Customs debt and liability

Customs debt and liability

Liability for customs or tax evasion

The taxpayer must pay the taxes/duties actually incurred. The taxation procedure runs independently and on an equal footing with the criminal tax procedure. The obligation under tax law to file tax returns and to cooperate in the taxation proceedings remains in effect, since the rights and obligations of the taxpayer in both proceedings are governed by the respective applicable regulations pursuant to Section 393 (1) of the German Fiscal Code (AO). However, once the criminal proceedings have been initiated, the tax obligations can no longer be enforced by means of coercive measures pursuant to Section 393 (1) sentence 3 AO. The consequence of a lack of cooperation can, however, be the estimation of the bases of taxation in accordance with § 162 AO. Even if so-called penalty estimates are inadmissible (see BFH BStBl. II 2001, 381), considerable pressure can be exerted on the accused on the basis of § 162 AO. In addition, the obligation to submit correct (also incriminating) tax returns for subsequent periods may give rise to a risk of self-incrimination.

The evaded taxes are subject to interest of 0.5 percent for each full month in accordance with §§ 235, 238 AO. The interest is not tax deductible (Sec. 4 (5) Sentence 1 No. 8a EStG, Sec. 12 No. 3 EStG, Sec. 10 No. 2 KStG).

According to § 69 AO, the persons named in §§ 34, 35 AO are liable for tax evasion by the taxpayers they represent. The liability therefore concerns the legal representatives of natural and legal persons (AG board of directors, GmbH managing directors, etc.) and the managing directors of unincorporated associations of persons and estates (§ 34 para. 1 AO) as well as the person who acts as a person authorized to dispose of property in his own name or in the name of a third party insofar as he can legally and actually fulfill the duties of a representative named in § 34 para. 1 AO.

Anyone who is not himself liable for tax can be held liable in accordance with Section 71 AO. According to this, anyone who commits tax evasion or participates in such an act is liable for the evaded taxes or unlawfully granted tax benefits as well as the evasion interest pursuant to Section 235 AO. This may concern, for example, the tax advisor who provides (even only psychological) assistance to the tax evader. Liability according to § 69 and 71 AO can exist in parallel.

Liability in kind for import and export duties and excise taxes

For import and export duties, as well as excise duties, the liability in kind according to § 76 AO (Tax Code) applies. This is intended to secure the public-law tax claim for goods subject to import and export duties and excise duties. Liability in kind can be compared to a lien on property.

The liability in kind creates a legal relationship under public law which entitles the tax authority to hold on to the goods without regard to the private rights of third parties in respect of import and export duties and excise duties, to enforce payment of tax debts by detaining them and, in order to secure this right, to prevent the actual disposal of the goods by third parties. In addition, the tax authority is authorized to satisfy itself by auctioning the goods.

However, the provision of Section 76 AO is applicable only if there are no provisions in the Union law (in particular the provisions of the Union Customs Code) regulating this matter. Accordingly, the provision of the Tax Code is only applicable insofar as Union law has not made any provision, is incomplete in comparison with the Tax Code, uses undefined legal terms, grants the customs authorities discretion, refers to national law or grants the customs authorities a regulatory power. Pursuant to Article 113 of the Union Customs Code (Article 232(1)(a) of the Customs Code), the customs authorities must use all the means at their disposal to obtain payment of import or export duties. However, the provision of Section 76 AO only applies to the extent that the customs authorities are not already entitled under the provisions of the Union Customs Code to seize and dispose of the goods. Such provisions are, for example, Art. 147 (4) (1), (2), Art. 198 (1), (2) Union Customs Code (Art. 53, 57 and 75 Union Customs Code). If the requirements of these provisions are met, there is no need for recourse to Section 76 AO.

Pursuant to Art. 76 (2) AO, the liability in kind arises in the case of goods subject to import and export duties when they are brought within the scope of this law, i.e. when they are brought into the territory subject to the sovereignty of the FRG. Linguistically, this only fits for import duties, since for goods subject to export duties, the duty is triggered by leaving the area of application of this law. In the case of goods subject to excise duty, the liability in kind arises when the goods are brought within the scope of this Act, when they begin to be extracted or when they begin to be manufactured. The time of incurrence of the customs debt is different from the time of incurrence of the liability in kind. The time when the customs debt arises for individual goods is regulated in Articles 77 to 87, 101 (1), (2) of the Union Customs Code (201 to 216 of the Code). The consequence of these different points in time is that the liability in kind according to § 76 AO can arise even before the customs and excise debts arise.

As long as the import and export duties have not been paid, the tax authorities can impose seizure on the goods that are subject to material liability, Section 76 (3) AO. The tax debt (customs debt) need not yet have arisen. The seizure is effected by the tax authority obtaining custody of the goods, e.g. by removal, storage, application of locks, seals, etc. It may also be sufficient for the tax authority to seize the goods. It may also be sufficient to prohibit the person who has custody of the goods from disposing of them, Section 76 (3) sentence 2 AO. This prohibits the recipient of the injunction from having an actual effect on the goods, from removing, destroying or altering them. Permissible, on the other hand, are dispositions of a legal nature that do not change the condition of the goods (e.g. transfer of ownership by way of security). The seizure is at the discretion of the tax authority. Accordingly, the principle of proportionality dictates that seizure should only take place if there is a concrete reason to believe that the tax claims will not be fulfilled or that their recovery is at risk. The seizure may be averted by payment of the tax debt. However, seizure under Section 76(3) must be distinguished from seizure by the tax authority in criminal tax proceedings under Section 399(2) sentence 2 AO in conjunction with the provisions of the Code of Criminal Procedure.

Section 76 (4) AO conclusively lists the reasons for the expiry of liability in kind. Accordingly, the liability in kind expires with the tax debt. According to § 47 AO, claims arising from the tax debt expire in particular through payment, set-off, remission and limitation. The extinction of the customs debt is regulated in Article 124 of the Union Customs Code (Articles 233 and 234 of the Customs Code). Accordingly, the customs debt is extinguished e.g. by payment of the amount of duty, remission of the amount of duty, invalidation of the customs declaration, lapse of time, seizure in the event of simultaneous or subsequent confiscation, destruction permitted by the authorities and accidental documents. Furthermore, the liability in kind expires when the seizure is lifted. In addition, the liability in kind expires if the goods are "transferred to a non-tax restricted traffic" with the consent of the tax authorities. This is the case for goods subject to import duties according to Article 201 of the Union Customs Code (Article 79 (1) of the Customs Code) when they are released for free circulation.

As a rule, the goods are disposed of by public auction (Section 327 sentence 2 in conjunction with Section 296 AO). However, it is also possible to liquidate the goods by private sale. The liquidation must be ordered in writing by the tax authority. Realization may only take place if the enforcement debtor has been notified of the intention to realize the assets and at least one week has elapsed since the notification.

The person concerned can lodge an objection against the seizure and against the order to liquidate the assets in accordance with Section 347 of the German Fiscal Code (AO) and file an action with the Tax Court against the decision rejecting the objection.