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26. July 2022 | The Total Cost Procedure for the Profit and Loss Account

11. August 2022 | Summary notification (§ 18a UStG): Deadlines / Content / Tax Criminal Risks (this contribution)

Business owners must pay VAT on a variety of complex and often cross-border transactions in order to correctly state them in your VAT advance notification. In the case of intra-Community deliveries, they must also submit a summary declaration. Problems may therefore arise, particularly in connection with intra-Community supplies. We explain the summary notification according to § 18a UStG and what you have to pay attention to – especially under tax criminal law aspects.

1st summary notification (§ 18a UStG)

Entrepreneurs who carry out certain cross-border transactions must submit a summary report in accordance with § 18a UStG. The beneficiaries regularly owe the tax for this. Therefore, the recapitulative statement is intended to enable the financial authorities responsible for the recipients to check whether the recipient is taxing the benefit properly. The aim is to combat tax evasion. The purpose of the recapitulative statement is therefore to ensure the taxation of acquisitions in the country of destination.

2nd summary declaration for intra-Community deliveries

2.1 Mechanism of intra-Community delivery

If the material requirements of § 6a (1) sentence 1 UStG are met, intra-Community supplies pursuant to § 4 no. 1 letter b are exempt from tax. Operators carrying out such an intra-Community supply of goods or an intra-Community triangular operation shall then submit a summary declaration. Furthermore, according to § 18a paragraph 2 of the UStG, this obligation also applies to entrepreneurs who receive other services within the meaning of § 3a paragraph 2 of the UStG.

2.2 Summary message: Deadlines and content

According to § 18a (1) sentence 1 of the UStG, the entrepreneur must for intra-Community deliveries until 25. Submit a summary report to the Federal Central Tax Office (BZSt) on the day following the end of each calendar month. Therefore, the entrepreneur must submit them for each calendar month in which he executes reportable transactions. On the other hand, entrepreneurs who do not exceed the turnover threshold of § 18a (1) sentence 2 UStG must submit them within 25 days after a calendar quarter. The same also applies to the reporting obligation according to § 18a paragraph 2 UStG. Small business owners, on the other hand, do not have to report this. The recapitulative statement must contain the VAT identification number, the tax base and the type of turnover for each acquirer. The information is transmitted by the BZSt to the member states.

2.3. Summary declaration and VAT advance declaration

In the monthly VAT advance declaration, which is to be transmitted according to § 18 (1) sentence 1 UStG by the tenth day of the following month, the entrepreneur declares the intra-Community delivery as tax-free. Then he must submit the recapitulative statement to the BZSt. The submission of the recapitulative declaration therefore takes place after the submission of the corresponding pre-declaration.

If the trader does not comply with his obligation to submit a proper recapitulative statement, the exemption shall in principle be refused. Therefore, in principle, it is only at the time of submission of the recapitulative statement or with the fruitless expiry of the submission period whether the turnover is exempt from tax. Any refusal of the exemption therefore follows the submission of the VAT advance declaration in time. However, the refusal of the tax exemption takes place retroactively, i.e. back to the time of the turnover.

However, by correcting the incorrect summary report, the entrepreneur can retroactively recover the tax exemption. The entrepreneur is obliged to correct the incorrect summary report within one month. In addition, the financial administration has decided that, on the one hand, a failed summary notification can be made within the month period. In addition, the correction after the expiry of the month period, but within the fixing period, should also lead to the retroactive recognition of the tax exemption. The monthly period therefore serves only the fine procedure.

Summary report: Criminal tax aspects

3.1. Tax penal consequences linked to tax exemption

Whenever the taxpayer has obligations to cooperate, the question arises of criminal tax risks. The regulations in § 18a UStG do not serve to ensure proper taxation in Germany. However, violations of the obligations under Section 18a of the UStG are sanctioned in accordance with the fine in Section 26a (2) no. 5 of the UStG. In addition, the link between tax exemption and the proper submission of the recapitulative statement may have criminal tax consequences.

3.2. Correct advance VAT declaration

If there is an intra-Community delivery and the VAT declaration is correct and complete. Then the VAT advance declaration does not become incorrect by the fact that the entrepreneur subsequently does not send a proper recapitulative report and thus loses the tax exemption retroactively.

In the reverse case of subsequent changes in favour of the taxpayer, which affect the time of filing the tax return, the situation at the time of the fact, i.e. the filing of the advance notification, is decisive. Subsequent changes in the tax liability in favour of or to the detriment of the taxable person are therefore irrelevant for the realisation of the facts, even if they have retroactive effect on the time of tax origin under substantive tax law.

Criminal liability risks therefore do not arise for the entrepreneur when the pre-registration is submitted if the pre-registration is submitted before an incorrect summary report or before the expiry of the submission period applicable to the reporting obligation.

3.3. No advance VAT declaration

If the entrepreneur does not file a VAT advance declaration, the duty of declaration continues. If the entrepreneur still does not submit the pre-declaration after refusing the tax exemption, this can be sanctioned in accordance with § 370 (1) no. 2 AO, § 378 (1) AO.

3.4. Summary incorrect

If, on the other hand, the entrepreneur intentionally or recklessly does not submit the summary report, incorrectly, incompletely or in time, he commits an administrative offence according to § 26a paragraph 2 no. 5 UStG. A tax evasion or frivolous tax reduction of sales tax in Germany, however, is excluded: Although the entrepreneur loses the tax exemption retroactively, so that the sales tax previously declared and fixed in the advance notification is too low. However, the non-compliant submission of the recapitulative statement does not lead to an objectively attributable reduction in tax, since the intra-Community supply would be exempt from tax under the lawful alternative behaviour of the regular submission.

On the other hand, a criminal liability is possible because of participation in an evasion of VAT in the country of destination (§ 370 paragraph 6 sentence 2 AO) if the incorrect submission of the recapitulative report serves to reduce VAT in another Member State.

3.5. Failed notification

If the taxpayer realizes that the tax exemption has subsequently been waived because he has not submitted a proper summary report, he must immediately report the waiver of the tax exemption to the competent tax office according to § 153 AO. If the entrepreneur recognizes that the tax exemption has ceased and fails to notify immediately pursuant to § 153 paragraph 2 AO, the fact of tax evasion is fulfilled by omission pursuant to § 370 paragraph 1 no. 2 AO. However, the retrieval or correction of the recapitulative report before the execution of the offense may include a withdrawal from the attempt. After completion of the offence, the taxpayer is recommended to combine the retrieval or correction of the recapitulative statement with a simultaneous notification to the tax office responsible for him, which meets the requirements of a self-disclosure or excuse, § 371, § 378 paragraph 3 AO.

There are no criminality risks, however, if the entrepreneur either immediately submits the notification according to § 153 paragraph 2 AO or submits or corrects the summary notification before the expiry of the period. In the latter case, the reporting obligation pursuant to § 153 paragraph 2 AO also expires.

4th Conclusion: Summary notification and criminal tax law

Finally, errors in the summary report lead to criminal tax problems if the entrepreneur participates in the evasion of sales tax in the country of destination. A further case exists if, after filing the pre-registration, the entrepreneur realizes that he has not submitted a proper summary report at the time of maturity and intentionally or recklessly refrains from immediately reporting the abolition of the tax exemption in accordance with § 153 paragraph 2 AO or to submit or correct a summary report within this period. Finally, it is relevant under criminal tax law if the trader intentionally or recklessly declares intra-Community supplies exempt in the VAT return, even though he has not submitted a proper recapitulative statement for the corresponding pre-declaration periods and thus the condition of exemption is not met.