Tax decisions and declaratory decisions, unless the decision has been issued subject to inspection (§ 164 (1) AO) or provisionally (§ 165 AO), can only be corrected, amended or revoked if the requirements for the application of a correction standard or amendment standard (§§ 129, 172 ff. AO) are fulfilled. For this reason, the question of whether a definitive tax ruling or a tax ruling can still be corrected or amended is of considerable importance. The assessment is highly controversial. We therefore explain under which conditions, even in the case of a final tax assessment or assessment decision, a subsequent tax assessment change is possible at the expense of the taxpayer, but also in favour of the taxpayer.

Tax administrative acts develop with their publication and effectiveness self-binding effect for the issuing tax authority. For this reason, the financial administration can in principle no longer change the decision once made to protect the trust of the user of the content. However, the tax procedure as mass proceedings does not guarantee legal correctness. This can lead to incorrect tax rulings and thus to violations of the uniformity and legality of taxation. Therefore, there is interest in the correction of the adjustment notice.

These conflicting interests bring the correction standards of §§ 129, 172 ff. Therefore, final tax rulings can be corrected under certain conditions. The adjustment notice is final if it is not subject to verification or has not been provisionally issued. Therefore, the correction rules break through the physical strength.

The challenge or objection to a tax administration act must be distinguished from the correction. It is only possible within the time limits for appeals. After that, the taxpayer can only apply to the tax office to correct the tax assessment.

Certain correction restrictions apply to all tax administration acts. Procedural errors and formal errors cannot be corrected if no other decision on the substance could be made. In addition, no correction is made if an illegal act can be re-interpreted into a legitimate administrative act. The correction is also allowed during the out-of-court or judicial appeal procedure, but in the case of tax rulings and rulings treated as such only until the expiry of the limitation period.

The terms ‘revocation’, ‘withdrawal’, ‘recall’ and ‘change’ differ from the terms ‘rectification’. The correction concerns only the external appearance of the administrative act. However, all terms are summarized under “correction”.

Tax rulings and declaratory rulings can be corrected according to § 129 AO, if there is a clerical error, calculation error or a similar obvious inaccuracy. Apparent inaccuracies within the meaning of § 129 AO are mechanical errors, such as input errors or transmission errors. The Bundesfinanzhof also applies § 129 AO to errors in which the inaccuracy of the administrative act is unrecognizable to the taxpayer.

On the other hand, errors in the interpretation, application of a rule of law, an incorrect assessment of the facts or the incorrect assumption of a fact which is not actually present preclude manifest error. Therefore, errors of fact and legal errors cannot lead to a correction according to § 129 AO. A correction is also excluded if the tax office deliberately does not take note of fixed file contents. This also applies if it can be safely assumed that a mechanical transmission error would have been noticed or avoided if knowledge had been required. Then not only the mechanical transmission error for the incorrectness of the decision has become original, but at the same time a mistake in the formation of wills.

Whether there is a mechanical error or a factual error or a legal error, is to be determined according to the circumstances of the individual case, taking into account the files. If this cannot be finally clarified, the tax office meets the objective burden of determination when it invokes the correction rule. If the overall circumstances indicate a mechanical oversight and there is no indication that the error is due to legal or factual considerations, the tax office may correct.

For example, a corporate income tax notice is manifestly incorrect if the taxpayer has not filled in line 44a of the corporate income tax return, even though the tax certificates available to the tax office and the Annex WA to the corporate income tax return show that the taxpayer has received a profit distribution from a GmbH.

§ 129 AO is also applicable if the tax office assumes a mistake that the taxpayer has made in fulfilling his duty of declaration and duty of cooperation, and thus makes himself own. However, if the erroneous entry in the tax return is based on a miscarriage of fact or legal error on the part of the taxpayer, there is no mechanical error. This therefore does not open the possibility of correction under § 129 AO.

§ 172 AO is the basic norm on the cancellation and amendment of tax notices and similar rulings. It is assumed as an unwritten factual characteristic that the decision is illegal. According to § 172 (1) sentence 2 AO, the possibility of correction also applies to the objection decision which confirms or amends the tax assessment.

In § 172 AO, the numbers list some cases in which the tax assessment can be corrected. The most important are probably the cases of the number 2. The decision may be amended in accordance with § 172 (1) sentence 1 number 2 letter a) AO on the basis of an amendment in favour of the taxable person. The request must be aimed at a specific change.

The discretion of the tax authority for a change of tax determination according to § 172 (1) sentence 1 no. 2 letter a AO is reduced to zero if the prerequisites of the correction standard are present. To do this, tax assessment must be illegal. In any case, the refusal to reassess the facts and the law after the decision to object is a discretionary error if the taxable person bases his amendment within the time limit for bringing proceedings at least on facts or legal considerations on which the authority has not yet ruled in opposition proceedings.

The simple change, which only has a selective effect, has little practical significance as an alternative to the objection due to considerable disadvantages. In individual cases, however, the simple amendment can be advantageous, because it is informally permissible and breaks through the persistence of the exit decision only to a limited extent.

Probably the most important correction standard is § 172 (1) sentence 1 number 2 letter d AO. Accordingly, the correction is possible, as far as this is legally permitted. The legally permitted cases are mainly regulated in § 173 – § 175b AO. However, there are also correction regulations outside the AO.

In the case of the amendment for new facts, it is primarily contested whether it is actually a fact that has subsequently become known and therefore justifies the breach of the existing force. However, even if new facts are available, the tax office may be prevented from amending its decision to the detriment of the taxpayer in accordance with the principles of good faith. A change in favour of the taxable person is only possible if the taxable person did not cause the subsequent disclosure to be grossly culpable. After an external examination, the change of decision is only possible under certain conditions.

A fact must have become known to the tax office afterwards. Negatively distinguishable from the facts are mere conclusions, i.e. in particular estimates, judgments of logic and legal subsumptions concerning the tax assessment of the facts.

Subsequently, facts or evidence are known if they existed at the time of issuance of the decision, but were not yet known. If a fact was already known to the tax office when a previous amendment decision was issued, § 173 (1) no. 1 AO does not allow a further amendment of the decision based on this fact. The tax authority shall be deemed to know only the contents of the files held in the competent department for the taxable person.

Internal facts, such as the intention to generate income, become known afterwards if the tax authority, after issuing the tax ruling, becomes aware of auxiliary facts that allow a certain conclusion to be drawn on the main internal fact.

In addition, it must be expected that the tax office would have decided differently with certainty bordering on certainty if it had been known in good time. Therefore, the facts must be relevant. Jurisdiction denies legal relevance if, even if the tax office had knowledge of the fact or the evidence in good time, it was almost certain that it would not have set a different amount of tax. The hypothetical causal course refers to the concrete decision situation of the competent public office holder. This may have to be objectified on the basis of the administrative provisions published at the time of the decision and the case-law declared applicable in administrative practice (BStBl. I, II).

4.4.1. Dependent on the taxable person’s burden or advantage

The extent to which the correction of the decision is limited depends on whether the decision is to be corrected in favour of or at the expense of the taxable person. This is assessed by whether the tax burden increases or decreases for the taxpayer.

For the question of whether a fact which has become known subsequently leads to a higher tax (then § 173 paragraph 1 no. 1 AO) or lower tax (then § 173 paragraph 1 no. 2 AO), it depends on the separate and uniform determination of the tax bases of a partnership whether and how the tax base for each individual party to the determination increases or decreases. The tax effects in the subsequent decisions, on the other hand, are not relevant for the amendment pursuant to § 173 (1) AO.

4.4.2. Amendment adjustment at the expense of the taxable person

If the fact remains unknown to the tax authority for breach of its investigative obligations, it may not correct the decision to the detriment of the taxable person. However, if the taxable person has in turn breached the duty to cooperate, the restriction of the amendment shall not apply if there is an internal connection between the breach of the duty to investigate and the breach of the duty to cooperate. The breaches of duty are therefore only compensated if they relate to the same fact or to the same evidence.

4.4.3. Amendment to the taxable person

The modification of a formally valid tax assessment in favour of the taxpayer may also be limited. This is possible, on the one hand, if the taxable person can be restored to the previous status due to the failure to comply with the opposition period. On the other hand, the adjustment notice can be corrected in favour of the taxpayer if he is not grossly at fault for the delay in becoming aware of the facts.

4.4.4. Tax assessment change after an external audit

Decisions issued on the basis of an external audit may be revoked or amended pursuant to § 173 paragraph 2 AO only in cases of tax evasion or reckless tax reduction. Such tax notices enjoy greater durability, because the facts can be extensively checked in the context of the external audit. The change block exists only insofar as the decision was issued on the basis of an external examination. Its scope is determined by the content of the test order.

According to § 173a AO, tax notices are to be annulled or amended insofar as the taxpayer has made clerical errors or calculation errors when drawing up his tax return and he has therefore incorrectly communicated to the tax authority certain facts which are legally relevant according to the circumstances at the time the tax notice was issued. The errors therefore need not be obvious.

§ 173a AO therefore mainly concerns cases in which the taxpayer miscalculates in additional invoices for the electronic tax return, which he has not sent to the tax office. If clerical or calculation errors made during the preparation of the tax return lead to the taxpayer notifying the tax authority of incorrect legally relevant facts, the incorrect tax assessment according to § 173a AO (irrespective of the requirements of § 173 AO) must be cancelled or changed.

Errors or incompletes in the context of data transmission to the tax office, however, are not covered by the correction regulation. Even the mere forgetting of a carry-over of self-determined tax bases in the tax return is not a clerical error or calculation error within the meaning of § 173a AO. The latter error leads to a correction according to § 173 AO.

According to § 174 (1) AO, the tax authority can change a tax assessment for the benefit of the taxpayer if a situation is considered multiple times.

A classic multiple consideration exists, for example, if the situation is assigned to several mutually exclusive control types, evaluation types or other objects. For example, a benefit from the same taxpayer may have been subject to both income tax and inheritance tax. The same applies if the facts were taken into account in several periods. However, no case of § 174 (1) AO is the double recording of a receipt in the income tax assessment.

In addition, the situation can also be assigned to several taxpayers, although only one tax debtor is considered. However, the same taxpayer may have used several tax offices.

The correction in favour of the taxable person is made on request. The taxpayer, on the other hand, must correct the adjustment notice ex officio. However, this is only possible if the erroneous consideration of the facts is based on an application or a declaration by the taxable person.

In addition, a tax assessment can be changed if a certain fact has been clearly not taken into account in the assumption in a tax assessment notice that it has to be taken into account in another tax assessment notice and this assumption proves to be incorrect. By contrast, an alternative ratio between the two control decisions does not have to exist objectively.

According to § 175 (1) no. 1 AO, a tax assessment or a declaratory decision is to be issued, revoked or amended, insofar as the tax authority issues, revokes or amends a basic decision, which has binding effect for this decision.

According to § 175 (1) no. 2 AO, a tax assessment is to be corrected insofar as an event occurs that has tax effects for the past. It is regularly problematic what constitutes a retroactive event. The decision was initially legal, but becomes illegal upon occurrence of the event. For this to happen, a fact must have a fiscal effect for the past. Cases are those of civil retroactive effect, as well as the dissolving condition, but also court decisions.