Suspension of Enforcement: Securing Liquidity Before the Dispute Is Decided

In Germany, an appeal stops nothing. Enforcement proceeds — until the suspension takes hold.

It is the most underestimated ground rule of German tax procedure: objections and court actions have no suspensive effect. The multi-million assessment issued after a special VAT audit becomes enforceable on its due date — account seizures, attachment of receivables, execution into stock — regardless of how strong your arguments are and how long the objection procedure takes. Whoever merely files an objection is litigating while the cash drains away. The remedy is the Aussetzung der Vollziehung (AdV) — suspension of enforcement: it freezes the payment obligation until the dispute is decided. In cases built on Section 25f of the German VAT Act, the AdV is not a sideshow but the first main battle — it decides whether the company economically survives the litigation it can legally win. The good news: precisely in “should have known” cases the prospects are structurally favourable, because the suspension attacks these assessments where they are weakest — at the burden of proof.

What the suspension does — and where to apply

Suspension of enforcement (Section 361 of the German Fiscal Code, AO, during the objection stage; Section 69 of the Fiscal Court Code, FGO, before the fiscal court) suspends the enforceability of the contested assessment: no due date, no execution, no late-payment surcharges on the suspended amount. It is granted where there are serious doubts as to the lawfulness of the assessment, or where enforcement would cause undue hardship not required by overriding public interests.

The route has two stages: first, the application to the tax office itself — filed in parallel with the objection, ideally in the same brief. If the office refuses or enforcement is imminent, the application to the fiscal court is open; its admission requirements (prior refusal by the authority or imminent enforcement) must be observed but are rarely an obstacle. The judicial AdV procedure is an interim procedure with summary examination — decided on the file and readily available evidence, in weeks rather than years. That is exactly what makes it the strategic centrepiece: here the defence obtains the first independent judicial assessment of the entire case — a signal that radiates into the objection procedure, the criminal case and every conversation with banks and credit insurers.

Serious doubts: why burden-of-proof cases are suspension cases

Serious doubts exist where, alongside the circumstances supporting lawfulness, weighty reasons emerge that leave the assessment genuinely undecided — more than a mere possibility, less than a probability of success. Assessments based on Section 25f are structurally vulnerable to this standard, for three reasons:

First, the burden of proof. The burden of establishing knowledge or means of knowledge lies with the tax administration — settled CJEU case law, confirmed by Germany’s Federal Fiscal Court, and conceded by the Federal Ministry of Finance circular on Section 25f itself. The CJEU expressly prohibits recourse to presumptions and assumptions; mere membership of a conspicuous invoicing chain is not enough. Assessments built on chains of inference, contamination logic and hindsight plausibility thus carry the “undecidedness” within them — the summary examination only has to expose that full proof is missing. What the tax office must prove is therefore the skeleton of every suspension application.

Second, the amount. Denial cascades, multiple capture of the same tax along one chain, estimates with safety surcharges: the quantum dimension carries serious doubts of its own, even where something would survive on the merits. Partial suspension is possible and often the fastest win.

Third, your own material. The summary examination works with readily available evidence — and rewards preparation. An Evidence Pack that exports, for every challenged transaction, the checks, timestamps, sources and approvals in readable form converts the abstract burden-of-proof objection into concrete exculpation. In an interim procedure, that is money in the bank — literally.

The second track: undue hardship

Beside serious doubts, the statute knows the hardship route: enforcement is also to be suspended where it would cause undue hardship not required by overriding public interests. In practice this track rarely succeeds alone — the challenge must not be obviously hopeless. But it changes what must be presented: where immediate enforcement would make wages, social contributions and critical supplier payments impossible and create irreversible damage, exactly that belongs in the application — concretely, with a liquidity plan, not as a generic complaint about “considerable burden”. The hardship track is also the hinge to the security question: the more tangible the threat to the company’s existence, the less the suspension may be made dependent on security the company can no longer raise. Combining both tracks — doubts about lawfulness plus documented hardship — gives the court two independent routes to the same result.

The flow in practice: from application to decision

Choreography co-determines success. The first application goes to the tax office — in the same brief as the objection, coupled with the express request to refrain from enforcement measures until the suspension is decided. Even this interim shield is valuable: it buys weeks in which no accounts are seized. If the office refuses — in Section 25f scenarios often with boilerplate — the way to the fiscal court is open; imminent enforcement opens it even without a formal refusal. The court application is the defence’s showpiece: a concentrated presentation of the case, burden-of-proof argument first, quantum dissection as the auxiliary argument, available evidence as an organised exhibit bundle — not a file dump, a readable dossier. The court decides by order, usually without an oral hearing; the decision is only exceptionally appealable, which makes the first serve count double. And it works beyond its operative part: a granted suspension disciplines the office’s further conduct; a reasoned refusal shows early where the argument needs sharpening — before the same questions are decided in the main proceedings.

Security: the price of suspension — negotiable

The suspension may be made conditional on providing security where the later collection of the tax claim appears endangered. This is where the economic value of the suspension is decided: an AdV against full security does not help a company that cannot raise the security. The defence works on three points: the risk prognosis (an operationally sound business with open books is no flight case), the amount (security at most for the portion not seriously in doubt) — and proportionality: where the security requirement would de facto nullify the suspension by endangering the company’s existence, it must not be demanded. The instruments are negotiable too: bank guarantee instead of deposit, staggered security, partial releases.

German VAT law offers a special bridge of its own: where the tax office withholds input-VAT surpluses, Section 18f of the VAT Act allows consent to the tax filing against security — the refund is paid out while the dispute continues in an orderly fashion. Combined with the AdV and, in freeze cases, the release amount of an asset freeze, this creates a liquidity roadmap instead of a suffocation scenario.

Interest, the double track, liability notices: the side calculations

Three items belong in every suspension strategy. The interest risk: if the challenge ultimately fails, suspension interest accrues — the AdV is a credit, not a gift. With substantial prospects of success this credit is almost always right; with pure time-buying strategies it is an arithmetic exercise to be run beforehand. The double track: against the asset freeze under Section 324 AO, the AdV is likewise the remedy of choice — objection and action alone have no suspensive effect there either; the literature calls the parallel AdV application mandatory. The second front: liability notices against managing directors are also open to suspension — and accessoriness works double here: serious doubts about the primary tax claim are at the same time serious doubts about the liability notice. Coordinating the AdV proceedings of company and officers multiplies the effect of every winning argument.

The sequence is clear: first the company stays solvent, then the merits are fought — from a position of strength. The VSK team of German attorneys and tax advisers combines suspension applications, security negotiations and evidence architecture into one roadmap that starts at the tax office and, where necessary, reaches a first judicial course-setting at the fiscal court within weeks.

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