Contract law: Contractual freedom and its consequences General contract law is characterised by the principle of contractual freedom. This private autonomy applies as long as it does not infringe laws or is contra bonos mores.

GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London – conclude: It is a characteristic feature of contracts that the contractual parties make corresponding declarations of intent (offer and acceptance). These declarations of intent can be freely agreed upon as long as this does not lead to the terms of the contract infringing applicable laws or being contra bonos mores. However, the result of this freedom when drafting the contract is that one must carefully consider before concluding the contract which rights and obligations ought to be contractually regulated so as to avoid nasty surprises at a later date. The contract should be drawn up in appropriate detail. Its content is considered binding. It must therefore also be borne in mind that a breach of contractual obligations can entail claims for damages or other legal consequences.

The provisions of general contract law apply to all types of contract in civil law, for example sales contracts, rental contracts, contracts to produce a work, service contracts, licensing contracts, lease contracts and even franchise contracts. The rules and provisions of these areas of law must therefore also be taken account of when concluding contracts. This shows that drafting contracts is a complex process which can easily exceed the knowledge of a layman. That is why a lawyer who is competent in the field of contract law should be consulted from the beginning and involved in drawing up the contract. The more accurately the contract is drafted, the lower the probability of being faced at a later date with nasty surprises with the corresponding legal consequences. Furthermore, in cases involving contracts with international partners, various international regulations also need to be observed.

If a breach of contract arises, it ought to be noted that claims from all types of civil law contracts are subject to the statute of limitations. Should claims for damages have arisen from the breach of contract, e.g. through non-performance or defective performance, these have to be asserted within the statutory timeframe. The regular statutory limitation period is three years. One should also obtain legal advice in order to enforce these claims.

Insurance law: Enforcing claims from the insurance policy It is crucial both in one’s private life and in business to cover oneself against damage and loss. It is not, however, always easy to enforce claims from an insurance policy if damage or loss has occurred.

GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London – conclude: Many risks can be covered by taking out an appropriate insurance policy. This protection may be of fundamental importance to both private individuals and business people as several damage or loss cases can threaten their livelihood and existence respectively, be they, for instance, severe storm damages in one’s private life or recourse claims in business. One must, however, always ensure that the policy covers the damage or loss and that the claim of insured persons is also able to be enforced against the insurance company.

For this reason, it may be advisable with a lot of insurance matters to consult lawyers competent in the field of insurance law from the outset. They can individually examine on behalf of their clients which benefits the insurance policy ought to include and also enforce claims from the contract against the insurer – both extrajudicially as well as through litigation – which is important because the course needs to be set at an early stage for the claims to be successfully enforced. Mistakes in the claim report should be avoided from the first enquiry made by the insurer and formalities and deadlines complied with. Much can depend on this as the claim settlement progresses.

It is also important for the policyholder to fulfil his obligations. Outstanding premium payments or the infringement of notification obligations can result in the claim against the insurance company lapsing.

It is essential for business people to obtain appropriate cover against potential recourse claims in order to avoid finding themselves on the brink of insolvency if damage or loss occurs. Attention must be paid here, inter alia, to whether the sum insured is sufficiently high and in which cases the insurance coverage is triggered. This should already be regulated in detail in the insurance contract. It can also potentially make sense to be underinsured.

Managers and executives occupy responsible positions in a company and are liable, as the case may be, even with their private assets, e.g. if they breach their duty of care. This can then lead to claims for damages or even custodial sentences. In order to minimise the financial risk, many executives take out D&O (directors and officers) insurance policies. The policy ought to cover all of the important points in the event of damage or loss in this instance as well.

Commercial law: Companies must comply with an abundance of legal regulations Any entrepreneur participating in economic life finds himself facing an abundance of laws, standards and regulations arising from various fields of law – national and international.

GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London – conclude: Whether in trade, services or industry, all businesses have to comply with an abundance of laws and regulations in order to participate in economic life. These concern a whole range of legal fields whose rules have to be observed.

Private commercial law covers the laws and regulations which govern the relationships between persons, companies and businesses participating in economic life. This encompasses, for example, trade law, company law, cartel law, competition law and industrial property protection.

Commercial administrative law roughly covers the relationship of businesses with the state and its agencies. Legal regulations from, inter alia, industrial law, foreign trade legislation and pricing law are applicable here.

Foreign trade legislation is very important as a lot of firms and businesses operate internationally. Trade in services, goods, capital, currencies and other commodities within the European Union is governed by European law. EU foreign trade legislation is in most cases applicable even with respect to countries outside of the EU. First and foremost in the case of foreign trade legislation, regulations concerning export controls and export licenses have to be observed.

Even foreign investors who wish to invest in Germany and vice versa have to comply with the provisions of international commercial law. These may vary from state to state or from one economic area to another.

Entrepreneurs and those starting businesses find themselves confronted with legal issues on an almost daily basis. That is why legal advice from a competent team of lawyers with the necessary expertise in the various areas of law is crucial, enabling potential mistakes and legal infringements to be nipped in the bud and avoided. This applies to the purchase or sale of businesses, to company shareholdings, preparing the general terms and conditions, selecting the company form, as well as the conduct of a case in the event of possible legal disputes or the collection of receivables domestically and abroad and enforcement across borders.

51 states have declared war on tax evasion – Voluntary disclosure a way out Banking secrecy might soon be a thing of the past and tax evaders will come under more and more pressure. 51 states have signed a tax treaty in Berlin concerning the automatic exchange of information.

GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London – conclude: Owing to the international tax treaty, it will become increasingly difficult going forward to withhold taxes from the exchequer and deposit illicit earnings in foreign bank accounts. 51 states have signed the tax treaty in Berlin concerning the automatic exchange of information. This likely means that banking secrecy will soon be history.

Among the signatories were not only the 28 states of the European Union but also former tax havens such as Liechtenstein and Singapore. Switzerland and many other states also want to participate in the future or sign the treaty. For most states, the automatic exchange of information begins in 2017.

The signing of the treaty could lead to the number of voluntary declarations increasing further, as a voluntary declaration presents tax evaders with the opportunity to return to a state of tax compliance. For this to happen, it must first be submitted on time, i.e. before the authorities begin corresponding investigations, which is likely to occur at an ever-increasing speed with the automatic exchange of information. Additionally, the voluntary declaration has to be complete. This means that all tax-relevant information from the past five years needs to be reported to the tax authorities. This will probably apply to no less than the preceding ten years as of 2015.

Since even small mistakes can render the voluntary declaration ineffective, it ought not to be prepared alone or with the help of standard templates. Each case is different and must accordingly be individually appraised. A more advisable strategy is to consult lawyers and tax advisors who are experienced in the field of tax law and are able to draw up the voluntary declaration in such a way that it takes effect and there is no threat of a conviction for tax evasion.

From January 1, 2015, substantially stricter rules are expected to apply to voluntary disclosure. Complete immunity will then only be possible if the amount of evaded taxes does not exceed 25,000 euros. This threshold has hitherto been set to 50,000 euros. In cases involving higher amounts, tiered penalty surcharges shall fall due according to the extent of the sum of evaded taxes.

Sales tax: Various rates, deadlines, obligations and possibilities Every citizen comes into contact with sales tax, also referred to as turnover tax, on an almost daily basis, as it is payable on every purchase and service.

GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London – conclude: There are two different rates in Germany for sales tax / turnover tax. The general rate is 19 per cent and the reduced rate 7 per cent. The reduced rate applies, for instance, to hotel stays, in artistic and media professions and also to many foodstuffs. Particularly regarding foodstuffs, however, it is confusing and frequently unclear which sales tax rate applies. For example: the reduced rate of seven per cent applies to fresh fruit, whereas 19 per cent is payable on fruit juices.

But irrespective of the tax rate, sales tax is always paid by the customer. Companies are obliged in all but a few cases to include sales tax in their invoices to customers and pay this to the tax authorities. This normally takes place in the context of the regular advance turnover tax return. In the advance return both the sales tax which has been taken from sales or services and that which has already been paid with respect to business-related purchases (input tax) are declared. The difference between these two amounts has to be paid to the tax authorities.

A distinction needs to be made here between nominal taxation and actual taxation. In general, nominal taxation applies. This means that the sales tax has to be paid as soon as the invoice has been presented to the customer. When the invoice is actually paid is irrelevant here. In the case of actual taxation, on the other hand, sales tax does not have to be paid until the invoice has been paid by the customer. This applies to the liberal professions as well as companies required to keep accounting records whose turnover in the previous year was not above 500,000 euros. A corresponding application has to be submitted to the tax authorities.

In the case of start-up businesses, advance turnover tax returns must be submitted monthly during the first two years. Otherwise, quarterly advance turnover tax returns are sufficient in most cases.

The statutory regulations for sales tax are extensive and not always comprehensible for laymen. In order to avoid problems with the tax authorities, it is helpful to consult experienced tax advisors from the outset. In the event of a dispute, lawyers experienced in the field of tax law can also provide further assistance.

Tax evasion: Countdown for voluntary disclosure has begun Tax evaders who wish to pre-empt a conviction for tax evasion with a voluntary declaration ought to hurry. Stricter rules for voluntary disclosure shall apply from 2015.

GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London – conclude: In all likelihood, stricter rules for voluntary disclosure in cases of tax evasion will apply as of January 1, 2015. Those who wish to return to a state of tax compliance with a voluntary declaration before this reform comes into force should therefore act quickly, as a voluntary declaration has to be well prepared in order to satisfy the requirements and not fail.

Two conditions need to be fulfilled first and foremost: The voluntary declaration has to be submitted before the authorities have commenced investigations and it must be complete. This means that all tax-relevant accounts and information from the past five years need to be disclosed to the competent tax office. Time needs to be allowed for in order to gather these documents because obtaining the relevant statements from banks can be arduous and take some time. Even the costs and processing fees of the banks need to be taken into account for this. While the amount of evaded taxes can initially be estimated, the estimate should be very accurate and certainly not too low. The banking documents are also important for the purpose of obtaining an overview.

This is because a voluntary declaration can only afford protection from a conviction for tax evasion if it is complete. That is why a voluntary declaration should not be prepared alone or with the help of standard templates; each case is different and it is easy to make mistakes. Even minor mistakes can result in the voluntary declaration becoming ineffective. It is therefore advisable to consult lawyers and tax advisors who are experienced in the field of tax law.

Voluntary disclosure can presently lead to complete immunity for sums of evaded taxes up to 50,000 euros. In cases involving higher amounts, a penalty surcharge is levied. From 2015, this threshold is expected to drop to 25,000 euros and the associated penalty surcharges where larger amounts are involved shall increase. Moreover, the tax return will have to be corrected for the past ten years instead of just five.

Tax evasion: Switzerland supports crackdown in banks Switzerland has perhaps had its day as a tax haven. According to media reports, Swiss investigators are supporting German tax investigators in searching several banks.

GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London – conclude: Switzerland is showing an increasing willingness to cooperate in the fight against tax evasion. According to media reports, Swiss investigators are now supporting their German colleagues in searching several banks. These are said to have cheated the German exchequer out of several million euros worth of tax money. Even if these cases did not represent classic tax evasion but rather the banks had capital gains taxes that had apparently been paid several times reimbursed from the German exchequer, they still demonstrate that Switzerland is serious about the fight against tax evasion. Things are becoming increasingly difficult for tax evaders who are storing illicit earnings in Swiss accounts.

It remains possible by means of a voluntary declaration to return to a state of tax compliance and avoid a conviction for tax evasion. It is therefore doubly advisable to take immediate action, since the risk of being detected manifestly continues to increase. However, voluntary disclosure is only possible if the authorities have not begun any investigations. In addition, voluntary disclosure will be considerably more expensive and difficult from 2015.

Those who decide on a voluntary declaration should certainly not prepare it on their own or with the help of standard templates, as the risk of mistakes being made in the process is high and even minor errors can result in the ineffectiveness of the voluntary declaration. It makes more sense to turn to lawyers and tax advisors who are experienced in the field of tax law. They know which documents the voluntary declaration has to include for it to be complete and avoid potential pitfalls so that voluntary disclosure is able to take effect and the tax evader, as soon as he has paid the tax liability plus interest and, as the case may be, any penalty surcharges, no longer has to worry about a conviction for tax evasion.

The rules for voluntary disclosure are set to be substantially tightened from 2015. It will then be necessary for tax-relevant information from the past ten years to be disclosed. Penalty surcharges will also rise. Voluntary disclosure will then be more difficult and expensive.


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