Criminal law on corruption
Despite concerted compliance efforts on the part of companies and public authorities alike, the expansion of what is deemed corrupt practices – both about political corruption by government officials as well as bribery and corruption in business transactions pursuant to section 299 of the Criminal Code – results in a large number of criminal investigations on allegations of corruption offences that are, in most cases, vigorously prosecuted.
The allegation of corrupt payments to recipients outside Germany plays a central role in this context. The cases investigated often involve genuine or supposed consultancy agreements which the investigating authorities interpret as “vehicles” to channel illicit payments to foreign officeholders, if only because the German investigators are unfamiliar with the structure and design of these agreements.
Also, the role that the provision of section 4 (5) sentence 1 no. 10 sentence 1 of the German Income Tax Act plays in disallowing the tax deductibility of bribes should not be underestimated. . If such payments were deducted as operating expenses, this would constitute tax fraud under section 370 (1) of the German Fiscal Code. This is particularly relevant since tax fraud can, in many cases, still be prosecuted when the prosecution of a corruption offence is time-barred, as the statutory period of limitation for tax fraud commences later and is usually longer. For this reason, some of the major “corruption trials” against German industrial groups were in fact the prosecution of tax offences.