Self-disclosure for tax evasion with cryptocurrencies

It can generally be assumed that private sales transactions with cryptocurrencies have attracted the attention of the tax authorities since 2017 at the latest. Anyone who has forgotten or deliberately omitted to declare the corresponding gains to the tax office in previous years may, from the point of view of the tax office, have made themselves liable to prosecution for tax evasion pursuant to Section 370 of the German Fiscal Code (AO). 

In order for the voluntary disclosure pursuant to Section 371 of the German Fiscal Code (AO) to have a penalty-exempt effect, it is generally necessary that the incorrect information is corrected in full, the incomplete information is supplemented or the omitted information is made up for with regard to all tax offenses of one type of tax. The corrected information must be provided for all tax offences of a tax type that are not time-barred, but at least for all tax offences of a tax type within the last ten calendar years.

Example

Bob made a taxable capital gain from cryptocurrencies of €15,000 in 2017 and deliberately did not declare it to the tax office. In 2018 and 2019, he had a loss. In 2020, he is expected to realize a capital gain in the amount of 20,000 euros. Since the "box is getting too hot" for him, Bob asks his lawyer in December 2020 whether he should declare all profits or only those from 2020 to the tax office.

Solution (simplified):

Bob has committed tax evasion in 2017 by deliberately not declaring his profits from crypto-currency transactions. If he would declare the profits only for the year 2020 to the tax office, there is a risk that the tax office would initiate criminal tax proceedings for the year 2017. In order for Bob to remain exempt from punishment, a voluntary disclosure according to § 371 AO is necessary. In this, information all all tax offences of the ten-year period of subsequent declaration must be provided. 

As the example shows, the processing can be extremely tedious (and costly) in individual cases, since the information on all sources of income of a tax type (in the case of income tax, in addition to other income pursuant to Section 23 EStG, e.g. also income from self-employment and employment as well as from capital assets) of the last 10 years must sometimes be checked and corrected if necessary. If errors occur during the processing, this can lead to the loss of the penalty-exempt effect of the voluntary disclosure and the declarant literally "turns himself in".

It is therefore advisable to file a voluntary disclosure to the tax office regarding previously undeclared capital gains from cryptocurrencies only with the assistance of a lawyer specializing in criminal tax law and cryptocurrencies.