July 2026

VAT Evasion in the German Federal Court of Justice’s Recent Case Law

In its decision of 5 March 2025 – 1 StR 501/21, the German Federal Court of Justice (Bundesgerichtshof – BGH) still took the view that tax evasion relating to VAT advance returns and the corresponding annual VAT return constituted a single procedural offence within the meaning of section 264 of the German Code of Criminal Procedure (Strafprozessordnung – StPO). In its decision of 10 December 2025 – 1 StR 387/25, the First Criminal Division of the BGH expressly departed from that position. Two further decisions have since been issued, developing this change in case law.

A.     1 StR 388/25

In its decision of 4 March 2026 – 1 StR 388/25, the BGH examined in greater detail the relationship between VAT advance returns and the annual VAT return for the purposes of determining whether one offence is absorbed as an unpunished prior or subsequent offence.

As a general rule under substantive criminal law, the BGH gives precedence to the prosecution of tax evasion relating to the annual VAT return, with offences relating to the VAT advance returns being absorbed as prior offences. To date, the BGH has ruled on the following scenarios:

  • filing incorrect VAT advance returns followed by an incorrect annual VAT return (judgment of 13 July 2017 – 1 StR 536/16);
  • failure to file VAT advance returns followed by failure to file the annual VAT return (decision of 25 October 2018 – 1 StR 7/18);
  • failure to file VAT advance returns followed by the filing of an incorrect annual VAT return (decision of 25 July 2019 – 1 StR 556/18).

One scenario had remained unresolved: the filing of incorrect VAT advance returns followed by a failure to file the annual VAT return. This was the situation before the BGH in case 1 StR 388/25.

According to the BGH, in this constellation the tax loss caused by the active filing of incorrect VAT advance returns carries greater weight than the subsequent tax evasion by omission. The failure to file the annual VAT return therefore constitutes an absorbed subsequent offence. In other words, the BGH has recognised an exception to its previous approach to the concurrence of offences.

The BGH reasoned that, in this situation, the additional wrongdoing inherent in the failure to file the annual VAT return is limited to the taxpayer’s failure to return to tax compliance. Tax compliance had already been breached by filing the incorrect VAT advance returns. In the Court’s view, the tax loss had therefore already become final; the advance returns did not merely constitute an interim stage whose effect was subsequently consolidated by the failure to file the annual VAT return.

B.      1 StR 428/25

The BGH’s more recently published decision of 3 March 2026 – 1 StR 428/25 provides a concise illustration of the practical procedural consequences of this new line of case law.

The defendant was charged, inter alia, with tax evasion for failing to file the annual VAT return for 2021. However, the criminally enforceable obligation to file that return had been suspended under the nemo tenetur principle – the privilege against self-incrimination – pursuant to section 393(1) of the German Fiscal Code (Abgabenordnung – AO) and Article 6 of the European Convention on Human Rights (ECHR).

The reason was that the public prosecutor’s office had already initiated criminal investigations into suspected tax evasion relating to the VAT advance returns for the first two quarters of 2021. Filing an annual VAT return covering those quarters would therefore have required the defendant to incriminate himself.

The BGH expressly clarified that its revised approach to the concurrence of offences does not affect its established case law on the application of the nemo tenetur principle. The defendant therefore had to be acquitted of the charge of tax evasion based on the failure to file the annual VAT return.

In principle, the prosecution might instead have relied on the VAT advance returns, which – given that the annual VAT return could not be prosecuted – would not have been absorbed as prior offences. However, the charge could not simply be amended pursuant to section 265 StPO. Under the BGH’s revised case law, the VAT advance returns constitute separate procedural offences. Although they had formed part of the original investigation, they had not been included in the indictment; only the annual VAT return had been charged. Nor had the public prosecutor’s office filed a supplementary indictment pursuant to section 266 StPO.

C.     Practical implications

Since its decisions in cases 1 StR 39/25 and 1 StR 445/24 concerning the relationship between German tax assessment notices determining the tax base and consequential tax assessment notices, the BGH has increasingly focused on each individual act or omission relating to a tax declaration.

The Court applied the same approach to VAT in case 1 StR 387/25 and has now consistently developed it further in cases 1 StR 388/25 and 1 StR 428/25.

The precise act or omission covered by an investigation, an event interrupting the limitation period and, in particular, an indictment is therefore not merely a technical question concerning the concurrence of offences. It may ultimately determine whether the individual offence can be prosecuted at all.