The Criminal-Law "Blocking Effect" of Section 25f: Where German VAT Criminal Liability Ends

In German tax proceedings, CJEU case law applies. In German criminal proceedings, only the statute applies.

The same facts, two sets of proceedings, two different yardsticks: what a German tax office may deny in tax terms is far from automatically criminal. Section 25f of the German VAT Act (Umsatzsteuergesetz – UStG) translated the EU Court of Justice’s anti-fraud case law into national statute – but more narrowly than Luxembourg formulated it. For criminal law, that narrowness is not a drafting accident. It is a boundary with constitutional rank: Article 103(2) of the German Basic Law – Germany’s strict version of nullum crimen sine lege – prohibits basing criminal liability on any denial of rights that goes beyond the written statute. German practitioners call the result the Sperrwirkung: the “blocking effect” of Section 25f. This page explains the doctrine for international in-house counsel and foreign defence lawyers, maps the concrete blocked zones – and shows why even voices from the prosecution side share the reading.

Two tracks, two yardsticks

The diagram on this page shows two tracks. On the tax track, the full force of EU law runs: since Kittel and Italmoda, the Court of Justice denies a knowing or negligent participant every right under the VAT system – on a widely held view even directly, alongside and beyond Section 25f. On the criminal track, that does not work. Germany’s tax evasion offence, Section 370 of the Fiscal Code (Abgabenordnung – AO), is a blanket offence: whether tax was evaded is determined by substantive tax law – but by statutory tax law. Where the statute does not order a denial, there is, in criminal terms, no tax shortfall that could have been concealed.

Sabine Grommes, the leading author on this question, has put the dividing line into one sentence that German defence teams now quote verbatim: for VAT periods ending after 31 December 2019, the criminal-law principle of legality makes Section 25f UStG exclusively decisive in criminal proceedings, and any recourse to the broader CJEU anti-abuse case law would be an impermissible analogy to the detriment of the accused – while in tax proceedings that case law remains applicable alongside the statute.

The punchline: the blocking effect exists only in criminal law – but there, it is absolute.

Why the gap exists at all

To use the blocking effect, you must measure the gap. Grommes reconstructed the “offence definition” implicit in the European case law and set it side by side with the German statute. The result: the Court of Justice’s catalogue of deniable positions covers all rights conferred by EU VAT law – input VAT deduction, the intra-Community supply exemption, the export exemption, the margin scheme, the import VAT exemption, even the direct claim against the treasury. Section 25f names only four positions. Measured against the European original, the German provision is “distinctly too narrowly drafted”.

In tax law, one may read that as a legislative oversight. In criminal law, it is the opposite: a conclusive decision. In 2020 the legislator defined which denials German law recognises – and thereby defined the outer limit of what can count as criminal tax evasion. A court that supplements the statutory catalogue with positions from Luxembourg is not interpreting a statute. It is writing one.

The constitutional foundation: the legality principle and the Becker doctrine

Two pillars carry the blocking effect. The first is the ban on analogy: under Article 103(2) of the Basic Law, an act can be punished only if its criminality was determined by statute before it was committed. For a blanket offence such as Section 370 AO, this guarantee extends to the tax norms that fill in the blank. Wolfram Reiß has stressed that even in pure tax law an interpretation against the taxpayer beyond the wording is impermissible – in criminal law, a fortiori. Germany’s leading criminal tax law commentary (Jäger/Randt/Bülte) is remarkably candid about how uneasy the import of the European anti-abuse doctrine into criminal law has been from the start, calling it a clause “difficult to reconcile” with the wording of the German criminal statute.

The second pillar comes from EU methodology itself. Christian Merkel has recently recalled the Becker doctrine: an EU directive has vertical direct effect only in favour of the individual. A state that failed to transpose a directive – or transposed it too narrowly – cannot invoke the directive against its citizens; direct application to the individual’s detriment is excluded. If the German legislator codified the anti-fraud case law incompletely, that is the state’s omission – not the accused’s risk. For criminal liability, the national statute remains the ceiling.

The concrete blocked zones

From the synopsis, distinct case groups emerge in which punishment is barred even where a tax-law denial can be debated:

The trader’s own evasion. By its wording, Section 25f covers only evasion at a preceding or subsequent stage of the chain – not the trader’s own offence. Germany’s Federal Court of Justice (Bundesgerichtshof, the supreme criminal court) ruled accordingly that merely concealing one’s own output transactions does not extinguish the input VAT from genuine purchases – against the more expansive Luxembourg line. Notably, this reading is endorsed from the prosecution side: Jost Schützeberg, a long-serving senior prosecutor, records in his case note that it corresponds to the wording of Section 25f as introduced on 1 January 2020. Where even the prosecution reads the statute that way, no trial court should pass over it. Grommes takes the consequence into the sentencing arithmetic: in own-evasion cases the input VAT must even be set off as reducing the evaded amount, because the German “no-netting rule” (Kompensationsverbot) does not apply where there is a direct economic link.

The import VAT gap. Import VAT is entirely absent from the catalogue of Section 25f. Grommes concludes that its denial is criminally “blocked”: sanctioning via the broader European catalogue would be prohibited analogy. Reiß adds the parallel gap for exports to non-EU countries. In import and export chains – in practice, every larger carousel complex with a third-country leg – this shifts the evasion calculation substantially.

Margin scheme and other EU-law rights. The Litdana constellation – denial of the margin scheme – appears in the European catalogue, not in the German statute. The same holds for further positions beyond the four numbers of Section 25f. Criminally, they are off limits.

Non-payment cases. Section 25f also cross-refers to the mere “damaging of VAT revenue” through non-payment of correctly declared tax. After the Court of Justice’s HA.EN. judgment, mere non-payment is not fraud; commentary considers the cross-reference incompatible with EU law to that extent. A criminal charge built on a denial that is itself contrary to EU law is doubly vulnerable – details on our page on Section 25f of the German VAT Act.

“Should have known” is not intent

The blocking effect limits the objective side of the offence. Next to it stands a second, equally important dividing line: even where Section 25f applies in tax terms, the mental element of Section 370 AO must be established independently. “Should have known” is the language of negligence – criminal intent under German doctrine requires that the accused knew, or at least seriously contemplated and accepted, the existence and amount of the tax claim and intended its evasion. The Jäger/Randt/Bülte commentary concedes indicative weight to the Kittel test but rejects any equation; tax-law presumptions, burden-of-proof rules and estimates must not be carried unchecked into the criminal court’s conviction. Bock and Fülscher put it with textbook clarity: the objective incorrectness of a return is not identical with subjective knowledge of the evasion. And Ann-Kathrin Schreiner has shown monographically that, because of the constitutional guilt principle, criminal law does not impute other people’s knowledge as a substitute for intent – whose knowledge within a company counts is a separate question requiring careful analysis.

Add the time factor: what matters is the state of knowledge at the time of supply. An input VAT deduction lawfully acquired does not lapse through later knowledge – and later knowledge does not trigger a criminally sanctioned duty to correct, because the original return was not incorrect when filed.

What this means for defence teams and advisers

For foreign counsel coordinating a German case, a three-step grid follows. First: does the allegation even sit within the catalogue of Section 25f – or is the prosecution working with the broader European catalogue? Second: does the wording carry the charge – own offence, import VAT, exports, non-payment? Third: has intent been established for the specific person, the specific time and the specific transaction – or is tax-law “should have known” being recast as criminal guilt? Each step is an independent attack on the indictment, the search warrant and the quantification of the alleged evasion. And each feeds back into the parallel proceedings: whoever reduces the criminal shortfall changes the volumes for asset freezes, secondary liability and confiscation. Where an investigation is already running – increasingly under the lead of the European Public Prosecutor’s Office – the blocking effect belongs in the defence architecture from day one; the course is set in the first 72 hours.

One closing point, for honesty’s sake: the blocking effect is the prevailing scholarly position, resting on strong foundations, but it has not yet been spelled out by Germany’s supreme courts in so many words. Whoever relies on it needs the complete doctrinal apparatus – wording comparison, the legality principle, the Becker doctrine, the commentary literature and the voice from the prosecution side. That is exactly what this page assembles.

The dispute is open – and ripe for decision

The commentary literature has by now sorted the camps clearly. In favour of the blocking effect stands the criminal-law ban on analogy: Section 25f is strict statutory law, and what its wording does not carry, no criminal court may add – so Tormöhlen in the Reiß/Kraeusel/Langer commentary. In the Sölch/Ringleb commentary, Treiber adds the open flank towards EU law: whether the denial complies with the legality principle of Article 49 of the Charter of Fundamental Rights is unresolved – up to and including the option of a reference to Luxembourg. The counter-voice belongs on the table, fairly stated: the most doctrinally coherent fiscal counter-position – Pflaum, in the Wäger commentary – treats Section 25f as “merely declaratory” and denies any criminal-law blocking effect; on that view, the rights never arise in the first place where the trader acted in bad faith. Whoever knows that position can counter it: the defence’s answer remains the wording and Article 103(2) of the Basic Law – a “declaratory” provision that carries criminal liability beyond its own text is unknown to the German constitution. And it is worth hearing what Luxembourg itself concedes: the President of the Court of Justice, Koen Lenaerts, has written that refusing an EU-law tax advantage is “a radical measure – one might even call it a sanction” – one that must not be applied lightly. Whoever says sanction must say certainty and foreseeability. And since the Court, in UP CAFFE in October 2024, applied the abuse prohibition directly even without a national denial provision, the tension with the requirement of a statutory basis has sharpened further. The dispute is not settled. It is ripe for decision.

New since December 2025: the Federal Court of Justice changes course on concurrence

In December 2025, Germany’s Federal Court of Justice changed its long-standing case law on concurrence: VAT advance returns and the annual return for the same year are separate procedural offences – in the court’s own words, “the Senate no longer adheres to this case law.” In substantive terms, the advance returns generally remain co-punished preliminary acts; cumulative conviction for identical wrongdoing is excluded. March 2026 brought the sequel: failing to file the annual return after deliberately incorrect advance returns is a co-punished subsequent act – but a corrected advance return does not operate as a voluntary self-disclosure where output transactions remain concealed. The balance is ambivalent. The prohibition of cumulation protects: nobody is punished twice for the same wrong. At the same time, limitation periods now run separately, and self-disclosures must be complete for each individual return – the precision requirements for corrections have risen drastically. How to set the switch correctly between a Section 153 correction and a voluntary self-disclosure is, from now on, anything but a formality. One warning on “large-scale” evasion: for findings assessments (Feststellungsbescheide), the Federal Court of Justice has, since October 2025, drawn the threshold at €140,000 of overstated income – with late completion of the offence and a correspondingly long limitation period.

Source box

Constitutional and methodological framework: - Article 103(2) of the German Basic Law (Grundgesetz); Section 1 of the German Criminal Code (StGB); Section 370 AO (German Fiscal Code; blanket offence). - Merkel, UR 2025, 641 (646 et seq.: vertical direct effect only in favour of the individual, Becker doctrine; no direct application of a directive to the individual’s detriment).

Blocking-effect literature (German-language): - Grommes, UR 2022, 420 (430) – the key passage, quoted in substance above. - Grommes, UR 2023, 433 (433: blocking effect in criminal law only; 435: CJEU catalogue of deniable rights, Section 25f “distinctly too narrow”; 437: import VAT gap and ban on analogy). - Schützeberg, PStR 2025, 4 (4 et seq.: wording correspondence of Section 25f, written from a former prosecutor’s perspective). - Reiß, UR 2020, 408 (411 et seq.: wording limit; 413 et seq.: exports/import VAT; 415: no-netting rule). - Joecks/Jäger/Randt/Bülte, Steuerstrafrecht, 9th ed. 2023, Introduction para. 129 (clause “difficult to reconcile” with the criminal statute); § 370 paras 460–462 (no unchecked adoption of tax presumptions); § 370 paras 502 et seq. (intent doctrine; “should have known” is not intent). - Bock/Fülscher, Steuerstrafrecht, 2024, pp. 30 et seq. (intent/mistake), pp. 141 et seq. (recklessness). - Schreiner, Wissenszurechnung im Umsatzsteuer(straf)recht, 2025, pp. 151–181 (no imputation of knowledge as substitute for intent). - Wild, PStR 2020, 119 (120: time-of-supply doctrine; no correction duty under Section 153 AO). - Tormöhlen, in: Reiß/Kraeusel/Langer, UStG, § 25f margin no. 36 (ban on analogy / lex stricta as a building block of the blocking effect). - Treiber, in: Sölch/Ringleb, UStG, 106th suppl. March 2026, § 25f margin no. 92 (compatibility with Article 49 CFR unresolved; option of a preliminary reference). - Pflaum, in: Wäger, UStG, 4th ed. (as of 6/2026), § 25f margin no. 57.2 (counter-position: Section 25f “merely declaratory”, no criminal-law blocking effect; also margin nos. 5.1/57.1: rights never arise, criminality of claiming them). - Lenaerts, EC Tax Review 2025, 78 (80 et seq.) – the denial as “a radical measure – one might even call it a sanction”.

Case law: - Federal Court of Justice (BGH), judgment of 20 October 2011 – 1 StR 41/09, BGHSt 57, 32 (adoption of the EU anti-abuse doctrine after a CJEU reference). - Federal Court of Justice (BGH), 14 October 2020 – 1 StR 213/19 (own evasion does not extinguish input VAT; case note Schützeberg, PStR 2025, 4–6). - Federal Court of Justice (BGH), 20 August 2019 – 1 StR 184/19, NZWiSt 2020, 111 (no retroactive bad faith). - Federal Court of Justice (BGH), order of 10 December 2025 – 1 StR 387/25, ECLI:DE:BGH:2025:101225B1STR387.25.0 (designated for the official reports, BGHSt), paras 22 et seq., 28, 30 (change of case law: advance returns and annual return as separate procedural offences; co-punished preliminary acts, prohibition of cumulation; supplementary indictment). - Federal Court of Justice (BGH), order of 4 March 2026 – 1 StR 388/25 (omitted annual return as co-punished subsequent act; a partial correction that continues to conceal output transactions has no self-disclosure effect). - Federal Court of Justice (BGH), judgment of 14 October 2025 – 1 StR 445/24 (“large scale” for findings assessments from €140,000 of overstated income; completion of the offence only with the last follow-up assessment, extended limitation period). - CJEU, judgment of 6 July 2006 – C-439/04 and C-440/04, Kittel and Recolta Recycling, ECLI:EU:C:2006:446. - CJEU, judgment of 18 December 2014 – C-131/13, C-163/13 and C-164/13, Schoenimport “Italmoda” Mariano Previti and Others, ECLI:EU:C:2014:2455. - CJEU, judgment of 1 July 2021 – C-521/19, CB, ECLI:EU:C:2021:523 (counter-position to the BGH line on own evasion). - CJEU, judgment of 15 September 2022 – C-227/21, HA.EN., ECLI:EU:C:2022:687 (non-payment is not fraud). - CJEU, judgment of 18 May 2017 – C-624/15, Litdana, ECLI:EU:C:2017:389 (margin scheme within the CJEU catalogue). - CJEU, judgment of 4 October 2024 – C-171/23, UP CAFFE, ECLI:EU:C:2024:840, para. 37 (direct application of the abuse prohibition without a national legal basis).

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