The tax code distinguishes not only conceptually between the withdrawal of an unlawful administrative act and the revocation of a lawful administrative act (§ 131 AO). The withdrawal of an administrative act is regulated in tax law in § 130 AO. Different rules apply to unlawful and non-favourable administrative acts. It is specifically regulated when a tax assessment can be corrected. Section 130 AO therefore does not apply to tax assessments. We explain under which conditions a withdrawal is possible.

Correction of administrative acts in tax law

1.1. Overcoming the durability of the administrative act

The taxation procedure is a mass procedure. In the interests of legality and equality of taxation, corrections of administrative acts are therefore necessary. If the order period has expired, administrative acts become in force. However, this does not mean that the administrative act is also valid. Despite the durability, the Authority may cancel the administrative act. The tax code gives different possibilities for this. What they all have in common, however, is the need to balance the principles of legal certainty and protection of legitimate expectations with legality.

1.2. Correction system of the Tax Code

The correction system of the tax code is dualistically divided. It is to differentiate between §§ 130, 131 AO and §§ 165, 172 ff. Sections 130 to 132 AO do not regulate the possibility of withdrawal and revocation conclusively. Special rules apply with §§ 164 paragraph 2, 165 paragraph 2, 172-177 AO for tax rulings and for those rulings for which the rules on tax rulings apply accordingly. In addition, there is no room for the application of §§ 130 ff. However, § 130 AO applies, among other things, for the rejection of favourable administrative acts, for independent orders in taxation proceedings including external examination, for the request for bookkeeping, for the fixing of delay surcharges or for liability decisions and toleration decisions.

§ 130 AO lays down different rules for withdrawal for unlawful beneficiaries (§ 130 paragraph 2 AO) and for non-beneficial ones (§ 130 paragraph 1 AO). A non-favourable administrative act unlawful at the time of issuance may be withdrawn (Section 130 (1) AO). On the other hand, an unlawful favourable administrative act can only be withdrawn in rare exceptional cases on the grounds of legitimate expectations (§ 130 (2) AO).

Whether an administrative act is unlawful is determined after the date of adoption of the administrative act. If the administrative act later becomes unlawful, a revocation according to § 131 AO may be possible. Therefore, the subsequent change in the factual and legal situation does not make the originally lawful administrative act unlawful. The objective burden of proof that the withdrawn administrative act was unlawful and that the conditions for the withdrawal exist is, in principle, the burden on the taxable person.

2. Withdrawal of favourable administrative acts

2.1. Withdrawal only allowed in exceptional cases

Beneficiary, unlawful administrative acts may be withdrawn in accordance with § 130 (2) AO. In doing so, account shall be taken of the legitimate interest of the person concerned in the existence of the beneficiary administrative act. Therefore, § 130(2) AO reverses the principle of paragraph 1. Consequently, the beneficiary of the illegal administrative act must not in principle be withdrawn. It can only be withdrawn under certain conditions, namely in cases where the person concerned does not have confidence in the existence of the administrative act or where his confidence is not worthy of protection.

The conditions under which an unlawful, favourable administrative act can be withdrawn are finally regulated in § 130 paragraph 2 numbers 1 – 4 AO. However, the financial authority can add reasons. It can therefore invoke the number 3 instead of § 130 paragraph 2 no. 2 AO subsequently.

On the other hand, there is no reason for withdrawal if the tax authority subsequently changes its view on the legal situation or subsequently assesses the facts or the evidence differently without false or misleading information being provided.

Deviating from the rules in general administrative law (§ 49 (4) VwVfG), the existence of the administrative act within the framework of § 130 (2) AO is not dependent on the beneficiary having manifested his confidence in the existence of the administrative act through special dispositions. However, the Authority must take this aspect into account within its discretion.

2.2. Definition of the beneficial administrative act

According to § 130 paragraph 2 AO, favourable administrative acts are those which establish or confirm a right or a legally significant advantage. The advantage must actually exist. It is not enough that the participant sees it subjectively as an advantage. From the point of view of the protection of legitimate expectations, the decisive factor is whether the withdrawal has a favourable or burdensome effect on the person concerned. Consideration is given here to withdrawing a burdensome administrative act in order to put a higher burden in place. The initial administrative act is favourable in that it does not create or impose a higher burden. The increase in the burden achieved would therefore have a burdensome effect and thus be governed by § 130 (2) AO. This affects, for example, delay surcharges, periodic penalty payments or liability decisions.

Administrative acts aimed at a monetary payment therefore have a dual character: they burden the person concerned insofar as they set a certain amount. On the other hand, they favour it at the same time to the extent that they do not set a higher amount. Therefore, § 130 paragraph 2 AO and not § 130 paragraph 1 AO apply to the determination of a higher amount.

An administrative act can also have a partly beneficial and partly burdensome effect on the person concerned. If the tax authority lifts the burdening part, § 130 (1) AO applies. If, on the other hand, a legal effect is to be eliminated in the existence of which the person concerned has an interest worthy of protection, § 130 paragraph 2 AO applies, however. A favourable administrative act is, for example, the allowance of actual taxation according to § 20 UStG.

2.3 Requirements for withdrawal

2.3.1. Issuance by a non-competent authority

A reason for withdrawal is according to § 130 paragraph 2 no. 1 AO, if the administrative act was issued by a factually incompetent authority. The factual lack of competence of the authority gives rise to a strong presumption of incompetence.

2.3.2. Obtained by unfair means

An administrative act can also be withdrawn if it was obtained by unfair means (§ 130 paragraph 2 no. 2 AO). The reason for this withdrawal is that the person who has obtained a favourable administrative act through those funds is not worthy of protection. As an example of unfair means, the law calls the malicious deception, threat or bribery.

Deceptive deception means deliberate, intentional deception. It may also consist of omission of information. However, this only if, in the circumstances of the case, there was an obligation to provide relevant information. Unaccountable false information is neither unfair nor fraudulent.

A threat lies in the intentional arousal of fear of evil and therefore in psychic compulsion. The threatened person must reckon with evil alone. Therefore, it is irrelevant whether the perpetrator is able to make the threat come true. However, the threat of admissible funds does not apply.

There must be a causal link between the use of the unfair means and the adoption of the favourable administrative act. Therefore, in the specific case without the use of the funds, the administrative act should not have been executed as it actually was.

As a rule, the beneficiary will use the unfair means himself and then obtain the administrative act. But it doesn't have to be. On the contrary, withdrawal is also permissible if the unfair remedy has been used by a third party with the knowledge and approval of the beneficiary and the taxpayer must be imputable to the behaviour of the third party. This applies, for example, to agents or representatives.

2.3.3. Unfairness of the Authority

A right of redemption under § 130 paragraph 2 no. 2 AO does not exist, however, if the civil servant who issues the beneficiary administrative act applies unfair means. The official does not obtain the administrative act, but issues it. For unfaithful officials, of whose unlawful actions the beneficiary knows nothing, the taxpayer does not have to be liable. Only if the civil servant acts with the knowledge and approval of the beneficiary or the beneficiary cooperates with the civil servant can § 130 paragraph 2 no. 3 AO apply.

2.3.4. Inaccurate or incomplete information

A right of withdrawal also exists if the beneficiary administrative act was obtained by the beneficiary through information which was incorrect or incomplete in a material connection. Then the beneficiary is not worthy of protection. He himself caused the illegality. If the authority has caused the incorrect or incomplete information or even co-inflicted it, § 130 paragraph 2 no. 3 AO does not intervene.

The beneficiary must not have known the inaccuracy or incompleteness. The incorrect or incomplete information must not have been culpable. In the case of slight negligence alone, the Authority may, at its discretion, waive the withdrawal of the administrative act. However, if the person concerned has intentionally or grossly negligently caused the error, the discretion is reduced to redemption.

However, the information must have been relevant to the decision. This is the case if the tax authority would not or would not have adopted the administrative act if the facts were fully known.

For example, the tax authority may withdraw the granted waiver of the tax for personal equity reasons if it later turns out that the taxpayer concealed a casino profit in the millions at the time of the waiver application.

2.3.5. Knowledge or grossly negligent ignorance of illegality

A further reason for withdrawal exists according to § 130 paragraph 2 no. 4 AO if the beneficiary is aware of the illegality or is not aware of it due to gross negligence. However, it is not sufficient that the beneficiary is aware of the factual circumstances that led to the illegality. Rather, he must have the – albeit amateur – awareness of the illegality of the administrative act itself. Here the subjective knowledge and skills of the beneficiary are decisive.

Where the administrative act has been notified to an authorised representative and the latter is obliged to examine the legality of the administrative act, the legal knowledge or knowledge requirements of the act shall be attributable to the beneficiary.

2.3.6. Extended scope

According to the wording, § 131 (1) no. 1, 2 AO applies only to lawful administrative acts. However, what applies to legitimate administrative acts must still apply to illegal administrative acts. Therefore, in the cases of § 131 (1) no. 1, 2 AO, it does not matter whether the administrative act is lawful or unlawful. Thus, the withdrawal of an unlawful administrative act is also possible if the withdrawal has been reserved permissibly (§ 131 paragraph 2 no. 1 AO) or if a condition has not been fulfilled (§ 131 paragraph 2 no. 2 AO).

3. Withdrawal of the non-favourable administrative act

A non-beneficial administrative act may be withdrawn by the authority at its discretion in accordance with § 130 (1) AO. Therefore, it does not have to take it back. The principles of individual justice and the general interest in legal certainty and legal peace must be considered.

When weighing up, it must be noted in particular that the rules on the periods of appeal must not be undermined. Therefore, the refusal of withdrawal is not discretionary if the person concerned only presents circumstances that he could have asserted in time by means of an appeal. This applies, for example, if the taxpayer has first filed an objection and later withdraws it.

However, it is not justified to reject the request in any case with reference to the expiry of the deadline. This applies, for example, if an appeal could not reasonably be expected under the circumstances of the case or if the authority has caused the taxable person to waive an appeal.

Furthermore, the gravity and manifestity of the infringement and the question of why the illegality of the administrative act is alleged only after the expiry of the appeal period are relevant in the context of the discretionary examination.

However, the authority will usually withdraw the administrative act if it is clearly faulty and can only be satisfied by withdrawing the legality. Confidence protection interests will generally not conflict.

If the authority does not carry out a discretionary review, there is a breach of discretion, so that the refusal is unlawful. However, if the taxpayer alone claims the illegality and does not substantiate this claim, it is not discretionary if the tax authority does not check the legality of the administrative act.

4. Scope of withdrawal

4.1 Objective scope

Insofar as the illegality extends, the administrative act may be withdrawn in whole or in part. Partial withdrawal presupposes partial infringement. For this purpose, the administrative act must be divisible. Administrative acts aimed at a cash benefit are always divisible. Where the illegality concerns only part of the administrative act, it is, however, illegal as a whole if the illegal part is so essential that the tax authority would not have adopted the administrative act without the illegal part.

4.2. Temporal scope

Not only whether the administrative act is withdrawn is at the discretion of the authority. Rather, it is also at the discretion of the authority whether it withdraws the administrative act with effect only for the future or also with effect for the past.

The withdrawal with effect for the past comes into consideration in particular when errors are to be corrected which have their cause in the sphere of the citizen. Therefore, the administrative act in the cases of § 130 paragraph 2 no. 2 – 4 AO is to be regularly withdrawn with effect for the past. In contrast, a withdrawal with effect for the future is advisable if protection of legitimate expectations is required, i.e. in particular in the case of § 130 paragraph 2 no. 1 AO.

It must be clear from the administrative act – alternatively by interpretation – whether the withdrawal is intended for the future or for the past. If this cannot be established, the withdrawal shall, in the absence of certainty, be null and void.

5th withdrawal period

Withdrawal is also possible during opposition proceedings and during tax court proceedings. Where a time limit applies, it should be noted that the administrative act may not be withdrawn after the time limit has expired.

For favourable administrative acts, the special regulation of § 130 (3) AO applies. Accordingly, the withdrawal is only possible within one year after having knowledge of the facts justifying the withdrawal. However, this does not apply in the event that the administrative act was obtained by unfair means.

It is irrelevant whether the facts already existed at the time of the adoption of the favourable administrative act or not. The facts must be known to the tax authority only afterwards. They must be relevant, that is, they must justify the withdrawal of the administrative act. The knowledge of the person or body within the financial authority appointed to deal with the case is crucial.

If the authority is inactive so long that the taxable person can conclude, in the circumstances, that the authority will no longer make use of the redemption option, the right of redemption is forfeited. The time required for forfeiture depends on the circumstances of the individual case. It depends on the citizen's point of view. Therefore, internal governmental conditions or processes are insignificant. It is therefore irrelevant whether the authority has acted consciously or unconsciously, culpably or innocently.

Legal consequences of withdrawal

The withdrawal ends the validity of the withdrawn administrative act (§ 124 paragraph 2 AO). With the withdrawal, the possibility of executing the administrative act (§ 249 paragraph 1 AO) or of enforcing it (§ 328 paragraph 1 AO) is eliminated. It is itself an administrative act. Appeals against the original administrative act are no longer possible and a pending appeal is settled.

It is questionable whether and under what conditions a new administrative act relating to the same subject matter can be substituted for the withdrawn administrative act. This depends on whether the withdrawal is a “no substitute”. If the withdrawal has been made without replacement, the protection of legitimate expectations shall preclude the adoption of a new administrative act. In doing so, the term “without substitute” must be interpreted in such a way as the person concerned could and had to understand, taking into account all circumstances. If the taxable person receives the new notification at the same time as the ‘replacement-free withdrawal’, according to the notification, he cannot trust the refund.

7. remedies

Annulment of an administrative act may be contested with an objection. If the authority withdraws the redemption administrative act in the objection procedure, the original administrative act shall take effect again.

If the authority refuses to withdraw all or part of an unlawful administrative act, the objection is also allowed. However, if the refusal is merely a so-called repetitive administrative act, so that the authority has not ruled on the substance of the matter, the objection is not allowed.