Panama Papers – Voluntary disclosure in response to tax evasion

The so-called “Panama Papers” have the potential to reveal tax evasion on a massive scale. German tax evaders can return to a state of tax compliance by way of voluntary disclosure.

GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London conclude: A data leak could give rise to one of the biggest tax scandals in recent decades. According to reports from international media outlets and the research consortium for the broadcasting corporations WDR and NDR as well as the newspaper Süddeutsche Zeitung, information has come to light regarding financial activities facilitated by more than 200,000 shell corporations in Panama. Public officials and other well-known personalities are said to be involved in these activities.

The revelations are thought to be attributable to a data leak at a law firm in Panama. In total, it is estimated that around 11 million documents containing highly sensitive information have surfaced. These are said to concern, among other things, money laundering and tax evasion. Panama’s public prosecutor’s office is reported to have already begun investigations and stated that Panama wishes to cooperate fully.

It is not illegal per se to have a financial interest in an offshore firm. Any further investigations will need to expose the extent to which illegal practices are lurking behind the Panama Papers and whether German citizens and / or banks are involved.

For tax dodgers, the recent revelations certainly represent another clear warning shot. Untaxed income in foreign accounts entails a high level of risk. If the tax evasion is discovered, high fines and long custodial sentences become a real possibility. This can be avoided by means of a voluntary declaration leading to immunity. However, it has to be submitted on time for this to happen, i.e. before the tax evasion is detected.

Tax evaders who wish to avoid a conviction should therefore take action and prepare a voluntary declaration. In order to be effective, the voluntary declaration not only needs to be submitted on time but also complete and error free. That is why it is also important not to jump the gun when it comes to voluntary disclosure. On the contrary, a voluntary declaration requires thorough and detailed preparation in order for it to be able to satisfy the complex legal requirements. For this reason, it ought not to be prepared by a layperson on their own or with the help of standard templates. The chances of mistakes being made in the process and thus the voluntary declaration failing are high.

It is safer to turn to lawyers and tax advisors who are versed in the field of tax law. They can assess each case individually and know which documents and information need to be included in the voluntary declaration for it to be capable of leading to immunity.

http://www.grprainer.com/en/legal-advice/tax-law/voluntary-disclosure.html