Modernization of the taxation procedure

The German Federal Ministry of Finance has published the draft bill for a law to modernize the taxation procedure, which had been planned for some time.

After 18 months of preparation and consultation with the states, the Federal Ministry of Finance has now published the first draft of a law to modernize the taxation procedure. Since the states also participated in the draft law, it is likely that the law can be passed before the end of this year, as no fundamental opposition from the states is expected in the Bundesrat.

The primary aim of the law is to introduce more automation into the tax offices. The more technology is to be accompanied by less paper, which in turn will also relieve taxpayers in some respects. Because of the many detailed changes, the bill is almost 140 pages long. Among the numerous changes, six points are worth highlighting:

• Automated assessment: In the future, more suitable tax returns are to be selected for fully automated tax assessment by computer. Risk management systems will then assign only the cases that really need to be checked to the tax officials for manual assessment. In the case of automated assessment, the tax return will be checked just as intensively as before, but by software and no longer by a tax official.

• Calculation and spelling errors: If calculation or spelling errors occurred when completing the tax return, a subsequent correction of a final tax assessment was previously only possible in exceptional cases. In the future, the cancellation or amendment of tax assessments will be mandatory if the taxpayer made clerical or calculation errors when preparing his tax return and therefore failed to inform the tax office of legally relevant facts.

  

• Tax return deadlines: Those who do not have a tax advisor must submit their tax return within the first five months of the following year. There is no change to this deadline. However, the automatic extension of the deadline to December 31 of the following year for taxpayers with a tax advisor, which was previously regulated by a decree, is now anchored in the law and extended by two months to February 28 of the second following year.

• Delay Surcharge: Parallel to the change in the tax return deadlines, the regulations on the late surcharge have been revised. In the past, the tax office always had the discretion to assess the surcharge. In the future, the tax office will be obliged to assess a surcharge for late filing if no extension of the deadline has been requested and the tax return has not been received by the tax office 14 months after the end of the assessment period or taxation date. The amount of the late tax surcharge is also regulated in a binding manner. For each month or part thereof of delay, 0.25 % of the assessed tax, but not less than 50 euros, is due.

• Document submission: Document submission obligations are to be converted as far as possible into document retention obligations with risk-oriented requirements by the tax authorities. In the future, significantly fewer documents will have to be submitted to the tax office with the tax return. For example, donation receipts only have to be submitted to the tax office on request. In the case of donation receipts, the beneficiary organization can also report the donation directly to the tax authorities electronically with the consent of the taxpayer, which then also eliminates the document retention requirement.

• Electronic notices: With the consent of the taxpayer, correspondence is to be increasingly converted to electronic communication. This applies, for example, to notices of assessment, objection decisions and external audit orders, which can be made available for retrieval and announced in this way. Conversely, taxpayers will in future be able to transmit electronically not only the tax return itself, but also supporting documents and explanations.

• Data transmission: The legal framework for the electronic data transmission obligations of companies and organizations will be standardized. Only procedure-specific special rules for individual data transmission obligations of employers, social insurance carriers, insurance companies and banks will be regulated in the respective special laws.

• Principle of official investigation: The principles of proportionality, equality and legality previously applied to the principle of official investigation. In addition, the components of economic efficiency and expediency are now explicitly anchored in the principle of official investigation, which must guide the tax office in its actions.