Cash and Document Controls at the Border

A person entering the EU, e.g. crossing from Switzerland into Germany, must report all monies to the responsible authorities in writing and without being solicited to do so. The responsible authority is the authority in charge of the entry or exit point used to cross into the EU (if entering Germany, the German Customs Service is responsible). This obligation only applies for amounts of money exceeding EUR 10,000.

Money in this sense includes not only cash, but also transferable bearer securities including so-called payment instruments with a bearer clause, such as traveller’s cheques, transferable instruments (including cheques, promissory notes and money orders) as well as incomplete instruments (including cheques and money orders), which have been signed but lack the beneficiary’s name.

The person owning as well as the person in possession of the respective monies are obligated to declare them. The person in control of the monies must be identified. If a person, who is not the owner, carries the money in his pocket or backpack, then this person is the bailee and in control of the money. He is the person obligated to declare it.

An incomplete declaration is considered void. This means, that there is an obligation for completeness and accuracy.

The declaration must include the following information (Art 3 Sec 2 Customs Regulations):

• First and last name of the declaring person, date of birth, place of birth and nationality;
• the owner of the monies;
• the recipient of the monies;
• the amount and type of monies;
• the origin and purpose of the monies;
• the travel route;
• the means of transport.

If borders are crossed within the EU, e.g. between the Netherlands and Germany, no declaration is required. A declaration is only required, when explicitly asked whether monies of at least EUR 10,000 are brought into the country.

Note by the tax law specialist from Cologne: When travelling within the EU, a so-called optional duty to declare applies. This duty only arises, when a person is explicitly being asked if more than EUR 10,000 in cash is carried. The question must be clear and intelligible. If the officer cannot establish that he has asked a clear, intelligible question, then there was no obligation to make a declaration. If the question was misunderstood, a prohibition error might be the case, which would rule out wilful intent.

Some clients inform us of their creative deliberations on how to circumvent the duty to declare. Caution is advised: The customs authorities are only interested in facts and will treat two separate envelopes as one aggregate amount of money.

As set out in the Customs Administration Act (Zollverwaltungsgesetz), customs officers are permitted to conduct random checks, not only at the border but also within 30 km of it. Clients frequently inform us of checks conducted in trains travelling close to the border. Checks are permissible outside this 30 km zone, if there is reason to suspect cash or similar monies are carried by persons or in means of transport. These checks must however be limited in their locality and duration.

Carrying cash across EU-borders is not a criminal offence, even if a declaration is omitted. It is however a misdemeanour, if committed intentionally or negligently, which may be penalised by a fine of up to EUR 1 Million. In the case of wilful intent, the fine is usually 25% of the amount of monies discovered (12% for negligence). It may be more or less, depending on the individual circumstances. The customs officer will also seize a significant portion of the monies on the spot, in order to secure payment of an impending fine. Further, criminal proceedings for money laundering may be commenced and this is sometimes done as a precautionary measure. A tax law specialist is able to advise on available legal remedies and the course of action to be taken.

The customs officers will usually inform the Tax Authority/tax investigator of the monies discovered.

Note by the tax law specialist in Cologne: This may result in a race against time, if the affected taxpayer wants to submit a voluntary self-disclosure for foreign capital gains to a German Tax Authority. This is, because discovery of the offence precludes a voluntary self-disclosure. Has the offence been officially discovered if the customs authority has gained awareness? Or rather later, once the Tax Authority has received a tracer note from the customs officer? Or is the Tax Authority initially obligated to perform a verification with the previous tax returns? What tax information value do tracer notes of the customs offices have? Jurisprudence does not answer these questions. Our tax law specialists in Cologne follow the developments in jurisprudence and literature in respect of these questions. In order not to waste time, there is the option to submit a voluntary self-disclosure based on estimated figures. Due to the changes in the laws pertaining to voluntary self-disclosures, it is recommended to seek the advice of a tax law specialist.

This is an issue faced by many affected taxpayers. On the one hand, a voluntary self-disclosure must be complete. This requires banking documentation or a reasonably reliable estimate. On the other hand, the traveller may be pulled over and checked at the border, which means that a discovery of the offence is impending. This balancing act can be resolved by professional management of a voluntary self-disclosure:

• There is no reason for the client to be anxious, if a voluntary self-disclosure based on an estimation has been transmitted to the Tax Authority via fax. From this time onwards, he has an irrevocable expectant right, as long as he pays the taxes assessed at a later time and his voluntary self-disclosure (estimate) is complete. An estimation can frequently be performed on the basis of the amount of capital and the type of investment. An estimated annual profit can be extrapolated on the basis of these values. It is however recommended to obtain professional advice. After sending the fax, the client may bring the banking documentation to Germany for the purpose of calculating the precise taxation values (second step).
• An alternative option is to instruct the tax adviser to request the banking documentation directly from the Swiss bank and agree with the bank to anonymise the documents prior to being dispatched. The bank will then use a code word for identification purposes. Should these documents be sighted by customs while in postal transfer (this has happened to some clients), they will not be able to allocate them to an individual person. This way, a discovery of the offence (which would be an estoppel for a voluntary self-disclosure) is precluded.

Note by the tax law specialist from Cologne: The investment in a foreign country will be freely disposable once the first step (fax with estimated figures sent to the Tax Authority) has been completed. The client may then be unconcerned about bringing monies and documentation across the border into Germany (the applicable obligation to declare cash must be observed).

Clients sometimes wish to transfer part of their money to a German bank account after having submitted a voluntary self-disclosure. Is there an obligation to make a declaration under foreign trade law ?

Note by the tax law specialist in Cologne: Transfers to own accounts as in the example above do not have to be reported. Transfers from a foreign country to Germany may be reportable under certain circumstances and the omission to do so may result in a fine. This is the case under foreign trade law, if individuals or entities resident in Germany receive a money transfer on their account from a foreign person(or on their behalf) and the transfer is 12,500 or equivalent. Partial amounts will be aggregated. Vice versa, transfers from Germany to foreign persons (or domestic persons acting on behalf of foreign persons) are also reportable. Foreign persons in this sense are individuals and entities who are not domiciled in Germany. Offset amounts are treated as cash transfers. Some transactions are excluded from the obligation to report, such as payments for the import of goods. The Bundesbank provides a mail-service for submitting reports. It should always be checked, whether the bank has already submitted a report or not.