New decision by the Austrian Federal Tax Court (BFG) regarding tax increases in case of voluntary self-disclosures pursuant to section 29 para. 6 Austrian Tax Criminal Code (FinStrG)

In a recent decision, the BFG dealt with the question of whether a tax increase is only to be assessed if an announced tax audit was actually the reason for submitting a voluntary self-disclosure (BFG 1 December 2023, RV/2100533/2023). Regarding this matter, the BFG interprets section 29 para. 6 FinStrG strictly. An ordinary review to the Austrian Supreme Administrative Court (VwGH) has been permitted. The BFG also makes interesting statements on the issue of fault regarding violations of the prohibition on deduction pursuant to section 20 para. 1 subsec. 7 Austrian Income Tax Act (EStG) (manager remuneration – see newsletter).

Statutory provision

Section 29 para. 6 FinStrG reads in part as follows (in German):

„Werden Selbstanzeigen anlässlich einer finanzbehördlichen Nachschau, Beschau, Abfertigung oder Prüfung von Büchern oder Aufzeichnungen nach deren Anmeldung oder sonstigen Bekanntgabe erstattet, tritt strafbefreiende Wirkung hinsichtlich vorsätzlich oder grob fahrlässig begangener Finanzvergehen nur unter der weiteren Voraussetzung insoweit ein, als auch eine mit einem Bescheid der Abgabenbehörde festzusetzende Abgabenerhöhung unter sinngemäßer Anwendung des Abs. 2 entrichtet wird. […].“

(Translation for information purposes only):

“If voluntary self-disclosures are submitted on the occasion of a review, inspection, processing or tax audit of books or records by the tax authority after their registration or other disclosure, exemption from fines with regard to tax offences committed intentionally or with gross negligence only applies subject to the additional requirement that taxes are increased by assessment of the tax authority applying para. 2 accordingly. […] .”

The supreme courts already addressed this issue in several decisions (regarding this matter we refer to our newsletter from 2020 (in German only):

The facts of the case of the decision by the BFG

The taxpayer was informed of a tax audit regarding the corporate income tax from 2015 to 2019 on 6 December 2021 via telephone and e-mail by the tax authorities. On 7 December 2021 a voluntary self-disclosure was submitted regarding the corporate income tax from 2016 to 2018. The relevant issues to be amended by the voluntary self-disclosure were identified by the taxpayer already on 8 November 2021 and the corresponding letter was finalised on 3 December 2021 and sent to the client for approval.

Followingly, a tax increase pursuant to section 29 para. 6 FinStrG was assessed by the tax authorities. An appeal was filed against the assessment of the tax increase. The appeal was rejected by the competent tax authority as unfounded in a preliminary appeal decision. Then a request for submission was filed with the BFG.

Point of law

The question is whether as a requirement for assessing tax increases the wording of the legislation and the purpose of the provision of section 29 para. 6 FinStrG should be interpreted in such a way that the taxpayer must not only be aware of a future tax audit procedure, but the tax audit is also required to be the (actual) reason for – and therefore causing – the submission of a voluntary self-disclosure. The decisions of the VwGH must be taken into account in this question of interpretation.

Decision of the BFG

The BFG concludes in its decision that the German word anlässlich (translated with on the occasion of see above) of section 29 para. 6 FinStrG is only to be interpreted in such a way that at the time of the announcement of the tax audit a voluntary self-disclosure must have been already submitted, in order to prevent an assessment of a tax increase. Therefore, the point in time of the announcement of a tax audit is the time limit after which a voluntary self-disclosure without assessing a tax increase is not possible anymore.

The BFG reasons that it is not possible to assume that by the amending legislation from 2014 to the Austrian Tax Criminal Code in section 29 para. 6 FinStrG the legislator had the intention to create an ambiguity regarding a tax increase depending on whether the taxpayer was already preparing a voluntary self-disclosure, irrespective of a tax audit, which – for whatever reasons – was only submitted after the announcement of such a tax audit.

Finally, the BFG states that in the present facts of the case nearly a month passed until the voluntary self-disclosure was submitted. The circumstance of the long period between the discovery of the relevant issues and the submission of the voluntary self-disclosure indicates that the taxpayer has acted against the intention of the legislator not to postpone the submission of a voluntary self-disclosure, but to return to tax compliance before the tax authorities initiate any action.

Conclusion

Nevertheless, in our opinion the better arguments speak for the fact that, when interpreting the term “anlässlich”, it must be taken into account whether a voluntary self-disclosure has already been planned, was in preparation and a submission was intended without delay. If this is the case, the announcement of tax audit proceedings may not be considered as an “occasion” for the voluntary self-disclosure.

In our opinion, the interpretation by the BFG would lead to inappropriate results, the assessment of tax increases would be a highly random process. Moreover, such an interpretation could all the more encourage unwelcome manoeuvres and therefore be contrary to the purpose of the provision, especially regarding offences committed with gross negligence: This is because of the relation between the fixed flat-rate amount of the tax increase and the current fine imposing approach by the tax authorities on tax offences committed with gross negligence.

In our opinion, in practise it is a question of evidence, whether the taxpayer can prove that the voluntary self-disclosure was already planned, in preparation or even in the approval process. Experience shows that the tax authorities in the past have not assessed a tax increase if it was credibly proven that no tax manoeuvres were intended. In our opinion, regarding the duration of processing a voluntary self-disclosure the complexity of the matter is to be taken into account. One month between the discovery of the issue and submitting a voluntary self-disclosure (as in the facts of the case relevant to the decision) is short for processing such a matter, especially in group and international contexts.

An ordinary review to the VwGH has been permitted.