Recipient naming

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Recipient designation in Germany refers to a procedure operated by the tax authorities on the basis of Section 160 of the Tax Code (AO). The taxpayer is asked to name the recipient of the payments . The designation of the recipient of payments is intended to ensure that expenses that are taken into account as tax-reducing for one taxpayer are taken into account as income by the recipient (so-called correspondence principle ). The sole purpose of § 160 AO is to prevent tax losses in Germany . These can arise because the expenses lead to a tax reduction for the payer, while the recipient remains unknown and the corresponding tax-increasing effect does not materialize.

Meaning of the regulation

Correspondence principle

The rule is based on the correspondence principle, according to which the expenses of one represent the income of another . Section 160 AO is intended to help implement this principle of correspondence.

In the literature , it is often questioned whether § 160 AO is required, as the general obligations to cooperate regulated in §§ 90 ff. AO have imposed extensive information and submission obligations on the taxpayer. The taxpayer can defend himself against these obligations to disclose the payee in sometimes lengthy legal remedy proceedings, and the tax authorities may even have to force the information through a penalty payment procedure. With § 160 AO, the legislator authorizes the tax authorities to carry out an assessment of evidence that is disadvantageous for the taxpayer in order to avoid a time-consuming obstruction of the tax assessment procedure. According to constant tax court case law, taxpayers have the burden of proof in the case of tax breaks anyway .

The provision therefore accelerates the tax assessment process and, with some cutbacks, serves tax supervision. By naming the recipient, the fulfillment of tasks in the tax administration should also be made more efficient and economical . In addition, the provision is of particular importance for the tax treatment of bribes, so-called no-invoice transactions as well as bogus transactions (sham transactions, e.g. in connection with bogus bills ).

Historical development

On the basis of an expert opinion by the Reichsfinanzhof , the Tax Adjustment Act of October 16, 1934, Section 205a was inserted into the Reich Tax Code with effect from January 1, 1935, and into the regulations on tax supervision. The official justification stated that “the deductible amounts are usually taxable by other people” .

At that time, the legislature saw the principle of correspondence as the most important purpose of the regulation. During this time, § 205a RAO also got its designation as a "bribery paragraph " . At that time, the legislature also took the view that Section 205a RAO would also pursue regulatory purposes. The aim was also to counter reprehensible business practices, in particular bribery payments and black market deals. Today, this purpose is only seen as a secondary purpose, since the deductibility of bribe payments as business expenses is already excluded in accordance with Section 4 (5) No. 10 EStG.

Historically, § 205a RAO was according to Tipke: “… no coercive means of a special kind with which the name of the recipient should be enforced. The regulation should also not allow double taxation . "

In 1977, § 205a RAO was adopted in the tax code as § 160 in a partially heavily modified form . With the law of December 19, 1985, Paragraph 2 was added to Section 160 AO. This regulates the right to refuse information for certain professional groups (e.g. clergy, lawyers, doctors, notaries, tax consultants) and came into force on January 1, 1987.

Systematics

Systematic position

The logical-systematic position of the standard within the tax code is of particular importance in its interpretation and application. Section 160 AO has been systematically incorporated into the regulations on tax assessment . From this position within the law it follows that § 160 AO does not establish any general or special duty to cooperate on the part of the taxpayer. The receiver designation is consequently not the determination of the tax basis of the taxpayer, but to prevent the creditor only the tax loss. The determination of the applicable tax claim that has arisen abstractly via § 38 AO is also not the subject of § 160 AO.

From the systematic position within the tax code it also follows that § 160 AO is not an amendment in the sense of the AO. With the exception of § 129 , § 164 and § 165 AO, the amendment regulations for tax assessments can be found from §§ 172 ff. AO and thus in the third subsection validity . § 160 AO allows the legal consequence of not being taken into account when naming the recipient. At the same time, the tax authorities must check whether this legal consequence can be implemented in the form of a changed tax assessment and whether a different tax may be assessed at all. Insofar as the notification to be changed has been issued subject to review , the tax assessment can be changed at any time via Section 164 (2) AO. In the case of a substantive and legally binding tax assessment, this can only be changed as far as §§ 172 ff. AO declare this to be permissible. A final tax assessment report on Section 175 (1) No. 2 AO (retroactive event) should be changed regularly . If the recipient was named before the initial tax assessment , this hurdle naturally does not apply and the tax authorities can allow the legal consequence to occur in the initial notification without further requirements.

Although that is standard no liability standard in terms of AO, but it is a "kind of strict liability 'attributed, since the taxpayer for not necessarily self-inflicted control hazard is liable. Furthermore, the regulation should not serve to punish taxpayers who act dishonestly in business dealings. Nevertheless, § 160 AO is assigned as a secondary purpose that such socio-politically undesirable practices are at least made more difficult. In addition, it again emerges from the position of the provision within the tax code that Section 160 AO is not a criminal or fine norm.

discretion

First level discretion (selection and decision-making process)

Although this is not clear from the wording of the regulation, § 160 AO contains a two-stage discretionary decision within the meaning of § 5 AO. In the first stage, the tax authority has a selection and decision-making process . At this stage, it has to decide, at its due discretion, whether it wants to ask the taxpayer to name the recipient.

If the taxpayer replies or has not given it, the tax authority has a legal consequence assessment on the second stage . The tax authority's discretion as to whether the expenses can be taken into account in terms of reason and amount is limited. If the recipient is named, a refusal of the deduction on the basis of § 160 AO is excluded. Failure to name this usually leads to a denial of the deduction. The word "regularly" (meaning: "as a rule") gives the tax authority a discretionary authorization to proceed differently in exceptional cases (so-called atypical cases).

Constituent elements

Burdens and expenses

From § 160 AO the following are finally recorded after enumerative listing:

Art meaning
Debt One-off obligation
Other loads Obligation to pay recurring burdens (e.g. pensions , usufruct )
Business expenses operationally induced expenses, cf. Section 4 (4) of the Income Tax Act
Advertising expenses Expenses for acquiring, securing and maintaining income, § 9 EStG
Other issues all (other) expenses that can be claimed to reduce taxes, e.g. B. Special expenses or extraordinary burdens

Section 160 AO wants to cover any type of tax-relevant burdens or expenses regardless of the type of tax . It should be noted here that Section 160 AO only covers the charges and expenses that are deductible according to the reason (so-called deduction according to the reason ), i.e. insofar as charges and expenses do not exist at all or are not to be taken into account according to the individual tax laws (e.g. B. due to the prohibition of deductions according to § 4 Abs. 5 EStG or: § 9 Abs. 5 EStG), these are not even covered by § 160 AO. The prohibition of deduction then results from the substantive tax laws.

Loss of tax at the creditor

Objective: to prevent tax losses

The first aim of § 160 AO is to avoid possible tax losses for the creditor. It follows from this that § 160 AO does not apply if a tax loss for the creditor is eliminated. Business expenses may only be reduced to the extent that they correspond to the tax loss for the creditor (deduction according to the amount). This can lead to a percentage reduction in the taxpayer's burdens and expenses. The calculation of the reduction is based on an (assumed) tax rate of the payee. In the opinion of the Federal Fiscal Court, any ambiguities are at the expense of the payer. The Federal Fiscal Court has also decided that if the recipient is not named, the refusal of the deduction is also lawful if the taxpayer has undoubtedly incurred the claimed business expenses.

A tax loss is ruled out if the recipient has set the income tax-increasing. Furthermore, a reduction may not be made if the payment does not increase tax for the payee (e.g. because the amounts received are below the basic tax-free allowance ).

In the case of transactions with unfair business conduct (so-called no-account transactions or undeclared work), with unusual payment methods (e.g. large-scale cash payments, payments to an account in a tax haven country and to foreign companies for domestic activities), the prevailing opinion is reasonable suspicion that failure to name the payee will result in a tax loss. Here it must be checked regularly whether a designation request can / should be made.

Designation requests

Second level discretion

A request for designation is the written request from the tax authorities to the taxpayer to name the recipient of a payment.

Designation request as an administrative act?

Failure to designate: denial of deduction

According to the case law of the Federal Fiscal Court , a request for designation is not an administrative act within the meaning of Section 118 AO, as there is no legal regulation in a specific individual case. The Federal Fiscal Court qualified the designation request as a preparatory act for tax assessment that cannot be challenged independently. In the context of this decision, the Federal Fiscal Court also stated that both stages of the exercise of discretion as a dependent part of the tax assessment can only be challenged with an objection (legal remedy) to the tax assessment issued on the basis of the recipient's name. Only in the objection procedure is the tax authority, and later possibly also the tax court, to check the legality of the designation request and the denial of the deduction. If the tax court determines that the request for designation made by the tax authority is illegal, it can itself make a legitimate request for designation.

In the literature, the prevailing opinion , which deviates from this , is that this legal regulation exists in a specific individual case, as a mandatory designation is necessary to protect against the legal consequences of § 160 AO. According to Klaus Tipke , however, this is a "particularly serious intrusion into the sphere of the taxpayer" . He further explains that a designation request contains a legal regulation, as it changes the legal position of the taxpayer. It is true that one cannot read a direct obligation from the law, but the request for designation creates obligations, since otherwise the legal consequence of refusal of the deduction occurs.

The dispute is irrelevant in practice and only of a theoretical nature, as the administration has adopted the opinion of the Federal Fiscal Court and stipulated it in the application decree of the tax code.

Requirements for a designation request

A formal requirement for the designation request is not stipulated in the law. For reasons of legal certainty , but especially for reasons of evidence, the tax courts have placed special requirements on a designation request in the course of the legal training . Because of the legal consequence of not being taken into account, the taxpayer must be able to unequivocally identify the legal basis of the request to name the recipient. As a rule, this is only possible with a written designation request. In addition, a written request for designation allows a later review by the tax courts and only enables a review of the sufficiently precise content required here. Last but not least, this enables the tax court to understand the discretionary considerations of the tax authority and to check whether the tax authority has correctly exercised its discretion. Even if the Federal Fiscal Court denies the designation request the character of an administrative act, it is nevertheless required to be sufficiently precise in terms of content within the meaning of Section 119 (1) AO.

Differentiation of designation requests from requests for information or submission

Sufficient specificity in terms of content within the meaning of Section 119 (1) AO (outflow of the requirement of specificity ) is required by requests for information or submission as well as by requests for designation. The principle of proportionality (purpose-means ratio: reasonable, necessary and achievable?) Must also be observed (so-called prohibition of excess ). This results from the rule of law anchored in the Basic Law . These requirements are specified in simple law in Sections 85 , 86 , 88 and 119 AO. The differences are far more serious:

Designation requests Requests for information or submission
Legal basis § 160 AO § 93 or § 97 AO
Position in law Rules on tax assessment general participation regulations
shape (usually) in writing informal
Administrative act within the meaning of the AO no administrative act Administrative act within the meaning of § 118 AO
independence dependent part of tax assessment Independent administrative act
Objection cannot be challenged independently Can be challenged according to § 347 Paragraph 1 No. 1 AO
Enforceability cannot be enforced enforceable and enforceable

Name of the recipient

When answering a designation request, the payee must be named precisely so that the tax authorities can carry out proper taxation for the recipient without great difficulty. According to established tax court case law, these include:

  • full name (of the payee)
  • address
  • Information on the type of services or the subject of the business relationship
  • Information on the date of payment and payment method

The term “recipient” in the sense of the standard is generally understood to mean the economic end recipient . If people are interposed who have not provided the services themselves (e.g. installation of a straw man so that they do not have to appear as a provider to the tax office), the recipient of the payment is deemed to be the person to whom the payment was ultimately received. The name and address of the person named are decisive at the time the service is provided. Subsequent changes are not at the expense of the taxpayer.

Right to refuse to provide information

It should be noted that Section 160 (2) AO refers to Section 102 AO and thus to the right to refuse information to protect certain professional secrets . As a result, there is no obligation to name the recipient for certain professionals who are legally entitled to refuse information. If a professional asserts his refusal to provide information, the legal consequence of not considering expenses may not occur.

Whether and to what extent general statutory rights to refuse information are affected in the context of naming the recipient is not sufficiently codified by law. It can only be inferred from Section 160 (2) AO that the rights to refuse to provide information for the protection of certain professional secrets and the purpose of the provision do not conflict. Frotscher is of the opinion that other rights to refuse to provide information, in particular those according to § 101 and § 103 AO, are not covered by § 160 AO, as there is a lack of sufficient reference. Different views are represented in the literature. Among other things, it is argued that the rights to refuse to provide information should be extended to Section 103 AO, as the rights to refuse to provide information as a principle of fair proceedings arise directly from the rule of law and must also be observed accordingly in taxation proceedings . Since the taxpayer would expose himself to criminal prosecution if the recipient of the payment were named accordingly, he has the right to refuse to testify under both § 103 AO and § 55 StPO. In this case - if the tax authority makes use of § 160 AO with knowledge of the possible criminal prosecution - there could be a non-discretionary designation request.

In the case of a taxpayer who is not a professional and who invokes his general right to refuse to provide information, strict liability in the form of non-consideration can nevertheless arise - unlike in the case of professionals. If the taxpayer invokes the right to refuse to cooperate, he can no longer be required to be named, but must allow the legal consequence in the form of non-consideration to apply against him.

If there are indications of criminal or fined bribery , the name of the recipient must always be requested. Here the discretion of the tax authorities is reduced to zero by the application decree for the tax code . However, the taxpayer should be instructed that he or she has the right to refuse to testify, as the tax authorities are obliged to inform the public prosecutor's office according to Section 4 (5) No. 10 of the Income Tax Act. The right to refuse to testify follows from the prohibition of the compulsion to incur criminal or fines and possibly also from § 393 AO. In doing so, the Federal Ministry of Finance has effectively extended the general right to refuse information to include the name of the recipient.

Right of the tax authority to determine the facts

Section 160 (1) sentence 2 AO expressly states that the right of the tax authorities to determine the facts of the matter remains unaffected. By law, there is only the right of the tax authorities to determine the facts, but not the obligation. Whether and with what means the tax authorities clarify the matter is at their dutiful discretion. The tax authority can therefore determine the facts independently (e.g. in the context of a request for information or an external audit ) or use the name of the recipient. As a rule, the tax authorities are exempt from the obligation to carry out their own investigation when applying Section 160 AO. Time-consuming investigations of the payee are not necessary, since the principle of official investigation is partially restricted by the regulation. The legality principle standardized in § 86 AO can result in a reduction in discretion to zero. In this case, based on the principle of official investigation according to § 88 AO, the tax authority is obliged to identify the recipient in addition to the procedure. The regulation entitles the tax authorities to clarify the facts with their own means and to dispel doubts in cases where there are reasonable doubts about the correctness of the information provided by the taxpayer.

Payments abroad

Section 160 AO only applies to tax losses in the Federal Republic of Germany . The regulation only protects German tax interests. If it is known with sufficient certainty that a payment has reached a recipient who is neither subject to unlimited nor limited tax liability in Germany, Section 160 AO is consequently not applicable.

The taxpayer has to prove that the payments have actually flowed abroad and that the payee is not taxable in Germany. Since the tax authorities abroad are not allowed to take any sovereign measures due to the territorial sovereignty of the other state, the taxpayer is subject to increased obligations to cooperate in foreign matters through Section 90 (2) AO .

Legally problematic are those cases in which the payments have reached a so-called domiciliary company or a letterbox company based abroad . Although these are legally existing companies, they are not or are not allowed to carry out their own business activities in their country of domicile (mostly tax haven countries) (so-called offshore companies ). The task of this company is to shield the real payee.

According to established case law, in such cases it is not the domiciliary company that is the recipient of the payment within the meaning of Section 160 AO, but the person to whom the payment was ultimately made. As far as the economic final recipient of the payment is a tax resident, § 160 AO is applicable. It is therefore not sufficient to simply name the legal representatives of the domiciliary company, as these are not the people behind the company. If it is obvious that the domiciliary company is not the ultimate recipient of the payments, it is usually not sufficient to name this domicile company as the payee (e.g. because the domiciliary company was unable to provide the services due to a lack of staff). The person who performed the services for or on behalf of the domiciliary company and to whom the payments were ultimately made must be named.

If the taxpayer has a business relationship with such a company, the tax authority has to send a request to the Information Center Abroad at the Federal Central Tax Office (BZSt). The foreign company is legally qualified there, which can be brought in as evidence by the tax authorities in the tax court proceedings. Since the information from the BZSt is based on a collection of facts, these must be assessed accordingly by the tax court when taking evidence. However, the legal qualification by the Federal Central Tax Office has no direct legal effect; Incorrect factual findings by the BZSt can be refuted.

In cases in which the taxpayer does not know or cannot name the ultimate recipient of the payments, he must expect a reduction in the deduction. If the taxpayer has been misled about his business partner and thus also about the payee, the tax authorities have the option of partially or fully allowing the deduction despite not being named. Here, the taxpayer can be expected to provide evidence if he can see that he has a business relationship with a domiciliary company.

The naming of a participant does not have to suffice to answer a request for naming if the alleged recipient of the payment is a non-resident taxpayer and, according to information from the International Information Center, he is known to work for several domiciliary companies. Here, in the opinion of the Federal Fiscal Court, the presumption arises that this non-resident taxpayer is only acting in trust .

bibliography

Individual evidence

  1. ↑ a b BFH judgment of March 10, 1999, BStBl. II 1999, 434 or AEAO to § 160 No. 4.
  2. ↑ Ax / Große / Melchior, Tax Code and Tax Court Code (Blue Series), p. 237, margin no. 1056.
  3. ↑ AEAO to § 160 No. 3; Lammerding, Tax Code and Tax Court Code (Green Series), p. 191.
  4. ↑ inserted by Section II § 21 Tax Adjustment Act of October 16, 1934, RGBl 1934 I, p. 925.
  5. ↑ a b Tipke, Commentary on the Reich Tax Code, p. 655 f.
  6. ↑ Tipke / Kruse on § 160 margin no. 4th
  7. ↑ a b Lammerding, Tax Code and Tax Court Code (Green Series), p. 192.
  8. ↑ AO liability norms in the fourth section Liability , §§ 69–77 AO.
  9. ^ Lammerding, Tax Code and Tax Court Code, p. 192; Wedelstedt / Kühn AO § 160 margin no. 4, also note: Penalty and fine regulations of the tax code can only be found in the eighth part of the AO penalty and fines regulations , there especially in the first and second part.
  10. ↑ BFH judgment of November 25, 1986 - VIII R 350/82 - BStBl. 1987 II p. 286.
  11. ↑ BFH judgment of August 9, 1989, Federal Tax Gazette. 1989 II p. 995, 1996 II, p. 5 1.
  12. ↑ BFH judgment of June 14, 2005 - BFH / NV 2005, 2161.
  13. ↑ BFH judgments of August 9, 1989 IR 66/86, BFHE 158, 7, BStBl 1989 II p. 995
  14. ↑ BFH of June 24, 1997 VIII R 9/96, BFHE 183, 358, BStBl 1998 II p. 51.
  15. ↑ BFH judgment of April 20, 1988 - IR 64/84 - BStBl. II p. 927.
  16. ↑ Lammerding, Tax Code and Tax Court Code (Green Series), p. 192.
  17. ↑ Ax / Große / Melchior, Tax Code and Tax Court Code (Blue Series), p. 237, margin no. 1070.
  18. ↑ BAEAO on § 160 No. 1 second paragraph.
  19. ↑ Lower Saxony Finance Court, judgment of March 31, 2005, Az. 6K 24/99, accessed on July 29, 2010 (doc; 78 kB).
  20. ↑ for example: BFH, BStBl. 1987 II, p. 286 481, 1996 II p. 51 BFH / NV 1996 p. 801, BMF, DB 1990, p. 201.
  21. ↑ BFH judgment of November 30, 2004 - BFH / NV 2004, 919.
  22. ↑ Kühn and Wedelstädt, AO comment, § 160, margin no. 27.
  23. ↑ Tipke / Kruse on § 160 margin no. 18th
  24. ↑ Frotscher in Schwarz, commentary on the AO to § 160, margin no. 35 .; also Wedelstedt / Kühn, AO § 160 margin no. 28
  25. ↑ a b Beermann & Gosch, AO comment on § 160 margin no. 40.
  26. ↑ AEAO to § 160 No. 1 Paragraph 1 S. 2
  27. ↑ BMF letter 10 October 2002, BStBl. I 1031, margin no. 30, accessed on July 29, 2010 (pdf).  ( Page no longer available , search in web archives )  Info: The link was automatically marked as defective. Please check the link according to the instructions and then remove this notice.@1@ 2Template: Toter Link / www.bundesfinanzministerium.de  
  28. ↑ Tipke / Kruse on § 160 margin no. 23.
  29. ↑ a b so Ax / Große / Melchior, Tax Code and Tax Court Code (Blue Series), pp. 243–244, margin no. 1080.
  30. ↑ a b Ax / Große / Melchior, Tax Code and Tax Court Code (Blue Series), p. 244 margin no. 1081.
  31. ↑ BFH judgment of August 12, 1999, BFH / NV 2000, p. 299.
  32. ↑ BFH judgment of August 25, 1986, BStBl. II 1987, p. 481.
  33. ↑ BFH judgment of November 25, 1999, BFH / NV 2000,677.
  34. ↑ Apitz, Die Steuerliche Betriebsprüfung, Issue 4/2003, pp. 104-105.
  35. ^ BFH judgment of October 17, 2001, BFH / NV 2002, p. 609.
  36. ↑ BFH judgment of April 1, 2003, DStR 2003, 1340.