The German city of Zossen, previously known as a tax haven in Brandenburg, is facing a serious financial crisis. Authorities must repay approximately 20 million euros in trade tax revenue. The reason is the discovery of numerous shell companies that only had post office boxes in the city to benefit from exceptionally low tax rates without conducting any real business there.
Massive Tax Repayments
The city of Zossen has been forced to repay approximately 20 million euros in Gewerbesteuer (trade tax) due to irregularities discovered in company registrations.
Shell Company Scandal
An audit revealed that around 150 enterprises only had post office boxes in one building, conducting no real business within the municipality.
City Budget Crisis
Due to the necessity of paying millions in compensation, a budget freeze has been introduced in Zossen, paralyzing local public investments.
Low Rates Were Tempting
The tax rate in Zossen was 270%, while in other parts of Brandenburg it exceeded 400%, which facilitated tax abuses.
The German city of Zossen, located in the suburban district of Teltow-Fläming near Berlin, has found itself at the center of a massive tax scandal. For years, the town gained fame as a local tax haven, attracting businesses with the region's lowest trade tax (Gewerbesteuer) rates. According to an audit conducted by the Brandenburg Ministry of Finance and the tax office in Luckenwalde, this model was largely based on abuses. Auditors demonstrated that nearly 150 entities registered at a shared address in a small office building were, in fact, shell companies. These enterprises did not conduct any real business in the city, and their presence was limited to having a post office box. Since German reunification in 1990, smaller municipalities in Brandenburg have often competed for investors by employing aggressive low local tax policies, which sometimes led to conflicts with federal tax authorities.The financial situation of Zossen has drastically deteriorated following the disclosure of the audit results. A city spokesperson confirmed that within the next two years, the local government will have to repay a total of 20 million euros in improperly collected taxes. As a consequence of these obligations, an immediate budget freeze has been introduced, meaning the suspension of almost all investment expenditures. The mayor and city council face the challenge of plugging a giant hole in public finances, while the municipality's previous image as a business magnet lies in ruins. This situation is particularly painful because Zossen had long applied a tax rate of 270 percent, while neighboring municipalities often exceeded the 400 percent threshold. The problem of virtual offices in Zossen is not a new phenomenon, but the scale of the current repayment claims is unprecedented in the recent history of the state. Companies could rent a “virtual headquarters” there for as little as 199 euros per month, which was a tempting offer for entities seeking cost optimization. However, now, following the intervention of the tax authorities, the city must face the consequences of accepting dead souls in its commercial register. Experts indicate that this case could serve as a warning to other German municipalities that try to build their budgets based on legally dubious tax structures. „In the coming two years, the tax repayments alone will amount to approximately 20 million euros.” — Spokesperson for the City of Zossen Local Taxes in Brandenburg: : → ; : → ; : → 20 million EUR — the amount the city of Zossen must repay in improperly collected taxes Liberal-leaning media emphasize the need to combat tax havens and praise the actions of tax control authorities. | Conservative media highlight the right of municipalities to tax autonomy and warn against excessive fiscalism by the state.