Suddenly in the sights of the tax investigation: Across Germany, private individuals are now receiving unpleasant mail. Because the tax offices check the tax returns for the years 2012 to 2014 to see whether income from rentals via Airbnb was reported.
The lucrative business of being a host.
Over the years, sharing platforms have enjoyed great popularity among private individuals in all areas, thus changing the market. On the online platform Airbnb, private individuals can easily become hosts and offer their private apartment or individual rooms. By renting out to tourists or travelers, hosts can reduce their own costs or simply earn a little extra. Especially in touristically attractive areas or in the big cities, the demand is huge and seen over the entire year, something comes together quickly. In most cases, users are not aware that this is income that is relevant under income tax law. A declaration of the income is then usually omitted.
Tax Investigation vs. Airbnb.
This bothered the Hamburg tax office. In the Hanseatic city, rentals via Airbnb were increasing rapidly, while the revenues generated were not declared by many Hamburg residents. Upon request, Airbnb initially refused to hand over user data, citing the GDPR. A special unit of the tax office then sued the online portal in 2018 at their place of business in Ireland. After a legal dispute, an Irish court ordered Airbnb to hand over the data of users (hosts) registered in Germany for the years 2012 to 2014. In September 2020, the tax administration received the data and began evaluating it. Since the beginning of 2021, the first data sets have been evaluated and are available to local tax offices. They are now making hospitable taxpayers aware of their rental activity at the time. For example, the Berlin administration received 10,000 data records.
Taxable rental income.
In fact, income from occasional subletting of one’s own home is also income from renting and leasing, which must be reported in the income tax return under Annex V. Many private individuals are subject to a widespread error when they assume that their income is covered by the so-called tax allowance. First, the tax office determines all the taxpayer’s income on the basis of the tax return and then, in a second step, deducts the tax-free amount from the total income. It is therefore not possible to apply the tax-free amount to individual types of income. Only an annual exemption limit of 520 euros exists for taxpayers for rental income.
Consequences under criminal tax law.
Anyone who has made incorrect or incomplete statements to the tax authorities about tax-relevant facts – such as rental income – or who has failed to inform the tax authorities about tax-relevant facts in breach of duty, is exposed to the risk of having committed tax evasion pursuant to Section 370 (1) AO (German Fiscal Code). In the event of a conviction, there is a risk of a fine or imprisonment, whereby the specific penalty depends on various factors, including the amount of the tax loss.
The tax investigation office first notifies the taxpayer that an investigation has been initiated against him or her on suspicion of tax evasion and opens the opportunity to comment on the allegations.
If the taxpayer remains silent, a penalty order is often issued against him or her, which sets a fine and is equivalent to a conviction in a criminal court. In the case of a first-time fine over 90 daily rates or two-time convictions, this is entered on the criminal record and the person is considered to have a “criminal record.” In addition, the responsible tax office will demand the taxes plus interest and late fees.
Possibilities for action
In order to avoid unpleasant consequences under criminal tax law, it is important to take action in good time.
In criminal tax law, there is in principle the possibility of a self-disclosure in accordance with Section 371 of the German Fiscal Code (AO). This is subject to special conditions, including that all types of tax from the last 10 to 14 years must be fully corrected. A voluntary declaration is blocked if the tax authorities have already initiated investigations. Nevertheless, a voluntary disclosure can have a penalty-reducing effect in favor of the taxpayer. In addition to the voluntary disclosure, individual reasons can also be presented to show that the taxpayer did not act intentionally.
The decisive factor is (often) to take the initiative. As expected, the processing of cases will drag on. This means that taxpayers can act now and correct tax returns or file a voluntary disclosure before the tax office gets in touch. If a letter has already been received, criminal or non-criminal consequences can still be reduced or avoided if qualified comments are made on the allegations.
The law firm H2W Criminal Law specializes in the defense of criminal tax cases. The aim is to control the tax proceedings and the (tax) criminal proceedings in equal measure and to provide you with optimal tax advice and criminal defense.