limitation of assessment
noun · Festsetzungsverjährung
The ordinary period for assessing a tax is four years; it stretches to five where the tax was recklessly understated and to ten where it was evaded, § 169 Abs. 2 AO. Two further mechanisms move the dates, a start delayed by up to three years where no return was filed and a suspension of expiry triggered by audits and proceedings, so the raw four years rarely decide a case.
Which translation, when
Why
Limitation of assessment is the Festsetzungsverjährung, and the German rules are a three-layer construction that a single figure never captures. The base is § 169 Abs. 2 AO: the assessment period is four years as a rule; it is five years so far as the tax was recklessly understated and ten years so far as it was evaded, and the wording matters, because the extension applies to the amount affected rather than to the whole assessment. The provision reaches beyond the taxpayer’s own conduct, applying even where the evasion or reckless understatement was committed by someone else, unless the taxpayer proves both that he obtained no financial advantage from the act and that it did not result from his failure to take the precautions required in commerce to prevent understatement. The second layer is the start of the clock. In principle the period begins at the end of the calendar year in which the tax arose, but where a return is required and none is filed, or it is filed late, the start is deferred to the end of the year in which the return arrives, and at the outside by three years. The third layer suspends expiry: audits, criminal investigations, pending objections and appeals and other statutory events stop the period running while they last, which is why a German file can reopen years long thought closed. Two further points belong in any translation. The period is observed if the notice left the tax office before expiry, so late arrival does not help the taxpayer, though the courts require the notice to reach him in the end, and a notice that never arrives leaves the period unobserved. And the Festsetzungsverjährung must not be confused with the Zahlungsverjährung, the separate clock governing when an assessed tax can no longer be collected.
Typical mistakes
- The extended periods apply so far as the tax was recklessly understated or evaded, so applying ten years to an entire assessment overstates the reach.
- A missing return defers the start of the period by up to three years, so counting from the year the tax arose produces the wrong date.
- Festsetzungsverjährung concerns assessing the tax and Zahlungsverjährung collecting it, so treating them as one clock confuses two different deadlines.
What matters
Working out whether a German tax year is still open: the calculation should start from the correct period, apply the deferred start where a return was missing or late, and check for audits or proceedings that suspended expiry.
What the machine misses
A machine version of limitation of assessment produces Verjährung der Steuer or Steuerverjährung, words that hide which of two clocks is meant, and the concept is the Festsetzungsverjährung of § 169 AO with its four, five and ten year periods; the vague rendering also loses the deferred start where no return was filed and the suspension an audit triggers.
Examples
| the assessment period | die Festsetzungsfrist |
| the period is four years | die Frist beträgt vier Jahre |
| so far as the tax was evaded | soweit eine Steuer hinterzogen worden ist |
| suspension of the expiry of the period | die Ablaufhemmung |