The landscape of taxation and regulatory compliance in Europe continues to evolve at a breakneck pace. After aproving the eInvcoicing mandate and GEBA, now the German government announced an ambitious "Action Plan" to intensify the fight against tax evasion and financial crime. This 26-measure package not only aims to increase tax revenue by billions of euros, but also marks a turning point in the use of technology, relying on a new eReporting system for VAT and Artificial Intelligence (AI) for fraud detection.
In this article, we break down the key points of this action plan and how it will affect the financial management of companies operating in Germany.
Germany's New Action Plan: fines, prison sentences, and reputational risk
Based on the premise that tax crime undermines trust in the rule of law, Germany has decided to reclassify tax evasion, moving it from a misdemeanor to a serious criminal offense.
For CFOs and financial executives, the implications of this package go far beyond a simple audit. Among the most notable measures are:
• Stricter penalties and fines: the maximum prison sentence for organized tax crime is being raised from 10 to 15 years. In addition, the maximum limits for administrative fines imposed on companies (legal entities) will be increased.
• End of amnesty for self-reporting: the exemption from punishment for voluntary disclosure is being eliminated. The government wants to put an end to the practice of confessing irregularities only when a company fears being discovered.
• Transparency and reputational damage: information about companies punished for serious tax crimes will be made public. This "name and shame" approach adds a critical reputational risk for corporations.
• Whistleblower protection: structures for systematic data acquisition and the protection of whistleblowers will be strengthened.
• Institutional reinforcement: 1,500 new specialists will be added to the customs service, and a Joint Center against Tax and Financial Crime will be created to coordinate investigations at the federal, state, and international levels.
With these measures, the German government expects to generate significant additional revenue, estimating an extra one billion euros in tax collection by 2027 alone.
eReporting and the role of Artificial Intelligence in combating tax evasion
One of the technological pillars of this plan is the modernization of tax administration. To prevent Value Added Tax (VAT) fraud, Germany will introduce a new electronic reporting system (eReporting). Under this new scheme, companies will be required to report VAT much more quickly and entirely electronically.
Furthermore, the government will establish a new data analysis center in cooperation with the federal states, allowing for inter-institutional access to tax information. All this data will be consolidated into a newly created central platform.
To this end, German tax authorities will develop and use AI-powered analytical tools to track large volumes of financial information, identify anomalous patterns, and detect potential fraud with unprecedented precision and speed.
New obligations for companies: data retention and local servers
The action plan also introduces strict requirements that will directly impact companies' document management and Accounts Payable and Accounts Receivable processes:
• Extended retention period: the mandatory period for keeping accounting and tax documents will be extended to 15 years.
• Mirror servers in Germany: lCompanies will be required to store their tax-relevant data on mirror servers physically located within German territory.
• Electronic cash registers: A mandatory electronic cash register system will be introduced to prevent fraud in sectors where cash usage is predominant, known as the KassenSichV (Cash Register Security Ordinance). This measure is relevant if your company has retail operations, its own stores, or direct points of sale (POS) in Germany. In that case, the CFO and the IT team must ensure that their Point of Sale (POS) systems are equipped with these security devices (TSE) and that the information from those electronic cash registers flows correctly, unalterably, and automatically into their central SAP system for subsequent VAT eReporting.
Prepare your SAP system for tax regulations with Brait
For companies that use SAP and operate in multiple countries, managing these fragmented regulations can pose an operational challenge and a high risk of penalties in the event of non-compliance.
At Brait, we specialize in SAP technology solutions that facilitate both operational workflows (automation) and regulatory compliance and eTaxes. The adoption of eReportingsystems, mandatory electronic invoicing (such as the ZUGFeRD format in Germany), and strict data retention requirements force companies to act on several fronts to adapt their systems. That is why we help companies implement centralized solutions, without compromising team workflows or subjecting them to unnecessary interruptions.
Through solutions like Invictia (our global electronic invoicing solution) and our partners' cutting-edge technology, we help companies:
• Issue and receive electronic invoices in compliance with local formats for each country (ZUGFeRD, Factur-X, UBL, etc.).
• Automate tax reporting and eReporting directly from SAP.
• Ensure legal document retention (such as the 15 years now required in Germany) through centralized repositories, automated archiving policies, and full audit traceability.
• Integrate different solutions without leaving SAP, from invoice process automation to intelligent ECM, avoiding manual tasks, errors, and exposing the company to risks.
If you need to adapt your SAP system to the new tax regulations in Germany or any other country, get in touch with us today!
