Last Updated on May 31, 2021 by LawEuro
The Fiscal Code of Germany
Fourth Chapter
External audit
1st Subchapter
General provisions
Section 193
Permissibility of an external audit
(1) It shall be permissible to conduct audits of taxpayers who operate a business or agricultural and forestry undertaking or who are self-employed, and of taxpayers within the meaning of section 147a.
(2) With respect to taxpayers other than those described in subsection (1) above, an external audit shall be permissible
1. to the extent that it concerns the obligation of these taxpayers on behalf of another to pay taxes or to withhold or remit to revenue authorities taxes which are due,
2. where there is a need to clarify the circumstances relevant for taxation and, due to the nature and scope of the circumstances to be examined, it is impractical to conduct an examination at the offices of the competent authority, or
3. where a taxpayer fails to comply with his obligation to cooperate under section 90(2), third sentence.
Section 194
Scope of an external audit
(1) The external audit shall serve to identify the taxpayer’s circumstances for tax purposes. It may cover one or more types of tax, one or more tax periods or be limited to certain aspects. The external audit of a partnership shall cover the partners’ circumstances for tax purposes to the extent that these are of importance with respect to the joint determinations to be examined. The tax circumstances of other persons may also be audited to the extent that the taxpayer was or is obliged on behalf of these persons to pay taxes or withhold and remit to revenue authorities taxes which are due; this shall also apply where any tax deficiencies are to be enforced against the other persons.
(2) The tax circumstances of partners and members as well as of members of supervisory bodies may, in addition to the cases governed by subsection (1) above, be included in the external audit to be conducted at a partnership where this serves the purpose of the audit in individual cases.
(3) Where due to an external audit circumstances of persons other than those named in subsection (1) above are determined, the evaluation of these findings shall be permissible to the extent that knowledge of such is of relevance for the taxation of these other persons or the findings concern an impermissible provision of assistance in tax matters.
Section 195
Jurisdiction
External audits shall be conducted by the revenue authorities responsible for the taxation. These may charge other revenue authorities with the external audit. The appointed revenue authority may undertake the tax assessment and issue binding commitments (sections 204 to 207) in the name of the competent revenue authority.
Section 196
Audit order
Revenue authorities shall specify the scope of an external audit in an audit order that is issued in written or electronic form and that contains instructions on applicable legal remedies in accordance with section 356.
Section 197
Disclosure of the audit order
(1) The audit order as well as the likely starting date of the audit and the names of the auditors shall be disclosed to the taxpayer in relation to whom the external audit is to be conducted a reasonable amount of time before the audit begins where this does not endanger the purpose of the audit. The taxpayer may elect not to have the deadline enforced. Where pursuant to section 194(2) the audit is to cover the tax circumstances of partners and members as well as members of supervisory bodies, the audit order shall also be disclosed to these persons.
(2) Upon application by the taxpayer, the starting date of the external audit shall be postponed to another date where important reasons for this can be established credibly.
Section 198
Identification duty, start of external audit
The auditors shall identify themselves without undue delay upon arrival at the premises. The date and time of the commencement of the external audit shall be recorded.
Section 199
Audit principles
(1) The external auditor shall examine the actual and legal circumstances which are decisive for the tax obligation and for measuring the tax (tax bases), regardless of whether these are to the taxpayer’s advantage or disadvantage.
(2) The taxpayer shall be informed during the external audit of the facts determined and the possible tax implications where this does not impede the purpose and course of the audit.
Section 200
Obligations of the taxpayer to cooperate
(1) The taxpayer shall be obliged to cooperate in determining the facts that may be relevant for taxation. In particular, he shall furnish information; submit records, accounts, business papers and other documents for inspection and audit; provide the explanations necessary to understand the records; and assist the revenue authority in executing its powers pursuant to section 147(6). Where the taxpayer or persons appointed by him are not able to furnish information, where the information is not sufficient to clarify the facts or where information furnished by the taxpayer is not likely to lead to results, the external auditor may request information from other persons belonging to the business. Section 93(2), second sentence, shall not apply.
(2) The taxpayer shall submit the documents named in subsection (1) above on his business premises or, where there is no office suitable for conducting the external audit available, on his living premises or at the offices of the competent authority. A room or workstation suitable for conducting the audit as well as the necessary aids shall be provided free of charge.
(3) The external audit shall be conducted during normal business or working hours. The auditors shall be entitled to enter and inspect sites and business premises. The owner of the business or his representative should be enlisted in the inspection of the premises.
Section 201
Final meeting
(1) A meeting shall be held on the results of the external audit (final meeting) unless the external audit leads to no changes to the tax bases or the taxpayer elects to forgo such a meeting. During the final meeting, disputed issues in particular as well as a legal assessment of the audit findings and their tax implications shall be discussed.
(2) Where the possibility exists that, on the basis of the audit findings, criminal or administrative fine proceedings are to be conducted, the taxpayer should be advised that a separate procedure will be conducted to assess the possibility of criminal or administrative fine proceedings.
Section 202
Content and disclosure of audit report
(1) A written report (audit report) shall be drawn up showing the result of the external audit. The audit report shall present in actual and legal terms the audit findings which are significant for taxation as well as the changes to the bases for taxation. Where the external audit does not lead to any changes to the bases for taxation, it shall be sufficient to disclose this to the taxpayer in writing.
(2) The revenue authority shall, upon application, supply the taxpayer with a copy of the audit report before it is evaluated and allow him opportunity to comment on it within a reasonable period of time.
Section 203
Shortened external audit
(1) The revenue authority may conduct a shortened external audit of taxpayers in respect of whom it regards an external audit in frequent intervals unnecessary in the particular circumstances. The audit shall be restricted to the essential tax bases.
(2) The taxpayer shall be informed before the audit is concluded of the extent of any likely deviations from the tax returns or tax assessments. The main audit findings of relevance for tax purposes shall be presented in writing to the taxpayer at the latest with the tax assessment notices. Sections 201(1) and 202(2) shall not apply.
Section 203a
External audits in cases where data is transmitted by third parties
(1) External audits of notifying entities as defined in section 93c(1) shall be permissible for the purpose of determining whether a notifying entity has
1. satisfied its obligations under section 93c(1) numbers 1, 2 and 4, section 93c(2) and section 93c(3) and
2. determined the content of the data set in accordance with the provisions of the relevant tax legislation.
(2) Such external audits shall be conducted by the revenue authority responsible for investigations under the first sentence of section 93c(4).
(3) Section 195, second sentence, and sections 196 to 203 shall apply accordingly.
2nd Subchapter
Binding commitments on the basis of an external audit
Section 204
Preconditions for a binding commitment
Once an external audit has been concluded, the revenue authority should, upon application, make a binding commitment to the taxpayer as to how circumstances which were audited for the past and which are contained in the audit report shall be treated for tax purposes in future where knowledge of such future tax treatment is important for the business activity of the taxpayer.
Section 205
Format of a binding commitment
(1) The binding commitment shall be issued in writing and shall be indicated as binding.
(2) The binding commitment shall contain:
1. the underlying circumstances for the binding commitment; in this regard, reference may be made to the circumstances described in the audit report,
2. the decision on the application and the main reasons for this,
3. information stating the taxes and period to which the binding commitment applies.
Section 206
Binding effect
(1) The binding commitment shall be binding in terms of taxation where circumstances which match those underlying the binding commitment arise at a later date.
(2) Subsection (1) above shall not apply where, to the applicant’s disadvantage, the binding commitment contravenes existing law.
Section 207
Expiry, cancellation and amendment of the binding commitment
(1) The binding commitment shall expire when the legal provisions on which the decision is based are changed.
(2) The revenue authority may cancel or amend the binding commitment with ex nunc effect.
(3) The retroactive cancellation or amendment of a binding commitment shall only be permissible where the taxpayer agrees or where the conditions set out in section 130(2) numbers 1 or 2 are met.
Fifth Chapter
Tax investigation (customs investigation)
Section 208
Tax investigation (customs investigation)
(1) Tax investigation (customs investigation) authorities shall be charged with
1. investigating tax crimes and tax-related administrative offences,
2. determining the tax bases in the cases named in number 1 above,
3. detecting and investigating unknown tax cases.
The offices of Land revenue authorities charged with tax investigations and the customs investigation offices shall have, in addition to the powers granted under section 404, second sentence, first half-sentence, the powers of investigation at the disposal of the tax offices (main customs offices). In the cases of numbers 2 and 3 above, the restrictions set out in section 93(1), third sentence, section 93(2), second sentence, and section 97(2) shall not apply; section 200(1), first and second sentences, section 200(2) and section 200(3), first and second sentences, shall apply mutatis mutandis, section 393(1) shall remain unaffected.
(2) Notwithstanding subsection (1) above, the offices of the revenue authorities of a Land charged with tax investigations and the customs investigations offices shall be responsible for
1. tax investigations, including external audits upon request by the competent revenue authority,
2. the other tasks entrusted to them within the scope of the jurisdiction of the revenue authorities.
(3) The tasks and powers of the tax offices (main customs offices) shall remain unaffected.
Sixth Chapter
Fiscal supervision in special cases
Section 209
Object of fiscal supervision
(1) The movement of goods over the border and in the free zones and free warehouses as well as the production and manufacture, storage, transport and commercial use of goods subject to excise duty and the trade of goods subject to excise duty shall be subject to customs supervision (fiscal supervision).
(2) Also subject to fiscal supervision shall be:
1. the shipping, export, storage, use, destruction, refinement, conversion and other processing or treatment of goods in an excise duty procedure,
2. the manufacture and export of goods, for which a remission, refund or rebate of excise duty is claimed.
(3) Other activities shall be subject to fiscal supervision where this is required by law.
Section 210
Powers of the revenue authorities
(1) The public officials charged by the revenue authority with fiscal supervision shall be entitled to enter during office and working hours property and premises of persons who exercise an independent commercial or professional activity, and to whom a matter subject to fiscal supervision is attributable, for the purpose of carrying out inspections or of reaching findings which could have a significant bearing on taxation (search).
(2) Furthermore, property and premises of persons to whom a matter subject to fiscal supervision is attributable shall be subject to search, without restriction as to time, where there is good reason based on facts to assume that smuggled goods or goods subject to excise duties but not properly taxed are located there or that provisions and orders, the observance of which is to be ensured by fiscal supervision, are being breached there. In cases of imminent danger the searching of living and business premises shall be permissible even without a court order.
(3) The public officials charged by the revenue authority with fiscal supervision shall be further entitled within the context of controls restricted by time and place to stop ships and other vehicles which seem to serve commercial purposes based on their outward appearance. The persons affected shall be obliged to provide proof of their identity and details of the goods being carried; they shall be obliged in particular to show consignment notes and other transport documents, including those of a non-tax nature. Where this or other facts give rise to the belief that goods subject to excise duties are being carried, the public officials may examine these goods and reach findings which may have a bearing on the taxation of these goods. The persons affected shall be obliged to provide details of the origin of the goods subject to excise duty, to tolerate the fact that samples may be taken without compensation and to provide the necessary assistance.
(4) An external audit pursuant to section 193 may be initiated without the need for a prior order (section 196) where reason to do so arises as a result of findings made when exercising fiscal supervision. The transition to an external audit shall be indicated in writing.
(5) Where it becomes necessary to carry out a search on the premises of the Federal Armed Forces or an institution or facility of the Federal Armed Forces not open to the public, a request shall be submitted to the commanding office of the Federal Armed Forces to carry it out. The revenue authority shall be entitled to participate. A request shall not be necessary where the search is to be carried out in quarters exclusively inhabited by persons other than soldiers.
Section 211
Obligations of the persons affected
(1) Whoever is affected by fiscal supervision measures shall be obliged to provide the public officials on demand with records, accounts, business papers and other documents relating to the matter subject to fiscal supervision and to the procurement and sale of goods subject to excise duty, with information and with the assistance otherwise needed to exercise fiscal supervision. Section 200(2), second sentence, shall apply mutatis mutandis.
(2) The obligations pursuant to subsection (1) above shall also apply where, within the context of a legally prescribed ex post taxation of goods subject to excise duty, the persons to whom and the extent to which goods subject to ex post taxation were delivered is to be determined in a business or enterprise subject to the fiscal supervision.
(3) Measures which serve to prevent or hamper the exercise of fiscal supervision shall be impermissible.
Section 212
Implementation provisions
(1) The Federal Ministry of Finance may, by way of ordinances specifying the duties to be fulfilled within the context of fiscal supervision, order that
1. certain actions may only be carried out on premises registered with the revenue authority or whose use for such purpose has been specially approved by the revenue authority,
2. premises, vehicles, equipment, vessels and conduits, which serve or may serve the manufacture, processing, refinement, storage, transport or measurement of taxable goods are to be set up, arranged, labelled or officially sealed in a particular manner at the cost of the owner of the business,
3. goods subject to monitoring are treated, labelled, stored, packaged, dispatched or used in a particular manner,
4. the trade of taxable goods is specially monitored where the trader is also the manufacturer of the goods,
5. records are to be kept in a particular manner and the inventory is to be determined for business processes and for taxable goods and for the input materials, production materials, auxiliary materials and intermediary products used to manufacture them,
6. accounts, records and other documents are to be stored in a particular manner,
7. processes and measures in businesses and enterprises which are of relevance for taxation are to be reported to the revenue authority,
8. gratuitous samples may be taken or gratuitous examples submitted of taxable goods, of goods in relation to which the remission, refund or rebate of excise duties is claimed, of material used in the manufacture these goods, and of their packaging.
(2) Such ordinances shall not require the consent of the Bundesrat, except where they concern beer duty.
Section 213
Special supervisory measures
Businesses or enterprises whose owners or executives have been finally and incontestably convicted of tax evasion, attempted tax evasion or participation in such an act may be subjected at their own costs to special supervisory measure where this is needed to ensure effective fiscal supervision. In particular, additional records and disclosure obligations, measures to ensure that premises, containers and equipment are safely sealed and other similar measures may be prescribed.
Section 214
Representatives
Any person who authorises a member of his business or undertaking to represent him for the purpose of fulfilling tax obligations arising from matters subject to fiscal supervision shall require the consent of the revenue authority.
Section 215
Seizure during supervision
(1) The revenue authority may secure by way of removal, placement under seal or prohibition on disposal
1. goods subject to excise duty which a public official finds
a) in manufacturing businesses or on other premises which should have been registered with the revenue authority but were not,
b) in trade without the goods being packaged, denoted or labelled in accordance with the tax laws or without the prescribed tax marks,
2. goods which are found in proximity to the border or in regions subject to border surveillance, where these are neither obviously Community goods nor appear to have been released for free circulation,
3. the items and material used to enclose the goods named in numbers 1 and 2 above,
4. equipment which is designed to manufacture goods subject to excise duty and which is located in a manufacturing business not registered with the revenue authority.
It shall also be permissible to secure the items where they were initially confiscated in the course of criminal proceedings and then made available to the revenue authority.
(2) The act of securing the items shall be recorded in writing. The act of securing the items shall be disclosed to the persons affected (owners, possessors) to the extent that these are known.
Section 216
Transfer to federal ownership
(1) Items secured pursuant to section 215 shall be transferred to federal ownership provided that they are not confiscated pursuant to section 375(2). This shall apply to found items only to the extent that no ownership claims are enforced.
(2) The persons affected shall be informed of the transfer of secured items to federal ownership. Where it is not known who the affected person is, section 10(2) of the Administrative Service of Documents Act shall apply mutatis mutandis.
(3) The transfer of ownership shall take effect as soon as the administrative act issued by the revenue authority has become incontestable. Subject to the first sentence above, ownership of items connected to the Land shall be deemed transferred once they have been detached. Third-party rights relating to a secured item shall remain. However, the termination of these rights may be ordered where the third party has contributed recklessly to circumstances that led to the securing of the item transferred to federal ownership or where he has acquired his rights to the item while aware of the circumstances that led to the securing of the item.
(4) Secured items may be sold before they have been transferred to federal ownership where there is a danger of decay or considerable loss in value or where theirretention, maintenance or preservation is accompanied by disproportionately high costs or difficulties; to this end, items which are attached to the ground or Land may be detached from these. The proceeds of sale shall take the place of the item. The emergency sale of these items shall be conducted in accordance with the provisions of this Code on the realisation of attached items. The persons concerned are to be consulted before the sale is ordered. They shall be informed of the order and the time and place of the sale where possible.
(5) Secured items or items already transferred to federal ownership shall be returned where the circumstances which led to their securing are not attributable to the owner or where transfer to federal ownership would seem to result in undue hardship for the persons affected. Third parties acting in good faith whose rights have been cancelled or impeded by the transfer to federal ownership shall be adequately compensated for such from the proceeds of the realisation of the item. In other respects, compensation may be granted where the refusal of such would mean undue hardship.
Section 217
Tax aides
In order to determine facts which have a bearing on customs or excise duties, the revenue authority may appoint as tax aides persons who themselves are not affected by the outcome of such findings.
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