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Reporting in accordance with the German Foreign Trade and Payments Ordinance – A frequently unknown and underestimated pitfall that could result in fines

In Germany, everyone can make payments to foreigners or receive payments from abroad without any restrictions or official authorisation. Nevertheless, the statistical reporting requirements that relate to external transactions have to be observed.

General information on foreign trade reporting

Reporting in accordance with the Foreign Trade and Payments Ordinance (Außenwirtschaftsverordnung, AWV) constitutes statistical reporting that serves to record cross-border payments, positions/stocks/holdings and assets for the purpose of compiling the balance of payments. These have to be reported periodically in accordance with the provisions of Section 63 ff. AWV to the Deutsche Bundesbank (German Federal Bank). To this end, the Bundesbank provides 14 different record sheets (reporting forms) that are intended for different target groups or represent different reporting purposes. A distinction is made between the following types of reports:

  • Cross-border payments > €12,500 in the context of cross-border goods traffic that are not recorded in the Intrastat/Extrastat reports.
  • Position/stock in cross-border claims and liabilities as well as the traffic in goods and services
  • Equity investment holdings
  • Equity interests held in and by foreign companies, subsidiaries and permanent establishments

All natural persons and legal entities are required to report. The reports have to be submitted electronically via the Deutsche Bundesbank portal.

Checking of foreign trade reports

It now appears to be common practice for the Bundes­bank to intensify its checking and monitoring of reporting requirements as well to focus increasingly on industrial companies. Furthermore, the Bundesbank routinely examines the reports that have been submitted and, in cases of uncertainty, will address questions to the submitting party.

The checks are carried out by Bundes­bank inspectors who, in the course of on-site inspections, review and evaluate documents such as invoices, agreements and statements of account that are related to potentially reportable transactions. The aim is to ensure that companies have submitted reports that are complete, accurate and timely.

Please note: Preparing for such a Bundesbank inspection, including organising it, providing data, access to systems and documents as well as supplying the requisite explanations of systems, processes and business transactions frequently involves a great deal of time and effort for the company that is to be inspected.

Typical sources of error when fulfilling reporting requirements

The most frequent sources of error for companies can be roughly divided up into the following categories:

(1) Being unaware and uncertain about the applicable rules – The requirements of the AWV reporting system – which have been fleshed out and supplemented in numerous notices and explanatory notes by the Deutsche Bundesbank – are extensive and complex.

(2) No clearly defined responsibilities – A lack of guidelines or process descriptions means that there are uncertainties with respect to the record sheets that have to be prepared as well as with respect to the participating and responsible departments.

(3) Process weaknesses as well as system-based sources of error – Compliance with regulatory requirements overextends those responsible in view of the large number of reportable transactions.

Consequences of violating the AWV reporting requirements

Submitting inaccurate, incomplete or late reports will be judged to be violations of the AWV and the competent customs authority could decide that these constitute administrative offences. Under the provisions on fines pursuant to Section 19(6) of the German Foreign Trade Act (Außenwirtschaftsgesetz, AWG) fines of up to €30,000 per violation are possible. Here, a violation is defined as any transaction that has not been reported or not completely, or reported with inaccurate attributes or late. Furthermore, liability for a fine towards the company and the persons acting for the company is possible for generally failing to provide proper organisational channels (failure to provide “proper supervision”) pursuant to Section 130 of the Administrative Offences Act (Gesetz über Ordnungswidrigkeiten, OWiG) in conjunction with Sections 9 and 30 OWiG.

Recommendation: If an inspection has been announced, or if the sources of error listed above have already been identified then a voluntary self-disclosure could be a sensible course of action. Pursuant to the provisions under AWG, in cases of negligence, if the violation was discovered by way of self-inspection and the competent authority was notified then the prosecution of the violation as an administrative offence would not be pursued.

Special cases in the event of foreign payments

These days, payments via PayPal or Ebay are common practice. With PayPal, the country where the business partner in the transaction comes from also plays a role. Here, what is important is not where PayPal is based but, instead, solely if these payments have been made in Germany or in a foreign country.

Conclusion: In order to comply with the requirements prescribed by law it will be necessary to develop the appropriate processes, methods and systems. Please do not hesitate to contact us if you require support for the implementation of a regular AWV reporting process.

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