Reporting obligations under German foreign trade law

Foreign trade law has been a hot topic not only since the attack on Ukraine in February 2022 and the associated sanctions against Russia. In this area, legal pitfalls lurk – especially in the form of extensive reporting obligations – with considerable risks. Below is a small overview:

a) Payments in foreign trade

Among other things, payments – regularly from EUR 12,500.00 – from or to foreign countries must be reported to the German Bundesbank. The underlying provision is regularly overlooked in practice but is increasingly punished with the initiation of fine proceedings. According to Section 67 of the Foreign Trade and Payments Regulation (Außenwirtschaftsverordnung, AWV), this obligation applies to residents of Germany who accept payments from foreigners (or on their behalf from other residents) or, conversely, make such payments. The law accepts some payments (e.g. less than EUR 12,500.00; payments for the import, export or movement of goods; payments, in connection with the taking out or repayment of certain loans) exempt from the reporting obligation. The reports must be submitted by the fifth or seventh calendar day of the following month, depending on the underlying transaction.

b) Reporting of corporate assets with a foreign element

Pursuant to section 64 of the AWV, residents must report their foreign assets to the Bundesbank – ultimately relating to companies with a balance sheet total of more than EUR 3 million – if at least 10% of a foreign company is directly attributable to them or more than 50% of such a company is indirectly attributable to them. In the case of business assets of more than EUR 3 million, residents must also report foreign permanent establishments and branches if these are assigned to a domestic company or a foreign company in which the resident indirectly holds more than 50% of the shares.

The report must be made once a year, no later than six months after the balance sheet date. If the reporting party does not submit a balance sheet, the report must be submitted by 30 June of the following year.

Corresponding assets of foreigners in Germany must also be reported (Section 65 AWV). However, the domestic company or a domestic branch and/or permanent establishment is obliged to report.

c) Reporting of receivables and liabilities to foreign countries

Residents must report their claims and liabilities to foreigners to the Bundesbank if they amount to more than EUR 5 million at the end of a month (Section 66 AWV). Generally, the reports must be made monthly, although the deadlines vary in detail. When certain parameters are reached, special features apply.

d) Risk of fines and possibility of voluntary disclosure

In the event of an intentional or negligent violation of these reporting obligations, there is a risk of fine proceedings or the imposition of fines of up to EUR 30,000.00 per violation (Section 19 (3) No. 1 (b), (6) AWG in conjunction with Section 81 (2) No. 19, 20 AWV). In the event of a negligent violation, there is the possibility of a voluntary disclosure to the responsible main customs office. The voluntary disclosure cures the failure to report. In the event of a negligent violation, it is strongly recommended that you also report to the Bundesbank and take appropriate (compliance) measures for the future. From practice, we can report that the authorities are currently very benevolent in dealing with such facts – stricter handling is a matter of time!

e) Notifications under the Sanctions Enforcement Act

A new reporting obligation – a consequence of the Russia sanctions – is provided for in Section 10 (1) sentence 1 no. 1 of the German Sanctions Enforcement Act of December 19, 2022. According to this provision, certain reports must be made to the Central Office for Sanctions Enforcement (Zentralstelle für Sanktionsdurchsetzung) about funds or economic resources in Germany that are owned or possessed by sanctioned foreigners or residents or are held or controlled by them. In the event of a violation, criminal proceedings are threatened.

 

Best regards

Martina Butenschön
Lawyer
Certified Specialist in Tax Law
Compliance Officer (C.H. Beck)

Manuela Beckert
Lawyer
Certified Specialist in Tax Law
Certified Consultant for Criminal Tax Law (DAA)

Dr. Andreas Dürr
Lawyer