Asset forfeiture in tax criminal law

Asset forfeiture in tax criminal law

The Act on the Reform of Criminal Asset Recovery has been in force since 01.07.2017. With this law, which makes fundamental changes to the Criminal Code and the Code of Criminal Procedure, the legislature is pursuing the goal of simplifying the law of asset recovery, facilitating the provisional seizure of assets and enabling the subsequent recovery of assets (BT-Drucks. 18/9525 p. 48).

The legislator's comprehensive approach to reform is to be underscored by replacing the term "forfeiture" with "confiscation." In addition, this is intended to align German law with the terminology commonly used in European Union law ("confiscation") - also in order to reduce difficulties in understanding cross-border asset recovery in international mutual legal assistance. Also new is the term "asset freeze", which replaces the previous "attachment in rem".

The gross principle of forfeiture, which is already in force but not uniformly applied by the senates of the Federal Court of Justice (BGH), is defined more precisely. The view of the 1st Senate of the BGH, which applies the gross principle without any restriction, in contrast to the 5th Senate, has prevailed.

Confiscation

If an unlawful act has been committed and the perpetrator or participant has obtained something for the act or from it, the court shall order its confiscation (Section 73 (1) sentence 1 StGB). What is obtained from tax evasion are the evaded taxes (BGH wistra 2010, 406). If the "something" obtained is no longer originally present in the possession of the person committing the crime, or if it cannot be surrendered due to its nature, the court shall order the confiscation of a sum of money corresponding to the value of what has been obtained (Section 73c sentence 1 StGB, confiscation of the value of the proceeds of the crime).

In the case of confiscation of assets, several perpetrators and/or participants in tax evasion are liable as joint and several debtors, i.e. each is liable for the entire amount (BGH NStZ 2011, 295 = wistra 2011, 101). By means of the representative clause of Section 73b (I) No. 1 StGB, confiscation is also possible against third parties for whom the offender has acted.

Finally, confiscation may also be ordered against a third party if the thing obtained was transferred to him free of charge or without legal reason or if he realized or should have realized at the time of the transfer that the thing obtained resulted from an unlawful act (Section 73b (I) No. 2 StGB). Via Section 73b (I) No. 3 of the Criminal Code, this also applies if the acquired property has passed to him as heir or has been transferred as beneficiary of a compulsory portion or legatee.

Objects which have been produced by an intentional criminal act or have been used or intended for its commission or preparation may be confiscated (Section 74 of the Criminal Code). If the person involved in the offense has thwarted confiscation (in particular by selling the object), confiscation of a corresponding sum of money may be ordered (Section 74c of the Criminal Code).

In addition, confiscation is possible in cases of tax evasion, breach of the ban and tax evasion in accordance with Section 375 (II) of the German Fiscal Code (AO). The confiscation may extend to the products, goods and other objects to which the evasion of excise duty or import and export duties within the meaning of Article 5 No. 20 and 21 of the Customs Code of the Union, the ban offence or tax evasion relates, and the means of transport used for the offence.

Section 76a (4) of the Criminal Code contains a significant innovation. The provision makes it possible to confiscate assets (independently) irrespective of proof of an unlawful act if the court is convinced of their illegal origin. The legislator also provides criminal judges with the new Section 437 of the Code of Criminal Procedure on how to convince themselves of an illegal origin: "When deciding on independent confiscation pursuant to Section 76a (4) of the Criminal Code, the court may base its conviction that the object derives from an illegal act in particular on a gross disproportion between the value of the object and the lawful income of the person concerned." This refers not only to income as defined in Section 2 of the Income Tax Act, but also to other inflows of assets such as gifts, inheritance or, for example, a lottery prize.

The decisive factor for ordering the measure is whether the court can be convinced that an act of the catalog of Section 76a (4) sentence 3 StGB has been committed. From criminal tax law and customs criminal law in the broader sense, the qualified smuggling of § 373 AO, intentional offenses under §§ 17 and 18 of the Foreign Trade and Payments Act, as well as offenses under the Weapons Act, the War Weapons Control Act and the Narcotics Act are listed here.

Procedural safeguarding of confiscation

Items subject to forfeiture or confiscation are seized in accordance with sections 111b(1) in conjunction with 111c of the Code of Criminal Procedure. The securing of the confiscation of the value of the proceeds of crime, which is predominant in criminal tax proceedings, is carried out by means of the property attachment pursuant to Section 111e of the Code of Criminal Procedure. This includes, in particular, the seizure of bank accounts, the seizure of movable property (e.g. jewelry, cars) and the compulsory security mortgage. The person concerned can suspend the execution of the attachment by depositing a sum of money (Section 111g (I) sentence 2 StPO). However, the fixed monetary amount is regularly too high, particularly in criminal tax law, to be raised by the person concerned.

The old time limit provision of Section 111b (3) of the Code of Criminal Procedure, according to which the attachment in rem was in principle to be lifted after 6 months at the latest if there were no urgent reasons, and the court was not allowed to extend the duration of the measure to 12 months at the request of the public prosecutor's office, has been dropped without replacement as a result of the legislative reform. Nevertheless, the general principle of proportionality also applies here, so that significant time deviations from the old legal situation are likely to be unlawful.

Another possibility of "pre-trial detention for money" (Quedenfeld/Füllsack-Bach, Verteidigung in Steuerstrafsachen, 4th ed., marginal no. 764) for the tax authorities is the arrest in rem under tax law pursuant to Sec. 324 AO. It serves to secure claims arising from the tax law relationship. In order to determine the amount of the arrest claim, the bases of taxation may be estimated in accordance with Section 162 AO (No. 71 (2) AStBV [St] 2017). The seizure of assets under criminal law and the seizure of assets in rem under tax law are on an equal footing (Section 111e (6) of the Code of Criminal Procedure).

Legal remedies against the securing of property seizure
An appeal pursuant to Section 304 of the Code of Criminal Procedure is admissible against the order of the asset freeze under criminal procedure. A further appeal pursuant to Section 310 (1) No. 3 of the Code of Criminal Procedure is admissible against a negative appeal decision if the asset freeze was ordered for an amount exceeding EUR 20,000. The person concerned may apply to the court at any time for a decision against measures taken in execution of the seizure or attachment (Section 111k (3) of the Code of Criminal Procedure).

The legal remedies under tax law are available against the seizure order under tax law. The objection pursuant to Sections 347 et seq. AO and the jump action pursuant to Sec. 45 (4) of the German Fiscal Court Code (FGO). In the absence of a suspensive effect of the legal remedies, it is necessary to apply for a stay of execution of the attachment order pursuant to Sec. 361 (2) AO and Sec. 69 FGO.