Germany’s Federal Court of Justice (BGH) ruled on 10 December 2025 that incorrect, incomplete, or omitted VAT advance returns and the corresponding annual VAT return for the same tax period constitute separate procedural acts for criminal-law purposes, abandoning its previous jurisprudence that treated them as a single procedural act (case 1 StR 387/25).
Background
The case concerned the de facto managing director of a GmbH involved in a VAT carousel fraud scheme in 2014. Following a tax investigation, the company submitted late VAT advance returns for April through September 2014 that claimed input VAT deductions to which it was not entitled. A subsequent annual VAT return for 2014, filed in June 2016, contained the same incorrect deductions.
The Regional Court convicted the defendant based on the incorrect advance returns. On appeal, the BGH examined, among other issues, the relationship between VAT advance returns and the subsequent annual VAT return.
Decision
The BGH held that VAT advance returns and annual VAT returns are separate procedural acts under German criminal procedure law. According to the Court, the two declarations are part of independent tax assessment procedures and are not so closely linked that they must be treated as a single procedural act.
In reaching this conclusion, the Court expressly abandoned its previous case law, under which VAT advance returns and the annual VAT return for the same tax year were generally regarded as one procedural act.
The Court also clarified that individual VAT advance returns within a tax year are themselves separate procedural acts.
Practical implications
The decision primarily affects tax criminal proceedings and procedural matters. Prosecutors and courts must now treat VAT advance returns and annual VAT returns as distinct procedural acts when determining the scope of an indictment and criminal liability.
However, the BGH confirmed that incorrect VAT advance returns will generally continue to be treated as co-punished prior acts where a subsequent incorrect annual VAT return is prosecuted. As a result, the ruling does not automatically lead to multiple punishments for the same underlying tax loss.
The decision will be particularly relevant where prosecution of the annual VAT return is not possible, for example because of procedural restrictions, discontinuation of proceedings, or limitation issues. In such cases, the advance returns may be prosecuted independently.
