Local tax court rules on failure to comply with tax authorities’ information request during a tax audit

A provision introduced in the Annual Tax Act 2009 permits the relocation of electronic bookkeeping abroad under certain circumstances. This provision is accompanied by a penalty (from EUR 2,500 to EUR 250,000 at the discretion of the tax office) for non-compliance.

The local tax court of Schleswig-Holstein recently issued a decision in proceedings for the suspension of execution with respect to the new rule (case reference 3 V 243/09). A taxpayer that was being audited failed to provide requested information to the tax auditor after several reminders. The tax authorities assessed the minimum penalty of EUR 2,500 and argued that an internal processing delay was caused by the taxpayer’s non-compliance. Because the case did not involve a transfer of electronic bookkeeping abroad, the question came up as to whether the case fell within the scope of the new penalty rule at all.

The local tax court was of the opinion that the penalty assessment is covered by the wording of the law because the explanatory statement to the law confirms the application of the penalty beyond cases relating to the transfer of electronic bookkeeping abroad.

The penalty rule should affect all taxpayers and may result in significant penalty assessments for failure to comply with information requests issued by the tax authorities unless the taxpayer can prove that the authorities did not exercise their administrative discretion correctly. In addition, depending on the type of tax the penalty relates to, it may not be tax deductible.

The penalty may be imposed if the taxpayer fails to comply with any one of the following obligations (see GTLN 1/2009):

• Timely submission of requested documentation and information during a tax audit;
• Granting of access to electronic accounting systems;
• Obtaining permission from the tax authorities prior to relocating electronic accounting systems outside Germany;
• Re-transfer of electronic accounting systems back to Germany at the request of the tax authorities; or
• Duty to inform the tax authorities about tax relevant facts.

If you have any questions, please contact the authors of this article at gtln@deloitte.de or your regular Deloitte contact.