Child benefit evaded? Criminal charges for tax evasion can be the consequence!

Under certain conditions, parents in Germany are entitled to child benefit. As of January 1, 2023, the entitlement to child benefit is a uniform 250 euros per month and child and is paid out to parents by the family benefits office. So far, so good.

But if the family benefits office pays out child benefits even though parents are not (or no longer) entitled to them, this can have unpleasant legal consequences. Anyone who receives child benefit without justification can be prosecuted for child benefit evasion as a form of tax evasion.

In this article, you can find out when you may be charged with child benefit evasion due to unauthorized receipt of child benefit.

Who is entitled to child benefits?

As a rule, parents are entitled to child benefit, not the children themselves – even if the parents receive the child benefit “for their children”. This is regulated in the Income Tax Act.

But for which children exactly do parents or adults receive child benefit?

In any case, child benefit is not linked to parentage as a matter of principle. The decisive factor is that the child is regularly cared for in a household and lives in the household. Thus, adults can receive child benefits for biological children and foster children, but also for stepchildren – or grandparents under certain conditions for grandchildren taken into the household.

One of the prerequisites, however, is that the child must be

• has not yet reached the age of 18, or
• has completed vocational training, is older than 18 but not yet 21 and is unemployed
• has not yet reached the age of 25 and is still in training (school, vocational training, studies, etc.).

Important. For children with a disability, adults may also be entitled to child benefits beyond the age of 25. 

In addition, the person claiming child benefit under the Income Tax Act must be subject to unlimited tax liability in Germany and: the child must be resident or ordinarily resident in Germany, the EU or an EEA state. The latter can be of importance especially in the case of a longer study abroad.

Attention. Even if a person does not have the main residence or habitual abode in Germany, a claim to child benefit according to the Federal Child Benefit Act (Bundeskindergeldgesetz) is conceivable.

“Unauthorized receipt” of child support: When is this the case?

But when is it a case of unauthorized receipt of child benefit? So when is there a threat of investigative proceedings for child benefit evasion?

In principle, there is a risk of legal consequences if there is no longer any entitlement to child benefit and the person who previously received child benefit does not inform the family benefits office (in good time) that the situation has changed in such a way that there is no longer any entitlement.

In such a case, it is a so-called unauthorized receipt of child benefit.

When can this be the case? Anyone who receives child benefit must inform the family benefits office if, among other things, the child for whom child benefit is being received

• stops vocational training or studies and starts working
• has changed his or her place of residence (e.g. has moved to the other parent)
• goes abroad to a non-EU or non-EEA country for a longer period of time in the course of the education or training

Domestic move – criminal charges for child support evasion possible!

Even a change of residence in Germany can bring the family benefits office on the scene. Beneficiaries must inform the family benefits office about a change or de-registration of the child – the mere de-registration at the residents’ registration office is not sufficient!

One situation in particular can lead to problems here: a child moves, or children move, to the parent who previously did not receive the child benefit after the parents separate. In this situation, the previous parent receiving child benefits would be obligated to inform the family benefits office about this move. This is because from the moment of moving out, this parent is in any case no longer entitled to child benefit.

Moving abroad as a risk for child support tax evasion

Moving abroad also carries the risk of “child benefit evasion”. If the entire family moves abroad and the parents are therefore no longer liable to pay taxes in Germany, the entitlement to child benefit under the Income Tax Act usually lapses.

If child benefit continues to be paid and the move is not reported, this can result in criminal liability for omission. Even though the data from the registration office is now automatically transferred to the family benefits office, beneficiaries must report the move themselves.

What is the risk of getting “caught”?

But how high is the risk that the family fund learns of circumstances that could lead to an accusation of child support evasion?

The risk has increased since 2018: Since then, the Federal Central Tax Office has been allowed to pass on reporting data to the family benefits office if the data changes, for example, due to a move. In particular, the automatic transfer of data in the event of a move abroad entails a certain risk of coming under the scrutiny of the family benefits office.

Child support evasion is punishable as tax evasion

It seems harsh that people are exposed to the risk of criminal proceedings in the event of an overpayment of child benefits – especially if a person does not claim benefits unjustifiably with full intent.

However, the German Fiscal Code (Abgabenordnung, AO) clearly states that even in such a case, a person may be liable to prosecution for tax evasion under Section 370 of the German Fiscal Code (Abgabenordnung, AO). This applies on the one hand if one

• intentionally provides incorrect or incomplete information about facts relevant to child benefits and therefore receives child benefits unjustifiably, or
• intentionally and in breach of duty fails to inform the tax office as the tax authority about facts or changes in facts that are relevant for the receipt of child benefits.

The amount of the penalty for evading child benefit depends on how much child benefit was unauthorizedly received: a fine can be expected for unauthorized receipt of child benefit over a period of just a few months. Anyone who has evaded more than 100,000 euros must expect a custodial sentence.

Is a fine possible for child support evasion?

However, you are not always liable to prosecution if you have received child benefit without justification. This is because the family benefits office can also be accused of “reckless tax evasion”. If you have only violated a duty of care, this can be considered a tax offense. In this case, only a fine is imposed.

Recovery and interest on child benefit

The family tax office will reclaim the evaded amount from the accused. However, these claims are also not possible for an unlimited period of time: claims for repayment can be claimed for a maximum period of ten years.

Attention. It is not uncommon for the family benefits office to reclaim overpaid child benefits in one fell swoop. This can hit families hard financially. In this case, it makes sense to negotiate an installment payment with the support of a lawyer.

However, not only the overpaid child benefit has to be refunded. In addition, so-called evasion interest is due.

Self-disclosure in case of child support evasion?

Child benefit evasion is a form of tax evasion. So the question arises: Does a voluntary declaration make sense here as well?

The answer is: basically yes! Because here, too, it is possible to prevent criminal prosecution by filing a voluntary disclosure. In this case, however, you must provide all the necessary information that you have not provided, or completely correct incorrect information.

And yet, a voluntary disclosure does not always prevent the family benefits office from filing criminal charges for the evasion of child benefits. Thus, criminal proceedings are possible despite self-disclosure if

• criminal or fine proceedings have been initiated and the person concerned is aware of this fact
• the tax evasion has already been “discovered” and the person concerned should at least have expected this to happen
• the tax advantage due to the child benefit evasion amounts to more than 50,000 euros.

Attention! Even in the case of a voluntary declaration of child benefit evasion, the overpaid child benefit must be refunded. If the authorities assess the case as tax evasion, interest on evasion will be added!

What to do in case of criminal charges for child support evasion?

If criminal proceedings have been initiated, you should basically not lose your head!

Our tips for this situation:

• Stay calm, do not contact the family insurance fund without thinking.
• Do not make rash statements
• Contact a lawyer for an initial assessment
• Lawyer inspects files and examines allegations against you in detail
• Attorney demands proper conduct of social law claim review by court
• Together you determine strategy
• If necessary, the lawyer can achieve that the proceedings are discontinued
• If necessary, your lawyer represents you in court to obtain the most lenient sentence possible