Settlement taxation in a fraudulent Ponzi scheme

Even if the fraudulent provider of a pyramid scheme has not paid the flat rate withholding tax to the tax office, investors can still rely on the flat rate effect of the deduction.

Capital income from feigned profits under a Ponzi scheme is also taxable if the investor can dispose of it and the provider is willing and able to perform at that time. This also applies if the Ponzi scheme collapses at a later date and the investor loses his money. In addition to this long-standing case law, the Federal Fiscal Court has now ruled that the subjective view of the investor is not only decisive in the taxation of the bogus returns, but also in the question of whether the final withholding tax withheld by the operator covers the tax liability of these returns.

If the investor could assume that the bogus returns were subject to tax deduction, the income tax is thus settled. This also applies if the fraudster did not declare the tax to the tax office and pay it over. In this case, however, the investor has received the full amount of the bogus returns for tax purposes, i.e. including the withheld capital gains tax.