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German Federal Fiscal Court revokes supplementary estimates against restaurant and bar owners!

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The plaintiff brought a claim against the reassessment of the tax audit. The estimates are fictitious and destructive.

The tax auditor’s position was based on 4 key points:

➢ Cash-book distortion
➢ Gross profit surcharge rates according to guideline collection rate
➢ Comparative figures from an unspecified restaurant business
➢ Actual notification of the last tax audit.

At the same time, the Tax Authority initiated criminal tax proceedings against the plaintiff, therefore extending the examination period to 10 years and setting higher advance payments for the current and coming years on the basis of the assessments.

The assessments were accompanied by seizures of accounts, attempts at foreclosure and the prohibition of trade. At the same time, the Tax Authority executed against the plaintiff’s wife, although her exemption from liability had already been enforced and officially notified.

The plaintiff brought an action against the assessments and explained in detail that his company was in fact unable to generate the reassessment. He highlighted the peculiarities of each company and presented testimonies and expert opinions as proof that the auditor’s assessments were inaccurate.

The Local Tax Court followed the Tax Authority’s reasoning and rejected the company-specific cash book. In terms of the amount in question, the Tax Court replaced the auditor’s unsupported assessment with a lump sum of 10 %. The Tax Court did not take any evidence.


Following the plaintiff’s appeal against the non-admission of the appeal, the Federal Tax Court overturned the decision of the Local Tax Court and referred the case back to the Local Tax Court.
The contested judgement was based on a violation of the obligation to clarify the facts (Art. 76 para. 1 sentence 1 FGO (Financial Court Act)); it violated the plaintiff’s right to a hearing (Art. 103 para. 1 GG (Basic Law), Art. 96 para. 2, Art. 119 n. 3 FGO) and is therefore based on procedural errors (Art. 115 para. 2 n. 3 FGO).

According to previous rulings of the Federal Tax Court, a procedural deficiency exists if a local Tax Court makes an estimate that is neither conclusive nor economically possible or reasonable. This was the case here.

The plaintiff had argued in detail that his business could not generate significantly higher sales and profits – as assumed by the Tax Authority and the Local Tax Court. Nevertheless, the Tax Court had not provided any clarification of the facts, although this would have been necessary. This concerns the cost of sales as well as the question whether the supplementary rate of 10 % set by the Local Tax Court can come close to reality. A Tax court violates the fundamental right to a right to be heard if it ignores the plaintiff’s claims that the latter actually could not generate the reassessment. In addition, the cash book should be rejected not only for formal reasons, it should be noted above all the material incorrectness should be noted. Overall, the Local Tax Court had to deal with the question of whether the reassessment amounts could correspond to the actual circumstances.


The Federal Tax Court has rejected the estimation methods of the Tax Authority and the lump-sum estimates of the Local Tax Court Kassel.

The Federal Tax Court thus clearly rejects the tax audit method and the lump-sum reassessment made by the Local Tax Court. Flat-rate reassessment at the expense of the company are not permitted without taking into account the special features of the individual company. Cash books that restaurant keepers create individually are to be accepted, regardless of whether they comply with the wishes of the Tax Authority. The tax auditor must respect the peculiarities of each company. If the Local Tax Court tries to amend the unsustainable arithmetic of the auditor with its own flat-rate assessment, this attempt too is unlawful.

Assessments that do not take into account the individual circumstances of the company are prohibited. Increased advance payments are prohibited, as is the initiation of criminal tax proceedings for the sole purpose of estimating 10 years instead of the regular 4 years. This should accelerate the threat to existence and thus the willingness to agree and settle. The main focus of the Tax Authority is concentrated on restaurant and bar owners owning real property. This administrative action has now been stopped by the Supreme Court.

As a result, it is crucial that the widespread practice of the Tax Authority to make lump-sum reassessments at the expense of the restaurant owners and landlords provokes legal disputes such as these. It would appreciated if the tax authorities took this into account within the framework of their official duties and remedied the taxpayer’s request for legal protection in order to avoid legal proceedings. At the very least, however, such obviously unlawful assessments must be avoided. Otherwise, the tax authorities will have face well-founded restitution actions and claims for damages.