assessment, if traceability cannot be established during the audit, or if the employer fails to cooperate during the audit.
• Fines may be imposed if the record-keeping and documentation obligations have been violated
• Fines may also be imposed if the obligation to cooperate has been violated
• A penalty payment may be imposed if there is a lack of cooperation during the audit. This is done in accordance with the Administrative Enforcement Act
• Late payment penalties may be imposed if the auditing pension insurance provider so decides and if claims for social security contributions due are identified for the past during a tax audit.

Aggregate Contribution Notice

A characteristic feature of the aggregate contribution notice is that the findings are not personalized. It should be noted that the determination of the insurance obligation and the contribution amount in the audit notice must, in principle, be personalized. This means that it must be individually identifiable for the respective insured persons. A total contribution notice may be issued as an exception if the employer has not properly fulfilled their record-keeping obligation. This means that, due to this failure, the insurance or contribution obligation or the amount of the contribution cannot be determined.

Fines for Violation of Record-Keeping and Documentation Obligations

Administrative offenses may be punished with a fine ranging from €2,500 to €50,000. When imposing a fine, the severity of the violation in the specific case, the charge against the offender, and their financial situation are taken into account.

Here, the administrative offense is penalized when an employer fails to maintain a payroll record or does not maintain it in the prescribed manner, or fails to retain it until the date specified therein. It also happens that a payroll record or a contribution statement is not prepared or is prepared incorrectly.

Fines for Violation of the Duty to Cooperate

Employers are required to provide auditors with information regarding the provision of social benefits and the payment of contributions. This obligation to provide information includes the type, scope, start, and end dates of employment, the place of employment, and the amount of wages, to the extent that this information is necessary for the granting and calculation of social benefits.

A fine may be imposed if employers intentionally or negligently fail to provide information. It is also relevant whether documents are not provided, are incomplete, or are not provided in a timely manner. The fine can amount to up to €5,000.

Information is considered “incorrect” if:

• if it was knowingly provided incorrectly – The employer provides information that does not correspond to the actual facts and is aware of this fact.
• if it was incomplete – The information omits essential parts of the requested facts.
• if it was not provided in a timely manner – The employer allows a reasonable deadline for the response to pass.

Late payment penalties

Those liable for payment must have paid contributions and advance contributions by the end of the due date. If this is not the case, a late payment penalty of 1% of the amount in arrears, rounded down to €50, may be imposed for each month or portion thereof. If the employer was unaware of the payment obligation through no fault of their own, this rule does not apply. Claims for contributions not intentionally withheld are subject to a four-year statute of limitations. However, intentionally withheld contributions are subject to a 30-year statute of limitations. Intent is deemed to exist if the employer, as the party liable for contributions, was aware of and intentionally chose to refrain from paying the contributions due.

Tax Advisors in Düsseldorf and Oberhausen

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