Last Updated on May 31, 2021 by LawEuro
The Fiscal Code of Germany
Third Chapter
Assessment and determination procedures
1st Subchapter
Tax assessment
I. General provisions
Section 155
Tax assessment
(1) Unless otherwise prescribed, the taxes shall be assessed by the revenue authority by way of tax assessment notice. The tax assessment notice shall be the administrative act disclosed pursuant to section 122(1). This shall also apply with respect to the complete or partial exemption from a tax and for the dismissal of an application for tax assessment.
(2) A tax assessment notice may be issued even where a basic assessment notice has not yet been issued.
(3) Where several taxpayers owe the tax as joint and several debtors, consolidated tax assessment notices may be issued against them. Administrative acts on ancillary tax payments or other claims to which this Code applies may be issued against one or more taxpayers in combination with consolidated tax assessment notices. This shall also apply where the legal relationship between the taxpayers is such that assessed taxes, ancillary tax payments or other claims are not to be borne by all participants.
(4) Based on the information at their disposal and the information furnished by the taxpayer, revenue authorities may use fully automated processes to conduct, correct, withdraw, revoke, cancel or amend (a) tax assessments as well as (b) credits of withheld taxes and prepayments, provided there is no cause for an individual case to be processed personally by an official. This also applies to
1. the issuance, correction, withdrawal, revocation, cancellation or amendment of administrative acts associated with such (a) tax assessments or (b) credits of withheld taxes and prepayments and
2. the attachment of ancillary provisions in accordance with section 120 to (a) tax assessments or (b) credits of withheld taxes and prepayments, provided that such ancillary provisions constitute a generalised order issued on the basis of administrative instructions from the Federal Ministry of Finance or the highest revenue authorities of the Länder.
Cause for processing by an official shall exist in particular in cases where the taxpayer provides information in a section or data field included for this purpose in the tax return, as described in section 150(7). In cases where an administrative act is issued using a fully automated process, the decision-making process regarding its issuance and disclosure shall be deemed completed at that point in time when the automated processing is finished.
(5) The provisions that apply to tax assessments shall apply mutatis mutandis to the assessment of tax rebates.
Section 156
Refraining from tax assessment
(1) In order to simplify administration, the Federal Ministry of Finance may prescribe by way of ordinance that a tax shall not be assessed if the actual amount to be assessed is unlikely to exceed a certain amount to be specified by the respective ordinance. The amount to be specified in accordance with the first sentence above may not exceed 25 euros. The same shall apply to the amendment of a tax assessment if the difference between an amended assessment and the previous assessment would not exceed the amount specified in the respective ordinance. Ordinances shall not require the consent of the Bundesrat where they concern motor vehicle tax, aviation tax, insurance tax, import and export duties, or excise duties with the exception of beer duty.
(2) The assessment of a tax and ancillary tax payments, and the amendment of such assessments, may be waived even for amounts exceeding 25 euros if it is expected that
1. the collection of the amount in question will be unsuccessful or
2. the costs of assessment and the costs of collection are disproportionate to the amount in question.
The highest revenue authorities may issue instructions for applying number 2 under the first sentence above to identified or identifiable categories of cases, with such instructions being uniform nationwide. Such instructions may not be made public if doing so could jeopardise the consistency and lawfulness of taxation. For taxes administered by Land revenue authorities on behalf of the Federation, the highest Land revenue authorities shall, in consultation with the Federal Ministry of Finance, devise these instructions with a view towards ensuring that the execution of tax laws is consistent on a nationwide basis.
Section 157
Form and content of tax assessment notices
(1) Unless otherwise specified, tax assessment notices shall be issued in written or electronic form. They shall identify the type and amount of the assessed tax and indicate the person who owes the tax. Furthermore, they shall be accompanied by instructions on applicable legal remedies, the deadline for seeking remedies, and the authority to which a request for remedy is to be filed.
(2) The determination of the tax base shall constitute a part of the tax assessment notice not separately contestable by legal remedy where the tax base is not determined separately.
Section 158
Validity of accounts
The accounts and records of the taxpayer which correspond to the provisions of sections 140 to 148 shall serve as the basis for taxation to the extent that the individual circumstances give no reason to object to their formal correctness.
Section 159
Proof of fiduciary status
(1) Whoever claims to own or possess rights in his name or items in his possession merely as trustee, representative of a third party, or pledgee shall be required upon request to prove to whom the rights or items belong; failure to do so shall result in their being routinely attributed to him. This shall not have the effect of restricting the right of the revenue authority to investigate the matter.
(2) Section 102 shall remain unaffected.
Section 160
Naming creditors and the recipients of payments
(1) Debts and other burdens, business expenditure, income-related expenses and other expenses shall as a matter of routine not be considered for tax purposes where the taxpayer does not meet the demands of the revenue authority to provide precise details of the names of the creditors or recipients. The right of the revenue authority to investigate the matter shall remain unaffected.
(2) Section 102 shall remain unaffected.
Section 161
Inventory shortfalls
Where, within the context of a prescribed or officially conducted inventory, shortfalls are determined with respect to goods subject to excise duty, it shall be assumed that an excise duty has arisen with respect to the missing goods or that a conditional excise duty has become unconditional where it cannot be established credibly that the missing goods are the result of circumstances for which tax would not have to be paid and which do not cause a conditional tax to become unconditional. In case of doubt, the tax shall be deemed to have arisen or become unconditional at the point in time at which the inventory is carried out.
Section 162
Estimating tax bases
(1) Where the revenue authority cannot determine or calculate the tax base, the revenue authority shall estimate it. All circumstances which have an impact on the estimate shall be taken into account.
(2) An estimate shall be undertaken in particular where the taxpayer is not willing to provide sufficient explanation regarding his details or refuses to give further information or a sworn statement or breaches his obligation to cooperate pursuant to section 90(2). The same shall apply where the taxpayer cannot furnish accounts or records which he is obliged under tax laws to keep, where the accounts or the records cannot be used as a basis for taxation pursuant to section 158 or where there are factual indications of the incorrectness or incompleteness of the details provided by the taxpayer on taxable income or business asset increases and the taxpayer fails to give his consent pursuant to section 93(7), first sentence, number 5. Where the taxpayer breaches his obligation to cooperate under section 90(2), third sentence, it shall be refutably assumed that taxable income in states or territories within the meaning of section 90(2), third sentence exists or is higher than the income declared.
(3) If a taxpayer breaches his obligation to cooperate under section 90(3) by failing to submit records of a business transaction or if the business transaction records submitted are essentially of no use, or if it is determined that he has not compiled records as described in the eighth sentence of section 90(3) in a timely manner, it shall be rebuttably presumed that his taxable income in Germany – which the records described in section 90(3) serve to determine – is higher than the income he declared. If in such cases the revenue authority must conduct an estimate and if this income can be determined only within a certain range – and in particular only on the basis of a price band – then the unfavourable limit of that range may be selected to the detriment of the taxpayer. If, despite the submission of usable records by the taxpayer, there are indications that the application of the arm’s length principle would cause the taxpayer’s income to be higher than the income declared on the basis of the submitted records, and if corresponding doubts cannot be cleared up because a foreign related party fails to fulfil its obligation to cooperate under section 90(2) or its obligation to provide information under section 93(1), the second sentence above shall apply accordingly.
(4) If a taxpayer fails to submit records as described in section 90(3) for a business transaction, or if the records submitted for a business transaction are essentially of no use, a penalty of 5,000 euros shall be imposed. The penalty shall be at least 5 percent and at most 10 percent of the additional income that results from a correction carried out on the basis of subsection (3) above, if this leads to a penalty of more than 5,000 euros. In cases where usable records are submitted late, the penalty shall total up to 1,000,000 euros, and shall be at least 100 euros for each full day following the expiration of the deadline. Insofar as the revenue authorities are given discretion in determining the penalty amount, their decision shall take into account not only the objective of inducing taxpayers to compile and punctually submit records as described in section 90(3), but also, and in particular, the benefits derived by the taxpayer and, in the case of late submission, the length of time by which the deadline has been missed. No penalty shall be imposed in cases where the non-fulfilment of obligations under section 90(3) appears to be excusable or the degree of fault is negligible. Fault on the part of a legal representative or aide shall be deemed the fault of the taxpayer. As a rule, the penalty shall be imposed after the completion of an external audit.
(5) In cases where section 155(2) applies, the tax bases to be specified in a basic assessment notice may be estimated.
Section 163
Divergent assessment of taxes on grounds of equity
(1) Tax bills may be set at a lower amount, and individual tax bases that would increase taxes may be excluded from the tax assessment, if levying the tax would be inequitable under the circumstances of the individual case. In the case of income tax, it may be permissible, with the taxpayer’s consent, for individual tax bases that would increase taxes to be included in a later assessment, and for individual tax bases that would reduce taxes to be included in an earlier assessment.
(2) Measures taken on grounds of equity in accordance with subsection (1) above may be carried out in conjunction with the relevant tax assessment.
(3) In cases where subsection (2) above applies, a measure taken on grounds of equity in accordance with subsection (1) above is always subject to revocation if it
1. is not explicitly issued as an autonomous decision by the revenue authority,
2. is taken in conjunction with a tax assessment subject to review in accordance with section 164
3. is taken in conjunction with a provisional tax assessment in accordance with section 165 and the reason for the provisional character of the assessment is also relevant for the decision taken under subsection (1) above.
In cases where number 1 above applies, a measure taken on grounds of equity shall no longer be subject to revocation once the deadline passes for assessing the tax to which the measure applies. In cases where number 2 above applies, a measure taken on grounds of equity shall no longer be subject to revocation once the tax assessment to which the measure applies is no longer subject to review. In cases where number 3 above applies, a measure taken on grounds of equity shall no longer be subject to revocation once the tax assessment to which the measure applies becomes final.
(4) If a measure taken on grounds of equity under subsection (1) above and subject to revocation under subsection (3) above is unlawful, it shall be withdrawn with retroactive effect. Section 130(3), first sentence, shall not apply in this case.
Section 164
Tax assessment subject to review
(1) As long as the tax case has not been subject to a final audit, taxes may be assessed generally, or in certain cases provisionally subject to review, without justification being required. Assessment of a prepayment shall always be a tax assessment subject to review.
(2) The tax assessment may be cancelled or amended for as long as the review proviso remains in effect. The taxpayer may apply for the cancellation or amendment of the tax assessment at any time. However, the relevant decision may be deferred until a final audit of the tax case, which shall be undertaken within a suitable timeframe.
(3) The review proviso may be cancelled at any time. Such cancellation shall be equivalent to a tax assessment not subject to review; section 157(1), first and third sentences, shall apply mutatis mutandis. The proviso shall be cancelled if, following an external audit, there are no changes to the tax assessment subject to review.
(4) The review proviso shall no longer apply in the event that the period for assessment expires. Section 169(2), second sentence, section 170(6) and section 171(7), (8) and (10) shall not apply.
Section 165
Provisional tax assessments, suspension of tax assessments
(1) A tax may be assessed provisionally where there is uncertainty as to whether the prerequisites required for the tax to come into effect have been met. This provision shall also apply where
1. there is uncertainty as to whether and when agreements with other states on taxation (section 2) which have a positive effect for the taxpayer come into effect with respect to the assessment of taxes,
2. the Federal Constitutional Court has determined the incompatibility of a tax law with the Basic Law of Germany and the legislator is obliged to make new provisions,
2a. due to a decision by the Court of Justice of the European Union, there may be a need to adopt new legislative provisions,
3. the compatibility of a tax law with primary law is the subject of proceedings before the Court of Justice of the European Union, the Federal Constitutional Court or a highest federal court, or
4. the interpretation of a tax law is the subject of proceedings before the Federal Fiscal Court.
The scope of and reason for the provisional character shall be indicated. Given the preconditions of the first and second sentences above, the tax assessment can also be suspended against or without provision of collateral.
(2) The revenue authority may cancel or amend a tax assessment to the extent that it has assessed the tax on a provisional basis. When the uncertainty has been cleared up, a provisional tax assessment shall be cancelled, amended or declared final; any suspended tax assessment shall be subsequently continued. In the cases outlined in subsection (1), second sentence, number 4 above, the uncertainty shall cease as soon as it clear that the principles of the Federal Fiscal Court’s ruling apply generally above and beyond the individual case ruled on. In the cases outlined in subsection (1), second sentence, above a provisional tax assessment pursuant to the second sentence above shall be declared final only upon application by the taxpayer when it cannot be cancelled or amended.
(3) A provisional tax assessment may be issued in conjunction with a tax assessment subject to review.
Section 166
Third party effects of the tax assessment
Where the tax has been incontestably assessed with respect to the taxpayer, in addition to a universal successor, anyone who would have been in a position to contest the assessment notice issued against the taxpayer as his representative, authorised nominee or by virtue of his own rights shall also be obliged to accept the validity of this.
Section 167
Self-assessed tax return, use of tax marks or tax stamps
(1) Where a tax has to be self-assessed as a result of a statutory obligation (section 150(1), third sentence), an assessment of the tax pursuant to section 155 shall be required only where the assessment leads to a divergent tax or the persons owing the tax or liability do not submit the self-assessed tax return. The first sentence above shall apply mutatis mutandis where because of a statutory obligation the tax is to be paid by applying tax marks or tax stamps. Where following an external audit within the meaning of section 193(2) number 1 the person owing the tax or liability recognises in writing his obligation to pay, such recognition shall be deemed equal to a self-assessed tax return.
(2) Self-assessed tax returns shall also be deemed to have been submitted on time when they are received by the responsible payments office with the time period allowed. This shall not apply to import/export duties and excise duties.
Section 168
Effects of a self-assessed tax return
A self-assessed tax return is equal to a tax assessment subject to review. Where the self-assessed tax return results in a reduction in the tax payable up to that point or to a tax rebate, the first sentence above shall apply only if the revenue authority agrees. The agreement shall not require a particular form.
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