Extended disclosure and correction obligations following an external audit (Section 153 (4) AO)
For taxes incurred after 31 December 2024, as well as for taxes incurred earlier for which an audit order is announced after 31 December 2024, there are extended notification and correction obligations for companies in accordance with Section 153 (4) of the German Fiscal Code (AO).
If an external audit has resulted in audit findings that have been implemented in final notices, companies must report and correct these facts in returns that were not subject to the external audit, i.e., for unaudited tax periods or types of tax, if they lead to a change in the basis of taxation.
As has been the case up to now, and will continue to be so, companies are obliged under Section 153 (1) AO to immediately report and correct any tax returns that are incorrect or incomplete and that may result or have already resulted in a reduction in tax if the company subsequently becomes aware of this before the expiry of the assessment period.
By Stefan Sperandio, Johanna Wolter und Sören Eling
Update on the (social security law) summary notice
In 2023, the German supreme tax court (BFH, VI R 27/20) ruled that employer contributions to a summary notice (Section 28f (2) of the SGB IV) do not constitute (taxable) wages for the employees concerned. In addition to the original "punitive nature" of the lump sum assessment, there is now also a certain incentive. However, a look at the case law on lump sum assessments shows that the legal requirements for their applicability do not necessarily favor this approach.
If an employer—regardless of fault—has not properly fulfilled its obligation to keep remuneration records for each employee and to store them in an orderly manner, and if as a result the insurance and/or contribution obligation and/or the contribution amount cannot be determined, the pension insurance institution conducting the audit may claim the total social security contribution from the sum of the wages paid by the employer.
However, it should be noted that there is a risk of administrative offense in this context. Anyone who intentionally or recklessly fails to keep or store remuneration records in violation of Section 28f (1) sentence 1 of the SGB IV is guilty of an administrative offense (Section 111 (1) No. 3 of the SGB IV). This can be punished with a fine of up to € 50,000 (Section 111 (4) of the SGB IV). The standard for proper recording is set out in Section 8 of the Contribution Procedure Regulation.
By Prof. Dr. Nikolaus Kastenbauer
Wage tax liability: No obligation of the tax office responsible for the permanent establishment to carry out a so-called shadow assessment in the event of incorrect wage tax withholding for employees with limited tax liability
Lower Saxony Tax Court (Judgment of April 16, 2025 - 9 K 155/22): Employers are liable for annual wage tax after the end of the year – not for the final income tax of their employees. Consequently, the tax office responsible for the permanent establishment is not obliged to carry out a so-called "shadow assessment." An appeal against the ruling is pending before the German Supreme Tax Court (Ref. VI R 8/25).
What was the issue?
The dispute centered on whether employer liability under Section 42d of the German Income Tax Act (EStG) for the past year is linked to annual wage tax (Section 38a (1) sentence 1 of the EStG) or to the employee's income tax, which may only be determined in the context of a (shadow) assessment.
What were the facts underlying the ruling?
A limited liability company (hereinafter: employer) employed two employees (a married couple) who were resident in the Netherlands and subject to limited tax liability in Germany. The wages were calculated according to tax class I, although tax class VI should have been applied due to the lack of/failure to retrieve ELStAM (electronic wage tax deduction features) data.
Following an external wage tax audit, the tax office responsible for the permanent establishment issued a liability notice for 2016–2019 (covering wage tax and ancillary taxes) due to the under-withholding of wage tax.
By Stefan Sperandio, Sven Rindelaub, Johanna Wolter und Silas Rosing
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