BFH: Application of the principles of proportionality and protection of legitimate expectations when estimating income

In its ruling of 28 November 2023, the Federal Fiscal Court (BFH) continued its case law on the application of the principles of proportionality and the protection of legitimate expectations in the case of estimates. It thus sets clear limits to the practice of the tax authorities to carry out so-called "moon estimates" in tax audit and tax investigation cases. What requirements now apply to estimates and how is the protection of legitimate expectations guaranteed?

According to the BFH, an estimate of income may not be based solely on the naming of formal or material defects. Rather, it must be weighted according to its significance for the specific individual case. A full estimate that completely rejects the taxpayer's profit calculation is only permissible in the case of serious deficiencies. This strengthens the protection of legitimate expectations vis-à-vis the tax authorities.

The facts of the case

Im zugrunde liegenden Fall betrieb ein Restaurantbesitzer in den Jahren 2011 bis 2014 ein Geschäft mit überwiegend Bareinnahmen. Er nutzte eine einfache elektronische Registrierkasse aus den 1980er-Jahren. Die Finanzverwaltung hielt die Aufzeichnungen für unzureichend und nahm eine Vollschätzung vor, die die erklärten Umsätze vervierfachte. Das Finanzgericht (FG) beauftragte einen Sachverständigen, der feststellte, dass ein interner Zähler (Z1-Zähler) der Kasse durch Codes veränderbar war. Solche Änderungen könnten jedoch bei Reparaturen notwendig sein. Das FG sah die Kasse als objektiv manipulierbar und für steuerliche Zwecke ungeeignet an, obwohl eine tatsächliche Manipulation nicht nachgewiesen wurde. Es bestätigte die Schätzung der Finanzverwaltung weitgehend.

Decision of the BFH

The BFH overturned this decision and referred the case back to the tax court for reconsideration. It is true that the cash register used was objectively manipulable, which in principle constitutes a serious formal defect and authorises the tax authorities to make estimates. However, the BFH emphasised that the manipulability of such old cash register models only became known over time. Taking into account the protection of legitimate expectations, taxpayers should be granted leniency under certain conditions specified in the judgement. The weight of the deficiency due to the objective manipulability is then not as high as in the normal case and can even be completely eliminated if additional evidence is provided. A blanket full assessment is disproportionate.

As of 14 April 2024, this case law remains authoritative, as there are no further decisions or legal changes. The BFH thus strengthens the protection of legitimate expectations and requires the tax authorities to carry out a differentiated review instead of excessive estimates.

Options for action

The judgement protects taxpayers from arbitrary interventions by the tax authorities. It shows that estimates are not automatically justified, even in the case of technical deficiencies, but must be weighed up on a case-by-case basis. Particularly in the case of older systems whose weaknesses were only recognised later, the protection of legitimate expectations applies. Taxpayers should therefore provide additional evidence to support their profit calculation and avoid excessive estimates.