Appeals, limitation and the surcharge
There is no remedy against the surcharge under section 398a of the Fiscal Code. Anyone who thinks it too high cannot challenge it — but they can challenge the tax it attaches to. That detour is the only route, and it works at several points at once.
- The surcharge is not a tax assessment but a condition for not pursuing prosecution — no separate remedy exists.
- What can be attacked is therefore only the tax assessment, by whose amount evaded the surcharge is measured.
- While the tax is in dispute the amount evaded is unsettled; the surcharge is then regularly held back.
- What is seriously in dispute can hardly be classified as intentionally evaded — which reduces the base.
- The same reasoning bears on the assessment period: without intent or recklessness, no extended period.
How the surcharge arises
With larger amounts, immunity no longer follows from the voluntary disclosure alone.
Where the tax understated per offence — that is, per type of tax and assessment period — exceeds 25,000 euros, the bar in section 371(2) sentence 1 no 3 of the Fiscal Code applies. Immunity then follows only through section 398a: alongside the tax and the interest, a sum must be paid to the public purse.
| Amount evaded | Surcharge |
|---|---|
| up to €25,000 | no surcharge |
| over €25,000 up to €100,000 | 10 % |
| over €100,000 up to €1,000,000 | 15 % |
| over €1,000,000 | 20 % |
Two features make the surcharge hard. It is neither a penalty nor a tax, but a condition on which prosecution is not pursued. And it is not refunded if proceedings are later reopened — at most it can be set off against a fine.
Added to that is the threshold effect: the step from 25,000 to 25,001 euros costs the full surcharge on the entire amount, not merely on the excess. The same applies at the boundaries within the scale.
There is no remedy against the surcharge itself
A point that regularly surprises those affected — and one that shapes the whole strategy.
The surcharge is not issued as a tax assessment. It is not an assessment within the meaning of the Fiscal Code but a condition within the criminal procedure: pay it, and prosecution is not pursued. Fail to pay it, and the proceedings continue.
There is therefore nothing for an appeal under section 347 of the Fiscal Code to attach to, and nothing for a claim before the tax court. No separate legal protection against the amount of the surcharge exists.
Commentators have criticised this since the provision was introduced — precisely because substantial amounts are demanded without judicial review. The criticism does not change the law as it stands.
- No appealthe surcharge is not a tax assessment
- No claimthe tax court route is not open
- No refundon reopening it is not repaid, at most set off
- Attackableonly the tax assessment the surcharge attaches to
A clear sequence follows: anyone who thinks the surcharge too high has to start where the amount arises — at the tax. And that has to happen before the assessment becomes final.
The detour through the tax — and its suspensive effect
The practical heart of this article.
The surcharge is measured by the tax evaded. That figure follows from the tax assessment. Where a reasoned appeal is lodged against the assessment, the amount of tax is open — and with it the base on which the surcharge is measured.
While the point in dispute is unresolved, the surcharge cannot be conclusively measured. In our experience it is in that position regularly not assessed but held back until the appeal has been decided.
That does more than buy time. Above all it prevents an amount being demanded on the basis of an assessment that later proves too high — and which could not then be recovered, because no refund is provided for.
Three effects at once
- The base falls. Where a disputed position drops out of the amount evaded, the surcharge falls accordingly.
- The band can drop. If the amount falls below a boundary, the lower percentage applies — and to the entire amount.
- The threshold can be undercut. If less than 25,000 euros per offence remains, the surcharge falls away entirely; immunity then follows from the voluntary disclosure alone.
The third point is the most powerful. Between 25,000 and 24,999 euros lies not one percentage point but the whole surcharge.
What is seriously in dispute is hardly evaded intentionally
The substantive reasoning from which everything else follows.
Tax evasion under section 370 of the Fiscal Code requires intent. The taxpayer must at least have regarded the elements of the offence as possible and accepted them. Where a legal question is seriously in dispute, that finding is hard to make.
Where a case on a legal question is pending before the Federal Fiscal Court, where tax courts take differing views, or where the administrative position departs from the case law, it can hardly be maintained that a taxpayer recognised and wanted an understatement of tax. Someone taking a defensible legal view does not act intentionally — not even where their view later turns out to be wrong.
For us the consequence is this: positions resting on such a disputed legal question do not belong in the amount evaded by which the surcharge is measured.
In the crypto field that affects many positions
Scarcely any core question of crypto taxation has been settled by the highest court. We are ourselves conducting cases on the classification of lending, on the disposal sequence, on the treatment of airdrops whose allocation rules were fixed afterwards, and on the question of recklessness. Each of those questions can, in an individual case, take a position out of the amount evaded. Our cases
There is a further point affecting the years up to 2022: the Anlage SO form only asked about gains from crypto assets separately from the 2023 assessment period. Anyone who entered nothing before that completed the form as it was put to them. Whether any accusation can be derived from that at all is doubtful.
The same reasoning bears on limitation
The second lever — and it reaches further back than the first.
The standard case
For income tax the assessment period is in principle four years. Once it has run, no assessment may be made — regardless of whether tax would have arisen in substance.
Reckless understatement
It extends to five years for reckless understatement of tax. Recklessness requires a heightened degree of negligence — not every omission suffices.
Evasion
Ten years only for tax evasion, that is, for intent. On top of that comes the suspension of the start of the period by up to three years.
Anyone setting out with reasons that there was neither intent nor recklessness is thereby attacking not only the surcharge but also the power to amend old years at all. If four years stands, no assessment is possible for the periods further back — and where nothing may be assessed, no amount evaded arises either.
We are conducting a claim on this point before the Baden-Württemberg Tax Court.
What follows in practice
Identify disputed positions early
Already at the preparation stage the two have to be separated: what was uncontroversially not declared, and what rests on a defensible legal view the authorities do not share? That separation belongs in the disclosure, not in a later defence.
Disclose the legal view
Someone taking a differing view and setting it out with reasons is visibly not acting in secret. That is at the same time the strongest argument against an allegation of intent.
Appeal within the deadline
Against the tax assessment, within one month. Once the assessment becomes final, the amount evaded is settled — and with it the surcharge, against which there is no remedy.
Apply for a stay where a test case is running
Where the legal question is already pending before the Federal Fiscal Court, the proceedings are stayed by operation of law. You carry no litigation risk and keep the base open at the same time.
Do not pay the surcharge prematurely
While the tax is in dispute, the amount of the surcharge should not be treated as settled. No refund is provided for — once paid, it is paid.
Questions and answers
How large is the surcharge under section 398a AO?
Can I appeal against the surcharge?
How can I attack the surcharge, then?
What happens to the surcharge while the appeal is running?
What does the dispute have to do with intent?
Does this affect the limitation period too?
Legal position: 25 August 2026. Sources: sections 169, 347, 355, 363, 370, 371 and 398a of the Fiscal Code.
The passages on intent where legal questions are in dispute, and on the treatment of the surcharge while an appeal is running, reflect our own legal view and our experience. No particular outcome can be derived from them. This article is not advice on an individual case and is not criminal defence. Where this English text and the German version differ, the German version governs.