The group was revealed to have cheated tests on diesel engines in the US and Europe, with more than one million vehicles estimated to have been affected in the UK alone.
The Braunschweig (also known as Brunswick) public prosecutor issued an administrative order against Volkswagen on Wednesday, imposing the maximum penalty of €5m, and then €995m for the “disgorgement of economic benefits”. This refers to repayment of profits accrued through illegal or unethical means.
Volkswagen said it accepted the fine and will not lodge an appeal against it. “Volkswagen, by doing so, admits its responsibility for the diesel crisis and considers this as a further major step towards the latter being overcome,” the group said.
“As a result of the administrative order imposing the fine, the active regulatory offence proceedings conducted against Volkswagen will be finally terminated. Volkswagen assumes that such termination of the proceedings will also have significant positive effects on further active administrative proceedings in Europe against (the group) and its subsidiaries.”
Last month, Volkswagen’s former chief executive Martin Winterkorn was charged with conspiracy to defraud the US government, as part of a wider investigation into the scandal.
The Department of Justice accuses the chief executive of violating the Clean Air Act by covering up Volkswagen’s cheating of emissions tests.
The US government alleges Mr Winterkorn knew about the cheating as early as March 2014, but the former VW boss denies wrongdoing and said he did not find out about the emissions cheating until August 2015, a month before the scandal came to light.
Oliver Schmidt, a former Volkswagen executive, was sentenced to seven years in prison last year for his part in the scandal. Mr Schmidt, a German national, was sent to the US in 2015 but failed to disclose the existence of the software which allowed the vehicles to falsely pass emissions tests. He also misled investigators and destroyed documents, a Detroit court heard.
Mr Schmidt made a plea deal for the seven-year sentence, and was also fined $400,000 (£300,000).