Tax Audit and Tax Evasion

A tax audit may be ordered even beyond the usual three-year period, particularly if tax evasion is suspected.

A taxpayer first filed a voluntary disclosure; shortly thereafter, he reported previously untaxed tips to the tax office. One year later, the tax office ordered a tax audit for the years 2000–2010. The taxpayer challenged the audit order to the extent that, without further justification, it covered a total of 11 years rather than the three years customary under the Tax Audit Regulations.

Suspicion is sufficient

The case went all the way to the Düsseldorf Fiscal Court, which deemed the extension of the audit period to be lawful. This was because criminal proceedings had already been initiated based on the voluntary disclosure and the request for correction. The duration of an external audit may exceed three years if there is suspicion of a tax violation or a criminal offense, or if significant changes to the tax base are anticipated. Findings discovered in the interim may also be taken into account for this decision. The auditors’ investigations had, in fact, raised suspicions of additional revenue exceeding €1,750,000.00 for the years 2008–2010 alone.