When the tax limitation occurs, the tax office cannot make any changes to a tax assessment. For the statute of limitations, the following questions arise: When does the statute of limitations begin, how long does it take before it occurs and can there be circumstances that interrupt or even prevent a statute of limitations? These questions are addressed in this article.

Surely you have heard of a limitation in tax law: As soon as limitation occurs, tax assessments are neither changeable nor challengeable by the taxpayer nor the tax office. In addition, the tax office then no longer has any means to cancel a tax assessment.

But how do we get from the tax declaration to the tax limitation and the associated “tax peace”? We are now examining this question, following the cycle prescribed by the taxation procedure. The income tax should serve as a general example.

But before we deal with the expiry of the tax, we need to describe the differences between substantive law and procedural law.

2.1.1. Content and scope of substantive tax law

We refer here to substantive law as the tax laws which apply to the collection of income tax, corporate tax, business tax and all other taxes, which are supplemented by directives and decrees. The individual tax laws indicate which persons have to pay taxes to what extent and to what extent and which exceptions may be given.

Furthermore, in tax theory, the areas which, for example, the tax liability relationship, liability or the regulations on certain conditions, such as public utility, are also classified as substantive rights. Unlike the specific tax laws, these regulations apply: these regulations do not create taxes, but influence them, especially their amount.

2.1.2. No justification of taxes by procedural law

Procedural law, on the other hand, determines the way in which the state collects taxes. Thus, procedural law generally also includes the regulation of legal relations between the state and citizens. So the procedural law – in tax law it is essentially the tax code (AO) – does not prescribe its own taxes. A tax is therefore by no means justified by the AO. The AO only regulates the implementation of the collection, establishment and determination of the tax. In short, the AO regulates the tax assessment, while the respective tax law regulates the tax.

So before there is a limitation period of a tax situation, first of all a meshing of substantive law and procedural law must have taken place. However, the statute of limitations is itself a regulation based solely on procedural law.

The substantive tax law applies first, in which it results in the collection of a tax when an event occurs. In our general example, income tax is the existence of income, which in turn is based on income generated, for example in the form of fees of a doctor or lawyer. For this purpose, the state levies income tax in accordance with the provisions of the Income Tax Act. At the same time, however, it also respects the provisions of the tax code. In particular, certain general deadlines are relevant here. This includes, among other things, the period for which taxation takes place (assessment period), until when a taxpayer has to file a tax return (delay period) and until which legal remedies can be filed (remedy period) in order to challenge a tax assessment. Finally, the AO also regulates the time from which a tax item is immutable. This period is defined as the limitation period.

Any formulation for a general definition of the limitation period in tax law always refers to the fixing period. In this case, the state of the limitation period occurs precisely when the fixing period has expired. Thus, the period over which the setting period extends constitutes the only time window under taxation during which a tax authority may set, amend or cancel taxes. All efforts in relation to an already issued tax notice, which a tax office or a taxpayer may initiate after the occurrence of a limitation period, thus remain without effect.

In tax law, however, there is more than one limitation period (for example, the limitation period). Unless there is a reckless tax reduction or evasion, the limitation period for excise duties is one year and for all other taxes is four years. In this part, however, we would like to concentrate on the limitation period according to § 169 AO.

For this purpose, two important characteristics are considered for the limitation period: the beginning and the duration of the period. There is no legal regulation for the end of the period, because the end of the period results from the beginning and the duration.

The beginning of the limitation period (§ 170 AO) occurs regularly with the end of the calendar year in which the tax return is submitted. However, if you have not submitted a tax return despite the obligation to submit, the fixing period begins at the latest with the expiry of the third calendar year after the tax origination. In income tax law, tax origination is in turn associated with the end of the assessment period. In fact, this is usually linked to the calendar year. However, other marketing years may also be considered as the assessment period. This is particularly common in the agricultural and forestry sectors.

In most cases, the fixing period takes four calendar years. There are two exceptions: If a tax reduction is reckless, the time limit will increase to five years, and if tax evasion takes place, it will increase to ten years. Conversely, this means that the fact of tax evasion no longer has any tax consequences after the expiry of the ten-year limitation period.

The whole thing can be represented well by some examples. For this, we want to look at the income of taxpayer Anton Knapp from 2020.

By the way, deadline calculations are an integral part of the written examination for the tax consultant exam.

3.3.1. Submitting the tax declaration 2022

In the first example, Anton Knapp will not submit his income tax return for 2020 until 2022.

By the way: Normally, the submission period ends on 31 July of the calendar year following the assessment period (here this would be 31.07.2021). However, the time limit indicated here may well be permissible if you commission a tax consultant to prepare the tax declaration. Because then the deadline is extended by seven more months. In addition, due to the current pandemic, a general extension for filing the income tax return until 31.05.2022 has been introduced, provided that tax advice is also consulted here. Therefore, we want to assume in our example that the tax consultant of Anton Knapp submits the tax declaration to the tax office no later than 28.02.2022.

The determination period thus begins at the end of 2022 and lasts four years. It will end at the end of 2026. The four-year period shall cover the years 2023 to 2026. Therefore, a change in the tax assessment from the year 2027 is excluded in principle (unless there is a reckless tax reduction or tax evasion).

3.3.2. Submitting the tax declaration 2021

If the taxpayer Anton Knapp had instead already submitted his tax return for 2020 in 2021, then the fixing period would be shortened by one year compared to the previously described deadline calculation. The statute of limitations would then already occur at the end of 2025 instead of the end of 2026.

3.3.3. The taxpayer does not submit a tax return and the tax office also remains inactive

But what does it look like if Anton Knapp does not file a tax return? For the assessment period 2020, the start of the determination period must then be set at 31.12.2021. The fixing period then ends on 31.12.2024, so that the limitation period occurs on 01.01.2025. If the tax office responsible for him has not taken any steps to tax his income from 2020 that result in a tax notice issued in this period, Mr. Knapp’s income will legally remain untaxed. However, the prerequisite for this is, of course, that the circumstances here do not constitute a frivolous tax reduction or tax evasion.

In connection with this, however, process inhibitions are also relevant. Expiry restrictions are circumstances that suspend the limitation period before the circumstance has been dissolved. In other words, when an expiration inhibition occurs, you simply stop counting the days remaining for the limitation period. If the reason for the suspension of expiration is removed again, however, the remaining days of the limitation period are counted on as if there had never been an interruption.

The best example of this would be an audit with the taxpayer. In the case of an audit, the limitation period remains suspended if the tax assessment, which the tax office changes on the basis of the audit, remains contestable. Thus, this means that the fixing period – and thus the limitation period – can only end when the opposition period of an amended tax assessment initiated by the audit has expired.

A detailed question is important: In the case of the service test, the sequence inhibition starts with the start of the service test instead of with the test set-up.

Further process inhibitions may result from: