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Not only convictions for intentional tax evasion or tax arrears, but also mere violations of payment and reporting obligations can establish unreliability under the German Hospitality Act (GastG) and jeopardize a liquor license.

In the case underlying the decision of the Bayreuth Administrative Court of June 28, 2023 (B 10 K 21.1088), convictions for driving under the influence, illegal possession of narcotics, and intentional bodily harm, as well as administrative offenses for violations of hygiene regulations, were not sufficient grounds for denying the liquor license. However, tax-related reasons led to the restaurateur's unreliability, as he failed to pay taxes due on time, did not submit tax returns on time, relied on estimates by the tax office, violated his employer obligations, and did not cooperate in the wage garnishment of his employee.

The liquor license under the German Hospitality Act (GastG) is, like the business license under the German Trade Regulation Act (GewO), contingent on the reliability of the business owner. The decisive factor is the prognosis that, based on the overall picture of the business owner's conduct, they will fulfill their professional obligations and manage the business properly in the future.

According to the decision of the Bayreuth Administrative Court of June 28, 2023, unreliability is already established with tax debts of €4,500 to €6,000, even without enforcement attempts by the municipality or tax office.

To prevent administrative proceedings for the revocation of the liquor license, even mere tax payment and reporting obligations should be strictly adhered to. Should prohibition proceedings be initiated, submitting a viable restructuring plan can be helpful. Mere one-off payments or insignificant monthly installments are usually no longer sufficient to restore the reliability required under hospitality law.

Even a legally binding conviction of a restaurateur for tax evasion – including by way of a penal order – can lead to a business prohibition.

The Bavarian Administrative Court of Appeal (VGH München) confirmed in its decision of September 19, 2023 (22 ZB 22.2089) that courts and authorities may base their decisions on the findings of the criminal court judge without conducting their own investigations. An exception exists only if there are substantial indications that the criminal court judge's findings are incorrect.

This decision is particularly relevant because administrative proceedings regarding the question of business reliability generally require a predictive assessment, and this assessment also incorporates factors outside of the criminal proceedings that relate to the future conduct of the business owner.

In the case underlying the VGH München's decision, the court affirmed a serious business-related offense (amount of damage and a duration of five years) and did not overturn the Administrative Court's judgment prohibiting business operations due to tax evasion because it had not been demonstrated why the criminal court's findings of fact were incorrect.

In this case, a restaurateur who had been operating in Munich for more than 25 years was convicted of tax evasion in 14 instances, causing damages of approximately €120,000, and sentenced to a total fine of 450 daily rates of €15 each. The conviction stemmed from improper bookkeeping, as the business was operating without a digital point-of-sale system during the relevant period. The conviction for intentional tax evasion was issued by way of a summary penalty order.

The Higher Administrative Court (VGH) upheld the revocation of the business license. The court ruled that simply paying the taxes and fines after conviction was insufficient to establish the business owner's reliability under trade law. Proof of a profound change in attitude and behavior was required.

The court further stated that this was necessary. Even offenses committed some time ago could still be held against a business owner in prohibition proceedings under Section 35 of the Trade Regulation Act (GewO) if they are relevant to the overall assessment, taking into account all circumstances of the offenses and the individual's personal development – ​​and this applies even beyond the deletion periods of the Federal Central Register.

This decision demonstrates that even the conclusion of tax evasion proceedings without a main hearing by way of a summary penalty order can have serious collateral consequences.

For questions, please contact us at kanzlei@wild.legal.