Reform of External Audits in Germany from 2025

Starting January 1st, 2025, Germany will introduce reforms to its external audit procedures under the Fiscal Code, aiming to enhance efficiency and transparency for businesses. Major chages include: Audit orders must be issued by the end of the calendar year following the year in which the tax assessment was first completed. For example, if a sales tax return for 2025 is approved in March 2027, the audit order must be issued by December 31, 2028. Delays in issuing audit orders will require justification.

 

To ensure faster resolution, the suspension of tax assessment deadlines due to audits will now have a five-year limit. If an audit order is issued, the audit must be completed within five years from the calendar year the order was announced.

Six months after receiving an audit order, taxpayers may receive a formal request for cooperation if they haven't complied. Failure to respond within a month could result in a fine of €75 per day, up to a maximum of €11,250.

If an audit reveals an error, businesses must not only correct it for the audited period but also for future tax periods where the same issue occurs. This aims to prevent repeated errors and potential accusations of tax evasion.

These reforms focus on accelerating external audits and improving compliance. Businesses should prepare for stricter timelines and enhanced correction obligations, emphasizing the need for an effective Tax Compliance Management System (TCMS).