Tax litigation in Germany: overview

A Q&A guide to civil and criminal tax litigation in Germany.

This Q&A provides a high level overview of the key practical issues in civil and criminal tax litigation, including: pre-court/pre-tribunal process, trial process, documentary evidence, witness evidence, expert evidence, closing the case in civil and criminal trials, decision, judgment or order, costs, appeals, and recent developments and proposals for reform.

To compare answers across multiple jurisdictions, visit the Tax Litigation: Country Q&A tool.

The Q&A is part of the global guide to tax litigation. For a full list of jurisdictional Q&As visit


Overview of tax litigation

Issues subject to tax litigation

1. What are the most common issues subject to tax litigation in your jurisdiction?

In 1965 Germany introduced special administration courts for tax matters (the German tax courts). A tax court is located in every German state, although in 2007 Berlin and Brandenburg combined their tax courts forming the tax court of Berlin/Brandenburg. The largest states, Bavaria and North Rhine-Westphalia, have two and three tax courts respectively.

These state tax courts are courts of first instance, which are monitored by the appeal court (namely the Federal Tax Court in Munich). According to the Federal Office for Statistics, 38,419 cases were pending at the end of 2015. This is less than 40% of the approximately 97,000 cases which were pending at the end of 1999. One should not take from these figures that Germany has become less litigious on tax matters during the last 15 years. Until 1999, it was still possible to withdraw an action without any costs if that withdrawal became effective prior to the oral hearing. Following the introduction of a EUR284 minimum fee, cases that are immediately withdrawn have dropped sharply. Serious tax disputes, including those of companies, have been increasing over the years and in particular as a consequence of deeper conflicts in tax audits. In 2015, around 5,400 cases were decided on either corporate or trade income tax. Around another 2,000 cases decided concerned the income of partnerships and around 6,200 cases concerned VAT. Disregarding withdrawals, the average duration of tax court procedures is slightly more than one year and more than 90% obtain a decision within three years after filing the action. As always, average figures are misleading as they do not take into account the size and complexity of such procedures. A major dispute should not be expected to be decided in less than three, and actually more likely not in less than four, years.

At the federal court level the number of major appeals (Revisionen) decreased from 1,008 in 2001 to 657 in 2015. It can be assumed that this is a consequence of fewer such appeals being permitted by the court of first instance. This assumption is based on the fact that a different kind of appeal, the number of complaints (Beschwerden) (which is in most cases opposing the non-admittance) in 2012 is at almost the same level as in 2001. The average duration of federal tax court procedures that ended with a judgment was 19 months in 2015, and again 90% of such cases were finished within less than three years. Also, at this level practical experience shows that the duration of complex and high-value matters tends to be at the upper end of this timeframe.

Legislative framework

2. Outline the legislative framework and principal pieces of legislation governing both civil and criminal tax litigation.

Civil tax litigation

The procedure in German tax courts is governed by the German Tax Court Code 1965 with various amendments (mainly for the purpose of accelerating procedures). Most of the disputes topics are governed by the:

  • Income Tax Act (for individuals and partnerships).

  • Corporate Income Tax Act (for corporations).

  • Trade Tax Act.

  • VAT Act.

The court must apply the law mainly by interpreting very detailed rules in a number of tax laws. Many of these provisions were introduced as a consequence of previous court decisions which had found against the tax administration. Therefore, precedent cases have less relevance than in common law countries (but, of course, they might still be helpful interpreting current law provisions). The tax administration normally publishes such judgments in the Federal Tax Gazette, which will then be applied on all similar pending matters.

Criminal tax litigation

In Germany different courts are in charge for either tax or criminal matters. This is even true for the tax or criminal aspects of the same matter. On an administrative level the tax authorities are entitled to investigate in both directions. The offices of the tax investigation department have the status of an assistant public prosecutor. Depending on the outcome of their investigations, they may close the file either with or without a penalty charge. If it goes to court via a public prosecutor, the criminal court will have to examine both facts and legal provisions in order to issue a judgment. Tax law provisions will be interpreted by the criminal judges, and it has previously happened that taxpayers have been sentenced for tax evasion while later on in the same matter the Federal Tax Court came to the conclusion that a tax claim did not exist at all. In most cases criminal courts are faster than the tax court procedure. Therefore, the opposite situation is rare, but could also be possible. However, there is a certain factual dependence on what the other branches of the courts have decided in the past. The criminal courts will typically follow regular jurisprudence of the Federal Tax Court, and to some extent vice versa.

Tax evasion and other criminal tax offences

3. What are the key elements that constitute tax evasion and other main criminal tax offences in your jurisdiction?

In general, tax fraud is committed if a person makes wrongful or incomplete declarations on aspects relevant for tax vis-à-vis a tax authority and as a result obtains a wrongful tax advantage. Tax fraud can also be committed by failing to make full, accurate and timely declarations vis-à-vis the tax authorities despite being obliged to do so. The charge of tax fraud requires intent. Grossly negligent tax evasion is a misdemeanour. In view of this, tax fraud can also be committed by failing to rectify past mistakes in tax returns, if these become apparent to the taxpayer.


Pre-court/pre-tribunal process

Assessment, re-assessments and administrative determinations in civil law

4. Outline the procedure for tax assessments, re-assessments and administrative determinations in civil law.

If a taxpayer does not agree with a tax assessment notice, he must file an administrative protest within one month after receipt of the tax assessment notice to the tax office that issued the assessment notice. The tax authority must decide if they agree with the taxpayer either completely or partially. To the extent that they do not accept the taxpayer's position, they must issue a formal decision on the administrative protest. There is no time frame in which the tax office must respond or make a decision. If there is no decision within an appropriate time frame (but in no case prior to six months after filing the protest), the taxpayer can directly approach the court. However, this option is rarely chosen, since the court can put this procedure on hold as it feels is appropriate to wait for a protest decision of the tax office. The taxpayer then has one month after receipt of the formal protest decision take further legal action with the tax courts. This protest procedure can be avoided if both the taxpayer and the tax office agree. However, this is rare in practice and may make sense only if the facts are undisputed. Otherwise, the court is entitled to refer the case back to the tax office, in which case a protest procedure must be executed.

If a taxpayer files a protest against the tax assessment notice there is no automatic stay of execution. If the taxpayer wishes to avoid the payment of taxes, he must formally apply for a stay of execution prior to the due date for those taxes. Although a stay of execution may also be granted at a later stage, applying for it after the due date triggers 1% interest per month if taxes have not been paid. If a stay of execution is granted, 6% interest per annum will be due if the case is eventually lost. If no stay of execution was granted and the tax was paid, 6% per annum becomes due in favour of the taxpayer if the case is eventually won.

In view of current market conditions many taxpayers decide not to apply for a stay of execution even if prospects of success are high. Courts are aware of this pure economic decision and do not take it as a sign of weakness if the taxpayer does not apply for a stay of execution.

Resolving disputes before commencing court proceedings

5. What are the main procedures used to resolve disputes before commencing proceedings in a civil court/tribunal?

Major tax disputes typically arise during a tax audit. In view of the lengthy court procedure, settlement opportunities are investigated during the audit. This is true particularly if a number of topics are disputed with different prospects of success respectively. If no settlement can be reached at this level, it is rare that a settlement is available during the administrative protest procedure. Superior authorities have typically been involved at the audit level already, so that a change of mind cannot be expected, although it cannot be excluded completely.

Elements of the offence in criminal law

6. What are the elements of the main criminal law offences in tax litigation?

Under section 370 of the General Tax Code, the intentional misrepresentation or omission of facts in declarations made towards the tax authorities constitutes a criminal offence, if it results in an inappropriately low assessment of taxes or in tax benefits accruing unjustly. Where the misrepresentation or omission is carried out with gross negligence, this constitutes a misdemeanour under section 378 of the General Tax Code.

Most criminal investigations involving corporations start during a tax audit. Where, during such an audit, an auditor becomes aware of a suspected tax crime, he must involve the special investigation units of the tax office so that they can open a formal investigation.

At the time a suspicion of a tax crime is discovered in a tax audit, a specialist section of the tax office will be involved in the case and the accused person(s) will be informed of the investigations against them. From this moment on, their duty of co-operation in the tax audit is partially suspended by their civil rights, which do not require them to give evidence to their disadvantage. Also, the means of force that the revenue can use to enforce information requests are no longer permissible under section 393 of the General Tax Code. The suspension of duties in the tax audit, however, does not fully absolve the defendant of any such co-operation and information duties. Failure to provide information can lead to the tax authorities assessing taxes based on estimates, which can be to the taxpayer's disadvantage.

Early resolution

7. What are the main procedures used for the early resolution of criminal law offences before trial?

In tax fraud cases, it is quite common to negotiate a potential plea deal prior to a trial. Effectively, this applies to cases where defrauded sums are not so high that a custodial sentence will be sought, as the mechanics employed in such structures are not available for custodial sentences. Theoretically, plea bargains could also be struck in larger cases, although this is very rare in practice.


Trial process

Format of the hearing/trial

8. What format does the hearing/trial take?

Hearings are typically held in public. However, parties can request that hearings be private. If the taxpayer requests so, the court has no discretion (that is, the public must be excluded). If a party fails to attend, a judgment can follow the hearing without being repeated. Unless otherwise instructed by the court, a claimant does not have to appear at the hearing but can be represented by his attorney. A hearing will be rescheduled upon request if that request is filed in advance and based on serious reasons (such as illness, travelling and so on). At an early stage of the procedure the parties will be asked if they waive their right to have a hearing. If both parties do so, the judgment will be based on written submissions only. In this case, only the three professional judges will take and sign the judgment.

Role of the judge/arbitrator/tribunal members

9. What is the role of the judge/arbitrator/tribunal members in both civil and criminal tax litigation?

Civil tax litigation

In German tax courts the trier of fact typically is a senate consisting of three professionals and two laymen. Within the senate, one of the professional judges acts as a reporting judge. He organises the procedure and monitors the formalities. The two laymen judges only come into play if an oral hearing takes place. If both parties waive the oral hearing, the judgment is rendered by the professional judges only. In less complex matters, the case can be handled completely by the reporting judge. This procedural decision is taken by the senate and cannot be appealed. However, the parties will be asked for their views beforehand. The case can be transferred back to the senate if the complexity of the matter becomes obvious at a later stage. Furthermore, the case can be handled completely by the reporting judge if the parties declare their consent. This declaration is irrevocable.

Both the senate and the reporting judge must investigate all relevant facts, even beyond the facts provided by the parties. Quite often the reporting judge organises an informal hearing in which he acts like a mediator. This is a real opportunity to settle a case, since both parties must reflect their position in view of the judge's statements. However, these statements are not necessarily the opinion of the entire senate and do not indicate what the final result will be if no settlement is reached.

Criminal tax litigation

Criminal court hearings are generally held in public. Excluding the public from a criminal court requires sound reasons (such as business secrets being part of the case). Once a criminal case goes to court, the court must decide whether to admit the prosecution, in which case a trial will be held, or whether to throw the case out. The latter is very rare in practice. Hearings will generally include a formal oral hearing of the case. Appeals to the federal criminal court require a written notification of where the preceding judgment was incorrect. Only if this is properly demonstrated will the appeal be admitted. Appeals to lower courts are easier to bring, but only apply to cases with lower penalties at stake.

Commencement of proceedings: civil law

10. What is the procedure for commencing tax litigation proceedings in civil law and/or a taxpayer appealing a decision of the tax authority?

Section 65 of the German Tax Court Code stipulates the minimum content requirements of an action, which must be filed within one month from the date the taxpayer receives the decision on the administrative protest. The action must generally:

  • Name the claimant and defendant as the parties to the procedure.

  • Identify the relevant tax assessment notice.

  • Identify the respective decision on the administrative protest.

  • Describe the object of the dispute which is necessary for the tax court to identify the competent trier of fact.

A copy of these documents must be attached.

If some of this information is missing, the court will request it and will give a deadline. If the respective deadline is missed, the action will not be admitted. The same is true with respect to a power of attorney, which must be attached from the beginning.

The action should contain the motion for judgment, which will be fine-tuned in the oral hearing. Furthermore, the action should describe both the facts and the arguments of the claimant. Quite often this part is delivered in a second submission only. Typically, further arguments are not excluded before the end of the oral hearing. However, the court might set a deadline if, in its view, the claimant is delaying the process. The taxpayer does not need professional representation to appear before the court of first instance, but it is highly recommended that a lawyer, tax adviser or accountant be involved right from the beginning. Due to the relevance of procedural rules, lawyers may be the better choice. Accounting firms, in particular, may trigger Sarbanes-Oxley issues. We have seen cases in which accounting firms stepped down from the court procedure when they became statutory auditors for the claimant.

The court will forward the action and any further submissions of the claimants to the defendant, which is the local tax office in charge of the tax assessment notice. The defendant may be obliged to involve superior authorities. However, this is an internal process within the authorities alone, and may require extra time for a response. In practice, the response differs in both length and scrutiny. It may just refer to the protest decision, or it could also be a very lengthy and thorough response.

11. Must a taxpayer pay the disputed tax before leave to appeal the tax authority's decision is granted?

A stay of execution may have already been granted at the beginning of the administrative protest. However, it is within the discretion of the authorities to determine that such a stay of execution is effective only for this first stage of litigation. If so, the taxpayer can again apply for it to the authorities and, if denied, to the court of first instance. This is a separate procedure and can even end up with the Federal Tax Court before the dispute itself has made any progress. Interest at a rate of 6% per annum becomes due if a stay of execution was granted and the case is lost. However, this interest rule also applies the other way around if the tax was paid and the case is won. There are no penalties that can be triggered in either direction.

Commencement of proceedings: criminal law

12. What is the procedure for commencing tax litigation proceedings in criminal law?

Depending on the magnitude of the allegation, a criminal process will be launched by the public prosecutor (who is assisted by the tax authorities in the preparation of his case) either before the:

  • Local court.

  • Regional court.

In most tax cases, the local courts (Amtsgericht) will be competent. However, if the sanction to be expected is a custodial sentence of more than four years, then the case must be tried before a regional court (Landgericht). Within the local courts, a single judge will handle the matter if the expected sanction is not more than two years' custodial sentence. Otherwise, a criminal court constituted by one professional judge and two laymen will handle the case.

The process commences with the prosecution forwarding the statement of accusation to the competent court, which will then review whether there is sufficient ground to believe a crime may have been committed. If this is the case, it will serve the statement of accusation to the defendant and set a date for the trial to begin. On the (first) trial date, the prosecution will read out the statement of accusation and the court will begin to collect evidence and hear witnesses.

In cases where there is no need for a public trial and where the prosecution does not seek a custodial sentence (irrespective of whether on probation or not), there is the possibility to avoid a public trial and instead request that the court issues a penalty order. It then is the defendant's choice whether he accepts the penalty order and pays the penalty or whether he objects. Upon objection, a formal public trial will be launched in the same manner as outlined above.

Government response

13. How has the government responded to recent civil and criminal law cases to improve the court procedure?

Civil law

There have been very few changes in procedural rules in recent years. The most notable is the introduction of rules on electronic communication with the tax courts in 2013.

Criminal law

In criminal law, specialist units for tax-related crimes were set-up at some prosecution services. Still, investigation in complex tax law cases can take long. In order to give the prosecution enough time to process a case, time-barring provisions for severe tax fraud have been extended.

Burden of proof

14. What is the burden of proof in both civil and criminal tax litigation proceedings?

Civil law

Each party has the burden of proof with respect to any facts that are in favour of the respective party. As a general principle the defendant must prove any facts which are relevant for a tax increase while the claimant must prove any facts that are relevant for a tax decrease. For example, the tax authorities must prove that there was additional income or that a hidden distribution occurred, while the defendant must prove that additional business expenses should be recognised. The main deviation from this rule exists with regard to cross-border matters in which the claimant must co-operate with regard to facts abroad or documents kept abroad. This is true particularly with regard to transfer pricing documentation, for which very detailed provisions exist.

The court must decide on the basis of the facts of which it is convinced. Therefore, facts are proven if there is no room for reasonable doubt.

Criminal law

In criminal cases the burden of proof is with the government, which must show that there are no reasonable doubts on the facts underlying a potential conviction. This is obvious with regard to the requirements of the tax law provisions, including the intention of the taxpayer to evade taxes. When it comes to the amount of taxes evaded, the court cannot just take the amount from the tax assessment notice. The tax assessment notice may include an estimate to which the tax office is entitled in certain situations. Such an estimate is relevant for the criminal sentence only if the court is convinced by undisputed facts that this estimate is without serious doubt.

Main stages

15. What are the main stages of typical court proceedings for tax disputes?

Civil law

After filing of the action the court will check the formalities and can ask for additional information or documentation. The parties then provide the court with their arguments by written submissions. If the reporting judge feels it appropriate, the judge can invite the parties for an informal hearing without including the entire senate. This is an occasion to discuss and maybe compromise after the judge has given insight into his thinking. If the case continues, typically further submissions deal with the outcome of that hearing. At this stage, the court may render a decision (Gerichtsbescheid). However, this decision will be rendered null and void if either party then makes a request for an oral hearing. If requested, the oral hearing takes place and forms the basis of the judgment.

Criminal law

In Germany, criminal proceedings are divided into three stages:

  • Preliminary proceedings (investigation).

  • Intermediate proceedings.

  • Actual trial.

Criminal investigations require an initial suspicion based on facts pointing towards the possibility of a criminal offence. Suspects in such proceedings have special rights, including the right to be heard. As a result, first hearings take place during the preliminary proceedings. Where a conviction seems more likely than an acquittal, the public prosecutor's office files the action, taking the procedure into an intermediate stage. During this, the court decides whether it is competent and eventually initiates the actual trial, otherwise, a case may be thrown out (although this rarely ever happens in practice).


Documentary evidence

Disclosure of documents in civil proceedings

16. What documents must the parties disclose to the other parties and/or the court in civil proceedings? Are there any detailed rules governing this procedure?

During the whole procedure and the trial, the taxpayer must submit/present accounts, records, business papers and other documents to the competent tax authority and the court upon request. In tax audits, the taxpayer must provide the explanations necessary to understand the records and, where relevant documents have been created with the aid of data-processing systems, assist the revenue authority in viewing these documents. The German Fiscal Code provides special rules with regard to transactions involving another country. In this case the taxpayer must keep and eventually submit records presenting the economic and legal aspects of the arm's-length agreements concluded with associated enterprises.

Special rules/considerations

17. Are there any special rules or considerations concerning the disclosure or discovery of documents in civil tax litigation?

Typically, there is extensive pre-trial exchange of documentary evidence already at the administrative level. However, there is no discovery in German tax court matters and, in particular, inspection of files is rarely granted to the taxpayer before the case is pending at court. However, once the case is pending, the taxpayer has the legal right to inspect the files and it is strongly recommended that the taxpayer apply for this. The inspection of files refers to both the court files as well as the administrative files which have been passed on to the court, typically including the audit files. It is advisable to apply for this right only when at least one submission is made by either party. Sometimes, the reporting judge makes some comments or highlights some passages which might reveal his thinking.

Disclosure in criminal proceedings

18. What documents must the parties disclose to the other parties and/or the court in criminal proceedings? Are there any detailed rules governing this procedure?

In criminal cases, the defendant is entitled to full and complete inspection of all files. However, before a formal charge has been laid, the prosecution service has the right to refuse inspection of files to the extent that such inspection might jeopardise the ongoing criminal investigation. Even in such cases, partial access to the files may be available, as it will be difficult for the prosecution to demonstrate that no documents whatsoever can be released. As soon as formal charges have been laid, all files must be laid open. Refusal to provide full access to the files may be a reason to contest a verdict later on.

Where a potential tax fraud charge involves more than one defendant, it is not uncommon that the respective defence attorneys will link up and exchange some information that they may have in excess of what is on the files. However, as there may be conflicting interests at play in such a case, this does not ensure full and accurate information.

Special rules/considerations

19. Are there any special rules or considerations concerning the disclosure of documents in criminal tax litigation?

In criminal trials, the suspect's obligation to participate in the investigation is suspended. Therefore, suspects have the right not to convey information, although this may still harm their position in civil tax litigation. Failure of the investigators to inform a suspect of his right to withhold information may lead to a collapse of the trial, if a criminal prosecution is based on information provided by a suspect who was not properly informed.


Witness evidence

Trial considerations

20. Do witnesses of fact give oral evidence or do they just submit written evidence? Is there a right to cross-examine witnesses of fact?

Civil law

It is one of the pre-eminent challenges to make sure that witness evidence is available when needed. For example, in view of the length of the procedure witnesses may no longer work for the claimant. They may have moved or are just no longer able to provide a clear picture of what has happened. Therefore, one must identify the topics for which the claimant has the burden of proof and which may become relevant in the course of the procedure. In any event, documentary evidence is preferable, but oral witness evidence may be the only type available.

Criminal law

In German criminal proceedings, witnesses must appear in court and give oral evidence. Principally, they are examined by the presiding judge, who shall permit the public prosecution office, the defendant, and the defence counsel to ask questions to the defendant, witnesses or experts. On a concurring application of the public prosecution office and the defendant, the presiding judge has the power to pass the examination of witnesses and experts named by the public prosecution office or the defendant to them. Then the public prosecution office and the defendant or the defence counsel have the right to be the first to examine the witnesses they have named.

Witness preparation

21. Provide a brief outline of the procedure for preparing witnesses in both civil and criminal cases. Are there any special or unique features to consider for witness evidence in criminal cases?

Civil law

Witnesses cannot be influenced by either the claimant or his adviser. But, of course, it is permissible to inform him about the fact that he will or may become a witness, and for which topics. The most efficient way is to ask questions. The witness should take notes for his memory.

Criminal law

The same principles that apply to civil proceedings also apply to criminal proceedings. Under the German Code of Criminal Procedure, witnesses are allowed to be assisted by a legal counsel, who has the permission to be present at the time of the examination. Counsel can be barred if certain facts justify the assumption that their presence would substantially hinder the taking of the evidence.

Hearsay evidence in civil and criminal trials

22. Are there any rules concerning the introduction of hearsay evidence in civil and criminal trials?

Civil trials

According to the Federal Fiscal Court, hearsay witness statements are not generally declared inadmissible or useless as they can include legal indications that may be relevant for the assessment of evidence.

Criminal trials

Although in criminal cases, there is a general rule that primary evidence is superior to circumstantial evidence, hearsay evidence can be introduced into proceedings in Germany. Hearsay witness statements are regarded as primary evidence of what the witness observed (that is, of the conversation he heard). In the context of investigating the facts of the case, a court can therefore also hear these witnesses, but will have to weigh the fact that they can only give evidence of their own observation.

Also, Germany does not per se employ a fruits-of-the-poisoned-tree doctrine. Instead, the use of evidence obtained following illegal gathering of information is generally permissible, unless this would violate basic legal rights. Therefore, confessions made under torture, for example, are not useable and, due to the severity of the violation of defendant's rights, so will secondary evidence found following this illegal means of obtaining information. However, in most cases, evidence gathered following illegally obtained evidence will remain permissible. A recent example was the acquisition of stolen data from foreign banks. That data can be used for taxation and, although their admissibility in criminal investigations is questionable, secondary evidence gathered following the receipt of such data is permissible.


Expert evidence

Expert reports in civil trials

23. What are the rules concerning the introduction of expert reports in civil trials?

Expert reports are permissible (see Question 24).

Expert evidence in civil trials

24. What are the rules concerning the introduction of expert evidence in civil trials?

Expert evidence can be provided by either an expert witness, who is interviewed by the court during the oral hearing, or in written form by an expert report. In practice, expert evidence is required in two different scenarios. German tax courts may ask for an expert if foreign law has to be applied or, very typically, in valuation disputes. One must distinguish this from an expert named by either party, which is not a tool of evidence. The parties can name an expert if they feel that their submission will be more plausible or convincing, which indeed might be the case if the expert has a good reputation. On the other hand, an expert can be appointed by the court if evidence is required by an expert report. The court will do so by a formal decision, against which a complaint (Beschwerde) can be filed. The main reason for a complaint may be that the chosen expert is biased. Once the expert report is delivered and forwarded to the parties there is further opportunity to discuss its content.

Expert evidence in criminal trials

25. What are the rules concerning the introduction of expert evidence in criminal trials? Is it possible to introduce expert reports?

Expert evidence

Expert evidence, including expert reports, can be examined in tax and criminal cases. However, the court will itself have to investigate the tax laws and their correct application and cannot rely solely on expert evidence for this. Therefore, experts in tax cases are more often found for underlying economic questions (such as adequate transfer prices and so on). Also, experts can be used to determine whether receipts were forged. Furthermore, expert evidence can be used to determine whether witness statements are credible.

Expert reports

See above, Expert evidence.

Special considerations

26. Are there any special considerations for introducing expert evidence/reports in both civil and criminal trials?

Civil trials

There are no special considerations for introducing expert evidence or reports in civil trials.

Criminal trials

There are no special considerations for introducing expert evidence or reports in criminal trials.


Closing the case in civil trials

27. What are the rules governing the submission of both written and oral argument in closing a civil trial?

When the oral hearing comes to an end, the claimant or his adviser is entitled to plead and summarise the major points. It is important at this stage not to go into too much detail, because otherwise the laymen judges will be lost. The pleading ends with a specific motion (which in most cases will have already been made in the first submission). However, there may be changes during the procedure or specifications required. The court will assist the claimant in making a reasonable motion. Thereafter, the defendant will also plead (in practice, his motion is usually just that the court should reject the action). The pleadings and the motion are usually made orally (however, the motion will become part of the protocol for the oral hearing).


Closing the case in criminal trials

28. What are the rules governing the submission of both written and oral argument in closing a criminal trial?

Once all witnesses have been heard, the prosecution will make its closing argument. In this closing argument, it should summarise the entire case as well as all findings of the court proceeding. It should also highlight aspects in favour of the defendant (if any). The statement ends with a specific motion itemising the sentence sought, the crime committed and any other sanctions involved.

Where the prosecution agrees that the defendant is innocent, it will request that he be acquitted.

After the prosecution's closing statement, the defence is entitled to a closing statement. This closing statement can have any content the defence sees fit, it does not require a formal motion for a specific result, although it is common to either request an acquittal or a lenient sentence. Closing statements are made orally. Finally, the defendant will always have the last word in any case, before the court will retire to deliberate on the verdict.


Decision, judgment or order

Civil law cases

29. What are the rules governing the issuance of a decision in civil cases?

The Tax Court Code provides as the basic rule that the decision is announced by the presiding judge at the end of the oral hearing. However, in practice the oral hearing ends with the announcement that a decision will be delivered to the parties in writing.

As a general rule, the decision must be completed within two weeks after the oral hearing. The claimant or his adviser may ring up the court's secretary in order to obtain the main information even before the decision is delivered by mail. In some cases, a formal written decision (Gerichtsbescheid) will be rendered prior to an oral hearing. However, each party is then entitled to request an oral hearing which makes such a written decision null and void. It is then completely disregarded for the ongoing procedure.

A written judgment requires a detailed summary of the facts which the senate regards relevant. This will be the relevant basis for any appeal. If the claimant feels that the relevant facts are either missing or laid down incorrectly, he must file a separate complaint in order to make it relevant for the appeal procedure. The judgment must provide detailed reasoning for the decision taken, as this may also be relevant for the right to appeal. The judgment must also include a decision on the right to appeal. If the judgment is silent on this the right to appeal is rejected.

Criminal law cases

30. What are the rules governing the issuance of a decision in criminal cases?

In Germany, there is one singular decision in a criminal case. There is no separation between the verdict and sentencing. Therefore, the decision will contain:

  • The verdict.

  • A sentence (if applicable).

  • Decisions on costs.

  • Any potential further sanctions.

Such further sanctions can include a prohibition on occupying certain professions or the seizing of assets. Where custodial sentences are employed, they will not automatically be enforced upon handing down of the judgment, but may be stalled (for example, while appeals are pending). However, where there is a risk that a defendant flees, the defendant can be arrested upon the issuing of the verdict or even before then, on the basis of an arrest warrant.



31. How is the issue of costs determined in both civil and criminal cases?

Civil law

The losing party must bear the costs. In the case of a partial win, each party must bear their respective portion of costs. This includes the court fees. If the defendant loses the case he must reimburse the claimant for his adviser's costs. In both cases, a statutory fees scale applies, under which the fee depends on the value of the dispute. The statutory fee scale is degressive and is capped at a value of EUR30 million. Normally, the claimant's adviser is paid on the basis of time spent. However, legally the statutory fee scale is the minimum amount due and the maximum amount to be reimbursed by the defendant. From a practical point of view, one has to consider if the cost risk is reduced by litigating only a part of the dispute. For this purpose, it should be agreed with the tax authorities before the administrative appeal is decided that only one out of several fiscal years should be litigated.

Criminal law

Generally, in a criminal case, the defendant must bear the costs if found guilty. If not, he will be reimbursed for costs he incurred. However, the reimbursement is capped to the statutory legal fee, which is usually lower than the costs charged by renowned defence attorneys.



Right to appeal in civil law

32. What are the main grounds for appealing a civil law decision?

The most important reason for a court to grant the right to appeal is that the matter is of relevance for a number of further cases pending at the administrative level or at different tax courts. Alternatively, the right to appeal can be based on the fact that a negative decision of the tax courts would deviate from previous decisions of the Federal Tax Court. The former right to appeal based on value only has been abolished. An appeal can be brought on matters of law only.

Procedure to appeal in civil law

33. What is the procedure for appealing a civil law decision?

There is no automatic right to appeal a decision of a German tax court. The right to appeal must be explicitly granted. If the decision is silent on the right to appeal, the tax court of first instance did not grant it. Therefore, it is helpful not just to include the request for the right to appeal into the motion, but also to provide the court with arguments as to why the court should grant this right.

If the tax court does not grant the right to appeal an appellant can file a non-admittance complaint (Nichtzulassungsbeschwerde) within one month after the formal decision was delivered to the relevant party. Such a non-admittance complaint is a very formal procedure which must argue the reasons why the right to appeal should be granted. Quite often advisers make the mistake of just arguing why the case was decided incorrectly by the court, which does not help at all.

The major appeal (Revision), if granted, must also be filed within one month after the formal decision was delivered to the appealing party. If a non-admittance complaint is successful, a major appeal need not be filed separately. Instead, a court decision will be delivered and the complaint procedure will continue as an appeal procedure. In both scenarios, the argument must be provided within a further month, and this deadline may be extended if an extension is requested before the end of the deadline. The appeal can only be based on the argument that the court of first instance misinterpreted the legal provisions. New facts cannot be introduced. The description of facts as provided in the decision of the court of first instance is binding and the same is true for the interpretation of such facts if it does not object to basic rules of logic.

The parties will exchange their views both in writing and in the oral hearing. If both parties waive the oral hearing, the decision will be rendered after such correspondence. Even if the parties do not waive the oral hearing, the court is entitled to render a formal decision in writing (Gerichtsbescheid) against which a kind of appeal is permitted (namely, the request for an oral hearing). If such a request is filed, the former written decision of the Federal Tax Court is null and void. Otherwise, it has the same binding effect as a formal decision.

Right to appeal in criminal law

34. What are the main grounds for appealing a criminal law decision?

Depending on the court of first instance, different reasons for appeals may be present. Where the court of first instance was the local court (Amtsgericht), appeals can be made to the regional court simply by contesting the decision. In such an appeal, the application of law as well as the facts of the case will be reviewed. Where decisions of a higher court are contested, specific, usually procedural reasons need to be given for an appeal. An appeal on a factual basis can only be brought if the factual assumptions made by the previous court defy the rules of logic or if they were gathered in a procedurally inadmissible way.

Procedure to appeal in criminal law

35. What is the procedure for appealing a criminal law decision?

Tax crime cases are handled before the same type of courts as other crimes. Therefore, they do not fall under the jurisdiction of tax courts, but under that of the ordinary courts. The appeals process is two-fold:

  • Where the court of first instance was the local court (Amtsgericht), a first appeal can be made to the regional court.

  • Where a case has been handled by the regional court directly (or is in the course of an appeal), the decision of the regional court can be challenged before the Federal Supreme Court (Bundesgerichtshof).

The Federal Supreme Court will only review the application of the laws by the regional court and will not review the facts of the matter. Only where the collection of facts violated legal provisions, or defies the laws of logic, can the Federal Supreme Court revoke this part of the regional court's decision. Appeals to the Federal Supreme Court are subject to deadlines and need to be justified in order to be accepted by the court. Otherwise, the appeal will be thrown out without a further hearing.


Recent civil law developments and proposals for reform

36. Outline the main recent civil law developments in tax litigation in your jurisdiction. Are there any proposals to reform civil law tax litigation?

Transfer pricing

Transfer pricing is rarely subject to litigation. Typically, transfer pricing disputes will be pursued through mutual authority procedures and perhaps subsequent arbitration. However, litigation is a viable solution if a corresponding adjustment in the other country would not help due to the fiscal situation of the affiliate (for example, a loss situation). It could also be an option if the result of the mutual authority procedure is completely unsatisfactory so that even a partial win at court would provide better results.

General Anti-Avoidance Rules (GAAR)

The German General Anti-Avoidance Rules (GAAR) has proved not to be very helpful for the tax authorities. The Federal Tax Court accepted limited use only, which in practice makes it a rare basis for dispute. On the other hand, the legislator reacted on such jurisprudence and introduced a number of special anti-avoidance rules which are often the subject of litigation. Many of those special anti-avoidance rules in fact contain a treaty override. These are currently under review by the constitutional court. A positive decision of the constitutional court would change the German tax environment drastically.

Directors' liability

Under section 69 of the German General Tax Code, directors are liable for taxes of the company if taxes have intentionally not been paid, or if their handling of the matter qualifies as gross negligence. Of course, as a taxpayer the company must be charged first. However, particularly in insolvency matters, the tax authorities go after directors. In that case, the directors may be able to rely on any applicable directors' and officers' insurance to cover the legal fees for litigation.

Internal Control System for Tax Compliance

The requirements for a voluntary self-disclosure under section 371 of the German General Tax Code have been tightened over the past five years. Therefore, taxpayers who see the necessity to remedy incorrect or incomplete tax returns must distinguish between a simple amendment under section 153 of the German General Tax Code and a voluntary self-disclosure. According to the Federal Ministry of Finance and following a change in the Fiscal Code Application Decree in May 2016, taxpayers that have implemented an Internal Control System for Tax Compliance will generally not be subject to criminal penalties when amendments of tax returns become necessary. However, there is no guidance on legal requirements or format and contents of such systems, which results in some uncertainties. In general, a system should be well fitted to the individual needs of the taxpayer and should consist of an internal controlling system and an internal monitoring system.


Recent criminal law developments and proposals for reform

37. Outline the main recent criminal law developments in tax litigation in your jurisdiction. Are there any proposals to reform criminal law tax litigation?

Tax evasion

With effect from January 2015, the rules on relief from punishment in the case of self-accusation have been tightened.


Online resources

Laws on the Internet (Gesetze im Internet)


Description. Fiscal Code of Germany (Abgabenordnung), translation provided by the Language Service of the Federal Ministry of Finance, up-to-date website maintained by the Federal Ministry of Justice and Consumer Protection.


Description. Code of Procedure of Fiscal Courts (Finanzgerichtsordnung), official, German version. Up-to-date website maintained by the Federal Ministry of Justice and Consumer Protection.


Description. German Code of Criminal Procedure (Strafprozessordnung). Original translation by Brian Duffett and Monika Ebinger, translation updated by Kathleen Müller-Rostin, up-to-date website maintained by the Federal Ministry of Justice and Consumer Protection.


Description. Court Fees Act (Gerichtskostengesetz), official, German version. Up-to-date website maintained by the Federal Ministry of Justice and Consumer Protection.

Contributor profiles

Dr. Axel Bödefeld, Partner

Oppenhoff & Partner Rechtsanwälte Steuerberater mbB

Konrad-Adenauer-Ufer 23

50668 Cologne

T +49 221 2091 543
F +49 221 2091 333

Professional qualifications. Germany, Attorney (Rechtsanwalt), Specialised Lawyer for Tax Law

Areas of practice. Tax law; mergers and acquisitions; structuring and restructuring of corporate groups; transfer pricing; litigation.

Non-professional qualifications. Diploma in Finance, Institute of Finance, Nordkirchen

Languages. German, English


  • Blumenberg/Benz: Die Unternehmensteuerreform 2008, Kapital IX, Funktionsverlagerung und Verrechnungspreise (the 2008 corporate tax reform, chapter IX, relocation of functions and internal transfer prices), Bödefeld/Kuntschik, pp 240-296, publisher: Verlag Dr Otto Schmidt Köln.

  • Verständigungs- und Schiedsverfahren nach dem EU-Schiedsabkommen – Theorie und Praxis (mutual agreement and arbitration proceedings pursuant to the EU Arbitration Convention – theory and practice), Dr Axel Bödefeld and Dr Nina Kuntschik, IStR 2009, issue 8, p 268 et seq.

  • Schiedsverfahren nach DBA (arbitration proceedings pursuant to the Double Taxation Treaty), Dr Axel Bödefeld and Dr Nina Kuntschik, IStR 2009, issue 13, p 449 et seq.

  • Der Überarbeitete Verhaltenskodex zur Anwendung des EU-Schiedsübereinkommens (the revised code of conduct for applying the EU Arbitration Convention), Dr Axel Bödefeld/Dr Nina Kuntschik, IStR 2010, issue 13, p 474 et seq.

  • Haftung für spaltungsbedingte Schulden (liability for demerger-based debts), Georg Maier-Reimer/Axel Bödefeld, liber amicorum for Martin Winter, 2011, p 453 et seq, publisher: Verlag Dr Otto Schmidt Köln.

  • Schiedsverfahren nach den DBA mit Großbritannien, der Schweiz und Liechtenstein (arbitration proceedings pursuant to the Double Taxation Treaty with Great Britain, Switzerland and Lichtenstein), Dr Nina Kuntschik/Dr Axel Bödefeld, IStR 2012, issue 4, p 137 et seq.

  • Tax Litigation Global Guide 2016/17, German chapter, Axel Bödefeld/Gunnar Knorr, Editor David Chodikoff, Miller Thomson LLP, Publisher: Thomson Reuters, 2016.

  • Transfer Pricing and Tax Avoidance, German chapter, Axel Bödefeld/Gunnar Knorr, Editor David Chodikoff, Miller Thompson LLP, Publisher: Thomson Reuters, 2017.

Dr. Gunnar Knorr, Partner

Oppenhoff & Partner Rechtsanwälte Steuerberater mbB

Konrad-Adenauer-Ufer 23

50668 Cologne

T +49 221 2091 541
F +49 221 2091 333

Professional qualifications. Germany, Attorney (Rechtsanwalt) and Certified Tax Adviser

Areas of practice. Tax law; mergers and acquisitions; corporate financing; structuring and restructuring of corporate groups; tax audits.

Languages. German, English, French


  • Böttcher/Habighorst/Schulte Commentary on the Merger Act and the Merger Tax Act, Commentary on section 24, Merger Tax Act, Publisher: Nomos, 2014.

  • Hilber: Handbook Cloud Computing, Tax Section, C H Beck, Munich 2013.

  • Tax Litigation Global Guide 2016/17, German chapter, Axel Bödefeld/Gunnar Knorr, Editor David Chodikoff, Miller Thomson LLP, Publisher: Thomson Reuters, 2016.

  • Transfer Pricing and Tax Avoidance, German chapter, Axel Bödefeld/Gunnar Knorr, Editor David Chodikoff, Miller Thompson LLP, Publisher: Thomson Reuters, 2017.

  • Hertz et al: Global Financial Reporting, Section on Share Based Payments, Publisher: Schaeffer/Poeschel, 2008.

  • Kessler: Company Financing for Medium Sized Entities - Tax Section, Publisher: Nomos, 2015.

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