Prohibition of compensation in criminal turnover tax law – Basic ruling of the BGH of 13 September 2018 – 1 StR 642/17

Deutsche Version
The Federal Court of Justice has decided, contrary to its established case-law, that input taxes must be taken into account when calculating the tax reduction and thus at the level of the facts, insofar as there is an economic connection between the outgoing invoice and the corresponding incoming invoice.
The judgment relates to a case in which the taxpayer failed to submit an advance turnover tax return. Since the legal asset of tax evasion is the securing of the state tax claim, input taxes, which the offender would automatically have been entitled to by law, have an effect on the determination of the tax damage caused by the omitted tax return already at the level of the offence and not – as previously only at the level of punishment. So far, in comparable cases, the amount of the turnover tax that was not paid determined the scope of the penalty and also whether a case of tax evasion was on a large scale (reduction amount per offence in excess of € 50,000). Only at the level of penalty assessment was it taken into account which tax damage arose from the offsetting of the input tax from the incoming invoice, which was also not declared.
Example:
A buys goods with a net goods value of 300.000 € in one month and sells them on at a net goods value of 400.000 €. He did not file a VAT return.
In the outdated opinion of the Federal Supreme Court, there was an accusation of VAT evasion by omitting to submit a declaration in the amount of the VAT (19%) on the sales proceeds of 400,000 €, i.e. 76.000 €. The simultaneously not declared input tax deduction in the amount of the value added tax (19%) on the incoming sales in the amount of 300.000 €, i.e. 57.000 €, was not taken into account when determining the amount of the tax reduction.
Thus in such a constellation a case of tax evasion on a large scale with a minimum penalty of 6 months up to a maximum of 10 years imprisonment was present. Despite a tax loss of only 19.000 €, the court could not impose a lower penalty than these 6 months.
Due to the current judgement of the Federal High Court in such cases in the future input tax and value added tax are to be balanced with the consequence that only a case of the simple tax evasion is present with a penalty range of fine up to imprisonment from 5 years.
However, the Federal Supreme Court pointed out in its reasoning that this compensation for damages at the level of the facts is only permissible if the deliveries have actually been made and it is not a matter of so-called fictitious deliveries. Only if the outgoing delivery was an actually executed delivery and an effective invoice as defined in §§ 14, 14 a UStG and the other conditions for deduction as defined in § 15 UStG exist for the incoming service.
If one considers that since its decision of 18 April 1978 – 5 StR 692/77 the Federal Supreme Court has denied this deductibility of input tax in cases of VAT evasion, the scope of this new fundamental decision of the Federal Supreme Court of 13 September 2018 becomes clear.