Tax evasion and its treatment under the new Code of Tax Procedure (Law 4987/2022)
Tax evasion crimes are considered as offences of particular risk as they affect the legal property of the Greek State and therefore anyone who intentionally commits a tax offence classified as a “tax evasion crime” is punished under the provisions of the Criminal Code.
Ι. Applicable provisions
Pursuant to Law 4987/2022, which ratified the Code of Tax Procedure (KFD) in replacement of Law 4987/2022. 4174/2013 and in No. 66 thereof, tax offences are standardized as tax evasion crimes, tax offences which can be categorized for better understanding into three groups of criminal conduct. Specifically, Article 66 of the Code of Tax Procedure states that a tax evasion crime is committed by anyone who with intent:
– 66(1a): in order to avoid payment of income tax, uniform property tax (ENFIA) or Special Real Estate Tax (SRET), conceals from the tax administration bodies taxable income from any source, in particular by failing to submit a return or by submitting an incorrect return or by entering in the books fictitious expenditure so that the taxable amount does not appear or appears reduced (tax evasion in income and property tax)
– 66 par. 1b: in order to avoid payment of VAT, VAT and withholding taxes and levies, he does not pay, or pays incorrectly, or offsets or deducts incorrectly, or obtains a refund by fraudulent concealment or concealment of true facts (tax evasion in VAT on other withholding or imposed taxes and levies)
– 66(5) : Whoever issues false or fictitious tax documents (invoices), as well as whoever accepts fictitious tax documents for a transaction that does not exist in whole or in part, or falsifies such documents, whether or not he evades payment of tax, unless the tax documents were used to commit or support one of the acts described above, in which case the offender is punished only for the latter as an instigator or accomplice (tax evasion is committed by issuing or accepting false, forged or falsified tax documents, invoices etc.)
The persons defined as instigators and accomplices of the above offences under the provisions of Article 67 of the VAT Code are the following:
– 67 par. 1a: In domestic limited liability companies, the chairmen of the Boards of Directors, the managing, appointed or co-directing directors, administrators, general managers or directors, as well as, in general, any person appointed either directly by law or by private will or by court decision to administer or manage or represent them.
– 67 par. 1b: In general partnerships and limited partnerships, the general partners and the directors.
– 66 par.5 : Whoever issues forged or fictitious tax documents (invoices), as well as whoever accepts fictitious tax documents for a transaction that does not exist in whole or in part, or falsifies such documents, whether or not he evades payment of tax, unless the tax documents were used to commit or support one of the acts described above, in which case the offender is punished only for the latter as an instigator or accomplice (tax evasion is committed by issuing or accepting false, forged or falsified tax documents)
The persons defined as instigators and accomplices of the above offences under the provisions of Article 67 of the VAT Code are the following:
– 67 par. 1a: In S.A. companies, the chairmen of the Boards of Directors, the managing, appointed or co-directing directors, administrators, general managers or directors, as well as, in general, any person appointed either directly by law or by private will or by court decision to administer or manage or represent them.
– 67 par. 1b: In general partnerships and limited partnerships, the general partners and the directors.
– 67(1c) : In limited liability companies (EPE) and private limited companies (IKE), the directors of such companies and, in general, any person appointed by them.
– 67 par. 1f : In foreign companies established in Greece in general and in all kinds of foreign corporations, the perpetrators of the crime of tax evasion are considered to be the persons appointed in Greece as their directors, representatives or agents.
ΙΙ.Statement of charges – Criminal prosecution – Criminalties provided for
Statement of claim
The criminal prosecution of tax evasion offences is explicitly defined as ex officio, but a strict prerequisite for its initiation is the submission of a complaint by the Governor or other competent officials of the tax administration (Article 55A(1) of Law 4987/2022).
Criminal prosecution/Suspension of criminal proceedings/Suspension of the limitation period for criminal offences
In recent years and under the influence of the ECHR and the Court of Justice of the EU, which, in a series of decisions require Member States to reconsider the issue of dual sanctions for the infringement, the exclusion of parallel proceedings and respect for the ne bis in idem principle, a mutual exclusion between administrative and criminal proceedings has in fact been established with the introduction of Article 32 of Law No. 4745/2020, which amended Article 68 of the Code of Tax Procedure under the previous version of the code and is now also in force under the new Law 4987/2022, according to which criminal proceedings are suspended until the administrative sanctions become final. In particular:
According to the provisions of Article 68 of the Code of Tax Procedure it is stipulated that:
“1. If there is a case of commission or attempted commission of a crime under the Code, a complaint shall be filed without delay by the Governor or by the organs of the Tax Administration or by the Financial Police Directorate of the Hellenic Police. The criminal prosecution shall be ex officio.
2.a) If, on the basis of an enforceable act of the tax authority, there is a case of commission or attempted commission of a tax evasion crime, as defined in Article 66, the issuance of such an act suspends the limitation period of the relevant crime and entails the suspension or suspension of the corresponding criminal proceedings on its own initiative. To that end, the tax authority concerned shall inform the competent public prosecutor without delay and shall send him a copy of the administrative act in question.
(b) If no criminal prosecution has been brought, the competent public prosecutor shall, by an act of the public prosecutor, suspend any further action in the criminal proceedings. If a criminal prosecution has been brought and the case is pending the main inquiry, the investigating judge, with the agreement of the public prosecutor, shall order the suspension of the criminal proceedings. If the case has been referred to the hearing, the criminal court shall order the suspension of the criminal proceedings; in all other cases the suspension shall be ordered by a competent judicial council.
c) The suspension of the limitation period and the suspension or suspension of the criminal proceedings shall last until the finalization of the relevant act of the tax authority, due to the unfulfilled expiry of the time limit for lodging an appeal, or until the decision of the competent administrative court on the appeal lodged has become final……”
The above-mentioned provisions suspend the criminal proceedings at whatever stage they are at until the completion of the corresponding administrative proceedings, and immediately after the discovery of the tax violation and the issuance of the corresponding act of assessment of the relevant tax.
There is then no risk that the relevant criminal prosecution will be time-barred since there is an unlimited suspension until the finalization of the act due to the non-appeal or after the adoption of the irrevocable decision of the competent administrative court. The above legislative provision gives priority to the administrative proceedings, so that after their conclusion and depending on the decision, the judgement is crystallized as to whether the administrative sanctions imposed without a final decision constitute sanctions of a criminal nature, so that criminal proceedings should be brought or not for the tax evasion offence at the time or be declared inadmissible due to res judicata.
ΙΙΙ.Criminalties provided for (Articles 66(3), (4) and (5) of the Code of Tax Procedure)
The offences of tax evasion are punishable as a misdemeanor by a minimum of two (2) years imprisonment or a fine in accordance with Article 57 of the Criminal Code.
Article 66 par. 3 of the Code of Tax Procedure.
(a) if the tax due on taxable income exceeds €100,000 per financial year; or
b) if the amount of the main tax, duty or levy to be refunded or refunded or offset exceeds per fiscal year:
(a) €50,000 in respect of VAT; or
(bb) €100,000 in any other case
Article 66 par. 4 of the Code of Tax Procedure
Tax evasion becomes a felony and imprisonment shall be imposed when the amounts referred to in par. 3 exceeds per tax year €100,000 for income, €50,000 if VAT is involved and €150,000 in any other case of tax, duty or levy.
Article 66 par. 5 of the Code of Tax Procedure
Specifically for issuing or receiving false or fictitious information and regardless of whether or not the person who issues or accepts it evades payment of the tax, shall be punished with a minimum of three (3) months’ imprisonment or a fine, unless the tax information was used for tax evasion under paragraphs 1 to 4 above either on income or VAT or on various withholding taxes (no double punishment), in which case the perpetrator shall be punished as a perpetrator or co-perpetrator.
Furthermore, anyone who issues or accepts false or fictitious tax documents is punished:
a) With imprisonment of at least one (1) year or a fine if the total value exceeds €75,000.
b) Imprisonment for a minimum of one (1) year or imprisonment for up to six (6) years if the total amount exceeds €200,000.
For the purposes of the above limits, tax items used in the commission of any of the acts referred to in paragraphs 1 to 4 shall not be taken into account.
IV.Pleas in law and main arguments
The prosecution is inadmissible on the basis of the limitation period for the State’s right in this respect.
According to the provisions of Article 55A of Law No. 4987/2022 and in particular in paragraph 2 thereof it is stipulated: “2. The limitation period for the offences under this law shall commence from the expiry of the period of time within which the Tax Administration may, pursuant to Article 36, issue an administrative, assessment or corrective tax assessment act, unless such an act has already been issued, in which case the limitation period for the aforementioned offences shall commence from the issuance of such act”
The provisions of Article 36 of Law 4987/2022 stipulate that:
- “The tax administration may issue an administrative, assessed or corrective tax assessment act within five (5) years from the end of the year in which the deadline for filing a return expires (……)
- The period referred to in par. 1 shall be extended:
a) if within the fifth year new information comes to the knowledge of the Tax Authority by one year.
b) if information is requested from a foreign country for as long as it takes more than one year from the receipt of the information by the Tax Administration,
(c) if an appeal, legal action, remedy or remedy is brought, for a period of one year after the issue of a decision or irrevocable judicial decision, (……)
… 3a Exceptionally, an administrative, assessment or corrective tax assessment act may be issued within ten (10) years from the end of the year in which the deadline for filing the return or the last return in the case where more than one return is to be filed: a) if the taxpayer has not filed a return within the period referred to in par. (b) in the event that after the five-year period new data or information comes to the knowledge of any department of the Tax Administration which could not have been known to it within the five-year period and it appears that the tax liability exceeds that determined on the basis of a previous direct, administrative, estimated or corrective tax assessment and only in respect of the matter to which it relates.
From the combination of the above provisions, it follows that it is not legal to submit a complaint, which, as mentioned above, is a necessary procedural requirement for the exercise of criminal prosecution, if the tax claims of the State under the provisions of Article 36 of the Tax Code are time-barred.
Consequently, a criminal prosecution brought on the basis of an invalid complaint on the ground that the relevant right is time-barred is inadmissible, the relevant plea being raised in the hearing as an independent plea. (A.M. 2029/2018, A.M. 95/2022, 782/2022, Opinion of the Legal Council of the State 14/2016).
2.Submission of a statement of claim / competency of persons submitting it
In accordance with the provisions of Article 68 of Law No. 4987/2022 “If there is a case of commission or attempted commission of a crime under this law, a complaint report shall be submitted without delay by the Secretary General of Public Revenue or by the organs of the Tax Administration or by the Economic Police Directorate of the Hellenic Police. The criminal prosecution shall be carried out ex officio’.
Because the submission of a complaint is a positive procedural requirement for the exercise of criminal prosecution should definitely have been submitted and even by the competent persons named in the above provision of the law (AP 798/2014 – inadmissible criminal prosecution).
3.Burden of proof for the factual circumstances – reasoning of the decision
As it has been held in case law, the burden of proof of the facts that establish the tax violation attributed to a certain person, which entails the imposition of the foregone taxes and related penalties against him, bears, in principle, the state, i.e. the tax administration (cf. Council of the State decisions 4049/2014, 2442/2013, 886/2005, etc.).
It has also been ruled in case law that in crimes of purpose with “excessive subjective substance”, as in this case the crimes of tax evasion, the conviction must be justified in the conviction specifically the excessive malice or malice of purpose, otherwise the required specific and detailed reasoning of the conviction is missing and it is void under Article 510 para. 1 f. D’ of the Criminal Code. (Supreme Court (Areios Pagos) decision 652/2017).
4.Principle of retroactivity of the most lenient substantive criminal law
According to Article 2 para. 1 of the Criminal Code, ratified by Law 4619/2019 and entered into force under Article 460 of the same Code as of 1-7-2019, if more than one provision of law has been applicable from the commission of the act until its final adjudication, the one that in the specific case leads to the more favorable treatment of the accused shall apply. It follows from the above-mentioned article that the most favorable provision is always applied and not the law as a single ‘whole’, and that the law later than the one in which the act was committed is obviously more favorable to the accused when it renders the act irrevocable.
As a milder law within the meaning of the aforementioned Article 2 para. 1 of the Criminal Code, is the one which, as in force, contains the most favorable provisions for the accused. To that end, a comparison is made of the majority of those provisions in their entirety. If this comparison reveals that the accused, as charged, is equally burdened by all the laws, then the law in force at the time of the commission of the act is applicable, otherwise the most recent more favorable law is applicable (Supreme Court (Areios Pagos) 728/2020).
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