Letter from Finanzamt!

[trybefore 6]

I have some UK income retained in the UK for some years and it is taxed in the UK. I have not declared this to the German Finanzamt.
What should I do and what is my best strategy to avoid jail?

Thanks for any links and advice.

[El Jeffo 42,135]

If you've already received a letter about it, I'm afraid it's bad news, because it removes the Selbstanzeige option.

 

I humbly suggest that you retain the services of a qualified lawyer ASAP instead of asking for advice from a bunch of Internet randos, based on incomplete information to boot.

 

Best of luck to you.

 

P.S. I moved your post to the Finance section

[trybefore 6]

Thanks for the reply. I know nothing about the Selbstanzeige option. I am planning to consult a tax adviser but you advise a lawyer rather than tax advisor or are they they same thing?

[El Jeffo 42,135]

The Selbstanzeige means you confess your sins. In exchange, you have to pay the back taxes, plus a likely fine, but escape criminal prosecution.

 

If the Finanzamt is already pursuing a case against you, however, that option is off the table.

 

You can start with a tax advisor/accountant, but if you're being audited and you know you've dodged some taxes, I think a lawyer will be inevitable.

[trybefore 6]

OK thanks. It's only money.

[Gambatte 972]

tax advisor, Steuerberater/in is the person you need.

 

No idea how much UK tax you did not report, but cmon it's got to be a very huge amount for you to risk jail.

My guess is no jail for 4-digit, probably even 5-digit.

[trybefore 6]

Haha! Definitely not a huge amount otherwise I would already have the same team as Gates, Warren, Musk, etc working on this for years.

[Gambatte 972]

9 minutes ago, trybefore said:

otherwise I would already have the same team as Gates, Warren, Musk, etc working on this for years.

No idea if true or not, but I remember at the time of the Panama papers reading that if the tax amount you want to cheat is "only" 1M, that's still way too little compared to the costs for the legal and tax advisors you need.

My guess is the guys you mentioned, honest or not, spend much more than 1M for their tax experts.

[trybefore 6]

After checking my records I see that I have paid tax in the UK on this income so it looks like I now have to pay tax twice...

[Gambatte 972]

1 hour ago, trybefore said:

 so it looks like I now have to pay tax twice...

Ahhhh, thorny topic...

Foreign income, regardless of tax being paid abroad or not, will generally make you pay more tax in Germany.

And yet most people here, including everybody's favorite tax profi, although will confirm the above, will insist saying the foreign income remains tax-free in Germany!

 

It's free but you must pay money!

[Krieg 15,074]

At least pre-Brexit, you technically didn't have to pay taxes for it.  But you had to report it and I think it could make you jump to the next bracket for the taxes on your income in Germany.  So technically you wouldn't have to pay double taxes but in practice it could make you pay more taxes.

[Gambatte 972]

17 minutes ago, Krieg said:

At least pre-Brexit, you technically didn't have to pay taxes for it.  But you had to report it and

 

I thought this statement was true ONLY if such income was rental income.

And no, there was not even need to report it.

[Krieg 15,074]

AFAIK Germany has double tax agreements with a bunch of countries, there is even one with my non-EU third world country.    You do not have to pay double taxes. But yes, you might end up paying more taxes.

 

I guess even in the post-Brexit times there will be some sort of tax agreement.

[GaryC 394]

This has absolutely NOTHING to do with Brexit, other than in terms of reporting foreign rental income for the progression rule that sets the rate of tax you pay in Germany, the UK has become a third country, not an EU MS from the end of 2020.

 

Depending on the type of income you may find you should have paid tax on it in Germany, rather than the UK, or that you get relief in Germany for the tax you also have to pay in the UK.  Either way, it will feature in the calculation of your tax rate in Germany.  The double taxation treaty between Germany and the UK will tell you who retains the right to tax whatever type of income it is.  

[trybefore 6]

Thanks for all the feedback guys. When it's all over I'll let you know how painful it was...

[trybefore 6]

So... I now have a bunch of forms to fill in but will use an advisor to complete them.

Can someone help me with what is the allowed/required way to calculate the Euro value of un-remitted £ and $ income in a year?

[GaryC 394]

6 hours ago, trybefore said:

So... I now have a bunch of forms to fill in but will use an advisor to complete them.

Can someone help me with what is the allowed/required way to calculate the Euro value of un-remitted £ and $ income in a year?

Pretty sure you use the rates in these tables  Bundesfinanzministerium - Umsatzsteuer-Umrechnungskurse.

 

In strictness you should apply the relevant rate to each transaction but depending on the income the FA may be content with an average for the year.  We are claiming unlimited liability treatment in connection with a German state pension receivable in the UK and they appear content to convert our UK income into € at the average rate for the year when assessing whether the criteria for unlimited liability treatment are met.

 

Good luck. 

[trybefore 6]

The Steuerberaterin pursed her lips and said, "That's likely to be expensive". She estimated €5k x 7 years plus any penalty. That was back in August...

Fast forward to now. Well it wasn't fast forward it was excrutiatingly slow waiting for the bill to come. Even though I have the cash to cover it that's a sh1t load of money to lose.

Anyhow the Finanzamt documents say no tax to pay. I don't understand why and I'm not asking either. Let sleeping dogs lie. So this story has a happy ending and I have some cash to give to my kids when they build/buy.

Thanks again for the friendly advice here.

[jeba 4,364]

On 15.6.2021, 11:38:28, Gambatte said:

My guess is no jail for 4-digit, probably even 5-digit.

And not even 3 years for 27 millions, as can be seen from the case of Hoeneß (and you get released early if you behave well while in jail). If you break it down to the hourly rate that´s around a €1000/hour "salary", even if you don´t behave. Might be worth it for some.

[jeba 4,364]

7 hours ago, trybefore said:

I don't understand why and I'm not asking either

You´ll find the answer in the "agreement on the avoidance of double taxation" between Germany and the UK.