In its ruling of 16 April 2013 (Az.: IX R 5/12), the Bundesfinanzhof held that costs incurred by a person convicted of an intentional offense for their criminal defense are not deductible as extraordinary expenses.
The BFH denied deduction under § 4 Abs. 4 and § 9 Abs. 1 EStG as business expenses or income-related expenses because the costs cannot be clearly attributed. According to the BFH, deduction as an extraordinary expense is likewise ruled out. This view differs from the BFH's case law on civil litigation costs, which may be deductible where litigation is unavoidable. In this respect, the judges stated that the commission of an intentional offense does not constitute an unavoidable event.
Frequently asked questions
Frequently asked questions
Are criminal defense costs deductible as extraordinary expenses?
No. In its ruling of 16 April 2013 (Az. IX R 5/12), the BFH held that criminal defense costs incurred in connection with a conviction for an intentional offense are not deductible as extraordinary expenses under § 33 EStG. The reasoning: committing an intentional crime does not constitute an unavoidable event.
Can criminal defense costs be deducted as business expenses or income-related expenses?
According to the BFH, a deduction under § 4 Abs. 4 EStG (business expenses) or § 9 Abs. 1 EStG (income-related expenses) is not permitted if the costs cannot be clearly attributed to the business or professional sphere. In cases of intentional offenses, this clear causal connection is generally lacking.
What is the difference compared to the treatment of civil litigation costs?
According to BFH case law, civil litigation costs may, under certain circumstances, be deductible as außergewöhnliche Belastung (extraordinary expenses) if the proceedings were unavoidable for the taxpayer. In criminal proceedings involving intentional offenses, this unavoidability is lacking, as the taxpayer caused the situation through their own conduct.
Does the deduction ban also apply to offenses committed negligently?
The BFH ruling of 16.04.2013 expressly refers to convictions for intentional offenses. In cases of negligently committed offenses, a different assessment may apply on a case-by-case basis, particularly where a professional or business-related nexus can be demonstrated.