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Informant offers to sell names of tax dodgers

A secret informant has offered to sell the German taxman the names of 1,500 Germans who have funds hidden in Switzerland, a newspaper reported Saturday.

Published: 30 January 2010 18:29 CET

Informant offers to sell names of tax dodgers

Photo: DPA

The daily Frankfurter Allgemeine Zeitung said the unnamed whistleblower had supplied details of five accounts worth some €1 million ($1.4 million) in tax as proof and demanded €2.5 million for the full list.

The paper quoted a tax official as confirming that the five accounts had been checked and said the finance ministry was considering the proposed deal.

“It’s now too late for these five to own up,” the official told the daily.

The German Finance Ministry declined to comment on the report while a Swiss Finance Ministry spokesman, Roland Meier, said Bern was waiting to see what Berlin expected.

If confirmed, the affair deals a new blew to Switzerland’s jealously-guarded banking secrecy which is under siege from several quarters. On Wednesday Swiss Finance Minister Hans-Rudolf Merz said Switzerland and France had resolved a spat over data stolen from the Geneva branch of banking giant HSBC.

He said that among other things France had agreed to send copies of the stolen data, concerning some 3,000 French citizens, to Switzerland, and promised not to transmit it to other countries.

Last year the former German finance minister, Peer Steinbrück, called on the Organisation for Economic Cooperation and Development (OECD) to put Switzerland on its black list of tax havens.

Switzerland was placed on the “grey list” of uncooperative countries but agreed to follow OECD rules on tax matters and end a distinction it made between tax evasion and fraud. It has since signed a separate agreements with a dozen countries on exchange of tax information, though not all have been ratified.

In a government-brokered settlement for charges of tax fraud in the United States, Switzerland’s banking flagship UBS last year agreed to hand over details of about 4,450 clients and US taxpayers to US authorities.

But last week a Swiss court upheld an appeal by one taxpayer against the transfer, saying the deal could not take precedence over the existing Swiss-US dual taxation agreement.

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EXPLAINED: Do I have to declare income from foreign sources on my German tax return?

If you’re filling in a German tax return, you are generally legally required to declare and pay tax on all income you earn – wherever in the world you earn it. This is true even if you keep the money abroad.

In most cases, your worldwide income is subject to what’s called “unlimited tax liability” – which means that there’s no exemptions or discounts on your taxes for money earned abroad – whether its from work or capital gains like the sale of stocks. This is generally even true if Germany doesn’t have a Double Taxation Agreement (DTA) with the other country in question.

If, however, Germany does have a DTA – some of your tax might end up getting limited in Germany. This is generally providing that you’ve paid it in the other country.

For example, the US may apply a withholding tax to payments made to you for freelance services you provide in the US, for example. In this case, the DTA between Germany and the US would allow you to submit documentation proving that you’ve already paid tax on this payment in the US. That’ll prevent you from having to pay tax again in Germany on the amount that actually gets wired to your account.

READER QUESTION: How can I find a German tax advisor?

Who has a double taxation treaty with Germany?

Germany has concluded double taxation agreements with numerous – but not all – countries and territories. You can check out the German government’s dropdown menu here to see which countries are on the list.

German residents earning money in other EU countries should still check this list, as certain tax provisions may be unique to the two countries in question.

READ ALSO: Everything you need to know about paying taxes in Germany

What about rental income?

As a general rule, rental income is taxed in the country where the property is located, meaning you don’t have to declare or pay it in Germany. There are some notable exceptions – for example if the property is located in Spain. In this case, you would report this income in Germany.

What about inheritance?

Some double taxation agreements have clauses that specifically govern what tax rules there are around inheritance that a German resident might get from abroad.

In general, the inheritor will still have to pay inheritance tax in Germany, but could see their tax liability reduced if tax already has to be paid abroad.

There are also other exceptions possible, such as if a child receives a property in their parent’s will and then proceeds to live in it for at least 10 years after they acquire it. In this case, they may not need to pay any tax on it.

In certain complicated cases – or if you have any doubt – it may be a good idea to seek out the services of a professional tax advisor who can make sure you don’t get in trouble with the Finanzamt (tax office).

READ ALSO: Do foreigners owe tax in Germany on money that is inherited from overseas?

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