Tax evasion in the restaurant industry

In tax criminal law, the most frequent charge is tax evasion. Few sectors are as closely scrutinized by tax authorities due to prejudices regarding tax honesty as the restaurant industry. This is due to the high volume of cash transactions and complex revenue structures. As a result, restaurants are particularly vulnerable to tax audits and investigations by the tax authorities. The introduction of the Cash Register Act established stricter requirements for electronic recording systems, intended to protect against manipulation. However, this has only partially mitigated the risk of becoming a target of investigations. In practice, even minor irregularities in accounting often lead to the initiation of tax evasion proceedings.

The criminal offense of tax evasion

The criminal offense of tax evasion is regulated in Section 370 of the German Fiscal Code (AO). The following are among the punishable acts:

The Providing incorrect or incomplete information regarding tax-relevant facts to the authorities
breach of duty Concealing facts relevant to taxation vis-à-vis the authorities
Failure to use tax stamps or labels

This requires that the action results in a reduction of taxes or the obtaining of unjustified tax advantages for oneself or someone else.

Federal Court of Justice (BGH), decision of June 26, 2025 (Case No. 1 StR 426/24) on the requirement of a successful deception:

The Munich Regional Court had convicted the defendant of attempted tax evasion; his appeal against this conviction was unsuccessful. The Federal Court of Justice (BGH) found that the defendant had committed a criminal offense by making false statements in his income tax return. The objective elements of the offense of tax evasion under Section 370 Paragraph 1 No. 1 of the German Fiscal Code (AO) are not negated by the fact that the false statement was discovered, because the wording of the provision does not require knowledge or lack thereof on the part of the tax authorities.

In addition to the act itself, the act must have been committed intentionally. Also accidentally incorrect information Such an act can be punishable if at least conditional intent can be proven, meaning that the perpetrator knowingly accepted the risk. If the act was only grossly negligent, it can be punished as an administrative offense under Section 378 of the German Fiscal Code (AO) with a fine of up to €50,000.

Federal Court of Justice (BGH), judgment of 25 January 2023 (Case No. 1 StR 199/22) on the requirement of intent in the offense of tax evasion:

In its judgment of January 25, 2023, the Federal Court of Justice (BGH) made findings regarding the requirement of intent for the offense of tax evasion. The Regional Court had previously acquitted the defendant of the charge of tax evasion in several cases on factual grounds, as it could not be convinced that the defendant had acted intentionally or recklessly.

The public prosecutor's appeal against this decision was unsuccessful. The Federal Court of Justice (BGH) ruled that neither the subjective elements of tax evasion under Section 370 Paragraph 1 of the German Fiscal Code (AO) nor those of negligent tax reduction under Section 378 of the German Fiscal Code (AO) are fulfilled if a defendant relied on his employees and tax advisors for the preparation of his accounting records and tax returns without having any reason to question their work.

Tax evasion is treated with Fine or imprisonment for up to five years These acts are punishable. Attempting these acts is also a crime, although the sentence may be reduced. Furthermore, Unpaid taxes including interest must be repaid., This often represents a significant financial burden for restaurateurs. In addition, they risk losing their restaurant license or being prohibited from operating a business under Section 35 of the Trade Regulation Act (GewO).

Particularly serious case of tax evasion in the restaurant industry: When does it become critical?

A particularly serious case of tax evasion This applies when the tax evasion significantly exceeds the usual amount. These cases are legally defined in Section 370 Paragraph 3 of the German Fiscal Code (AO). standardized. Such a standard exists, for example, when:

tax evasion or the obtaining of unjustified tax advantages on a particularly large scale
an official abuses his position
counterfeit or falsified documents may be used
if one acts as a member of a gang that repeatedly commits such acts

The penalty, if the court deems a particularly serious case proven, is between six months and ten years imprisonment.

In the restaurant industry, cash register manipulation is a major risk. This includes deleting sales before the receipt is printed, failing to record cash transactions, keeping parallel cash register records, or deliberately omitting complete invoices. Black money payments to suppliers or incomplete accounting can also give rise to suspicion of serious tax evasion.

The situation becomes particularly critical when such actions are not a one-off occurrence, but rather take place over months or years. In such cases, the courts often consider it a particularly serious offense because the behavior is organized, repeated, and aimed at significant tax evasion.

Federal Court of Justice (BGH), judgment of October 14, 2025 (Case No. 1 StR 445/24) on the large extent of a tax advantage obtained:

In its judgment of October 14, 2025, the Federal Court of Justice (BGH) established when a tax advantage obtained is considered substantial. The Regional Court had previously convicted the defendants of tax evasion, attempted tax evasion, and aiding and abetting attempted tax evasion, against which the defendants appealed. The BGH ruled that a tax advantage obtained through incorrect information in a declaration for the separate and uniform determination of tax bases pursuant to Sections 180 Paragraph 1 Sentence 1 No. 2a, 182 Paragraph 1 Sentence 1 of the German Fiscal Code (AO) meets the criteria for substantiality within the meaning of Section 370 Paragraph 3 Sentence 2 No. 1 Alternative 2 of the AO if the income attributable to a group of persons is determined to be at least €140,000 lower than the actual income received.

Aiding and abetting tax evasion

In connection with tax evasion investigations in the restaurant industry, individuals who are not the "main suspect" are often accused of aiding and abetting tax evasion. Aiding and abetting is a criminal offense for anyone who... intentionally supports or promotes tax evasion by another person. This usually affects people from the business environment, accounting staff, point-of-sale system service providers, or tax advisors. The relevant factor here is... Demarcation the criminal aiding and abetting of a mere typical professional or neutral support action, which occurs without knowledge of tax evasion.

Typical cases of tax evasion in the restaurant industry

Typical cases involve the Manipulation of electronic cash register systems, For example, by failing to record sales or subsequently canceling them. This results in incomplete revenue being booked, which, without verifiable documentation, can be considered suspicious.

Often also Orders without an invoice This includes concealing cash transactions and failing to record tips. Payments without receipts are made to keep sales outside the accounting records. Other frequently observed scenarios include: incomplete tax returns. Also Undeclared work Employing unregistered staff or unpaid temporary workers is one of the common forms of tax evasion in restaurants, bars, and cafes. Some businesses also use... fake invoices or Fake invoices, in order to artificially increase operating expenses and reduce their tax burden.

During a tax audit in the restaurant industry, these irregularities are often uncovered through digital cash register audits, data analysis, and comparison with industry benchmarks. Therefore, meticulous bookkeeping and a legally compliant point-of-sale system are crucial to avoid fines, back payments, and criminal prosecution.

How do defendants find out that criminal proceedings for tax evasion are underway against them?

As a rule, those accused of tax evasion are notified of an investigation via written notification. This usually takes the form of a questionnaire, a notification of suspicion, or – if the investigation has already concluded – a Penal order the tax office or the public prosecutor's office. If you have a summons of the accused Receiving a letter (e.g., summoning you for questioning by the tax authorities) means that criminal proceedings for tax evasion have been initiated against you. However, you may also receive a letter simply indicating an indictment or notification of the initiation of criminal proceedings. Anyone receiving such letters should consult a lawyer specializing in tax law as soon as possible to effectively protect their rights and minimize the potential consequences (e.g., back taxes, fines, or penalties).

In many cases, a tax audit or a cash register inspection is conducted beforehand.‑ or an inspection for undeclared work is carried out, during which irregularities are discovered. Most tax audits are announced in advance by the tax office. Business owners usually receive a written audit notice by mail or email two to four weeks before the scheduled date.‑Email. It contains the types of taxes to be audited, the audit period, and the name of the auditor.

Certain audits, such as those for value added tax, are exempt from this rule.‑, income tax‑ or cash registers‑Unannounced inspections can take place if there is suspicion of tax evasion or irregularities. The Financial Control Unit for Undeclared Work can also appear without prior notice.

What happens during a tax audit for tax evasion in the restaurant industry?

During a tax audit in the restaurant industry, the main focus is on whether sales, revenues, and expenses have been correctly recorded and whether tax evasion has occurred. Restaurateurs are particularly likely to attract the attention of tax investigators and the tax authorities responsible for combating undeclared work if there are conspicuous discrepancies between cash on hand, cost of goods sold, and actual sales.

Tax audit procedure

A tax audit typically begins with a written audit order from the tax office, specifying the audit period, scope, and required documents. In many cases, a cash register will also be examined.‑ or digital‑An inspection was carried out, during which cash balances, counting protocols and electronic cash register data were checked unannounced or at short notice.

If the auditors find serious irregularities, they can resort to estimations – for example, using the „30/70” rule.‑Method“ (30% Beverages, 70% Food) or other industry guidelines – and derive substantial additional tax demands from them. In case of doubt, tax penalties also apply.‑ or fine proceedings, especially if cash transactions are concealed or undeclared work is proven.

What exactly is being checked?

In the catering industry, the main areas of examination typically include:

Cash register and sales: daily closing statements, cash register reports, number of sales, cash deficits, count protocols and reconciliation with accounting.
Cost of goods sold and expenses: Receipts for purchases of food, beverages and other operating supplies, inventory entries, as well as spoilage and own consumption.
Personnel and social security contributions: payroll accounts, time sheets, minimum wage documentation and proof of registered employees
Tax compliance: Allocation of private‑ and business use, trade tax burden, VAT returns and accuracy of tax declarations.

What documents are required?

The tax office usually requires a wide range of documents, including:

Cash book, cash reports and daily closing statements, including receipts and counting protocols
Documentation for all income and expenses (invoices, receipts, credit notes), including bank statements.‑ and credit cards‑Evaluations
Payroll accounts, employment contracts, minimum wage records and social security records
Menus, recipes, logbooks for company vehicles and documentation for cash register software in accordance with GoBD.

Voluntary disclosure

If an error has been accidentally made in the accounting and this is noticed in time, there is the possibility of self-reporting. without penalty to remain. If incorrect information is reported completely and correctly, only a full back payment is required. However, this requires that the self-disclosure be made before a tax audit or the initiation of an investigation, otherwise it is no longer considered voluntary.

Experienced criminal defense in tax evasion cases

Investigations into tax evasion often pose an existential threat to restaurants. If you are confronted with such an accusation, it is crucial that you refrain from making any statements initially – even if your only intention is to exonerate yourself. Contact us – we are here to support you as experienced criminal defense lawyers in this situation.

FAQ:

When does tax evasion occur?

Tax evasion occurs when incorrect or incomplete information about significant facts is given to the authorities, when such facts are concealed, or when tax stamps or labels are unlawfully omitted, thereby reducing taxes or obtaining an unjustified tax advantage.

Why is the restaurant industry particularly susceptible to tax evasion?

The industry is considered a high-risk sector because it involves large amounts of cash transactions, many individual transactions, and requires more complex accounting.

How does an investigation for tax evasion come about?

An investigation always begins with an initial suspicion, which can arise, for example, during tax audits, cash register inspections, due to anonymous tips or irregularities in tax returns.

Are minor accounting errors sufficient grounds for criminal proceedings?

Yes, because these often act as a trigger to conduct further investigations, which can lead to criminal proceedings.

What happens during a tax audit or cash register inspection?

Auditors will primarily examine the company's cash management, receipts, and income. Irregularities in the accounting can lead to criminal proceedings.

What penalties are there for tax evasion?

In addition to sanctions such as fines or imprisonment, there is a risk of back payment of taxes plus interest, as well as, under certain circumstances, measures under trade law.

Does every irregularity automatically constitute tax evasion?

No, because the offense of tax evasion requires intent. If the action was merely grossly negligent, it could also be considered reckless tax evasion under Section 378 of the German Fiscal Code (AO).

What are some typical methods of tax evasion?

Increased methods include manipulation of cash register systems or unrecorded cash payments, missing or incorrect invoices, and undeclared income in tax returns.

What should you do if you are accused of tax evasion?

In this case, you should absolutely refuse to make a statement and consult a lawyer experienced in tax criminal law.