Tax compliance: Avoiding risks, exploiting opportunities

Tax compliance means much more than merely meeting your filing requirements. An effective tax compliance system enables our clients, on the one hand, to achieve the lowest possible tax burden by means of tax optimization and, on the other hand, offers comprehensive protection against tax and criminal liability risks.

The importance of compliance issues in general and tax compliance in particular has steadily increased. The “Neubürger decision” of the Munich I Regional Court represents another aspect and a decisive turning point in liability issues. For the first time, a board member was sentenced to pay millions in damages to the company due to a deficient compliance system. According to the decision, a board member’s duties include to organize and supervise the company in such a way that it does not violate the law. Otherwise, he is liable – this is the clear statement of the judgment.

According to the reasons for the judgment, a board member only fulfills his obligations if he sets up a compliance organization focused on loss prevention and risk control. The mere existence of a compliance organization within the company is therefore not sufficient. It must also be possible to prove that the system is adequate, effective and functional.

Nowadays, incorporating a tax compliance component into this system is essential; however, many companies have not implemented such component, even if a general compliance system is in place.