Ne
ws

By Dr. Katharina Wild

The most important principle is: cooperate organizationally, but neither voluntarily hand over evidence nor provide any information about the case. A lawful search must not be obstructed. At the same time, the law firm must actively uphold confidentiality, the right to refuse to testify, and prohibitions against seizure.

I. What are the most common scenarios for searches of tax offices?

There are no official statistics on searches of tax offices. In practice, however, the following scenarios predominate:

1. Criminal proceedings against a client

This is the standard case. The tax office is not a suspect, but a "third party" within the meaning of Section 103 of the German Code of Criminal Procedure (StPO). We regularly seek:

• Accounting records, receipts, and account statements,
• Annual financial statements and tax returns,
• DATEV data and analyses,
• Emails and correspondence,
• Documents relating to specific business transactions,
• Information to be compared with documents seized from the client.

Typical initial proceedings involve:

• Tax evasion,
• VAT fraud,
• Untaxed income from cash-intensive businesses,
• Undeclared wage payments,
• Sham self-employment,
• Hidden profit distributions,
• Foreign assets, or
• Insolvency offenses.

2. Suspicion of Participation Against the Tax Advisor

The search is then carried out at the suspect's premises pursuant to Section 102 of the German Code of Criminal Procedure (StPO).

Typical charges include:

• Aiding and abetting tax evasion through deliberately false declarations,
• Participation in fictitious invoices or concealed payment flows,
• Backdating or subsequently altering documents,
• Active assistance in concealing untaxed income,
• Obstruction of justice or aiding and abetting after the offense has become known,
• Participation in impermissible schemes where the line between advice and participation in the offense is allegedly crossed.

The mere processing of an objectively incorrect tax return does not automatically establish the intent to aid and abett. Specific circumstances indicating deliberate assistance are required.

3. Personal Offenses of the Firm Owner

Less frequently, the focus is on the firm's own affairs, such as:

• tax evasion,
• withholding social security contributions,
• billing or subsidy fraud,
• insolvency offenses,
• breach of trust or money laundering.

Therefore, the first question on-site must always be: Who is the accused – only the client or also the tax advisor? Sections 102 and 103 of the German Code of Criminal Procedure (StPO) impose different requirements.

II. How should I, as a tax advisor, behave correctly during a search?

Immediate measures

• Remain calm and identify the officer in charge

• Ask to see their official identification, note their name, agency, telephone number, and file number. The officers should be escorted to a meeting room and not allowed to wander through the office unsupervised.

• Review the search warrant thoroughly

In particular, the following information must be ascertained:

• Suspect,
• Alleged offense,
• Tax periods affected,
• Client sought,
• Designated rooms,
• Documents or data sought,
• Date of the warrant.

A search warrant should generally not be formulated too broadly and is usually no longer enforceable after six months. If there is alleged imminent danger, the specific justification should be documented.

Contact a specialized criminal defense attorney immediately

The investigating officers can be asked to wait until their arrival. However, there is no legal right to a longer delay.

Inform affected clients

Unless a confidentiality agreement or a conflicting order exists, the client or their legal counsel should be notified. A spontaneous release from confidentiality should not be granted.

No information on the matter

Neither the tax advisor nor any employees should provide informal "background information." This applies particularly to questions such as:

"Who initiated this entry?"

"Were you aware of the inaccuracy?"

"What did the client say about it?"

"Who is actually handling the case?"

"Did this transaction seem suspicious to you?"

Even seemingly innocuous conversations are routinely recorded in memos.

Controlled search assistance instead of voluntary disclosure

It can be useful to locate precisely identified client files or data yourself. This avoids a broad search with chance findings and access to other clients' data.

It must be explicitly stated:

The documents are identified or presented solely to limit the scope of the search. Voluntary disclosure or seizure is not consented to. All rights to prohibit seizure and all legal remedies remain reserved.

The objection must be recorded in the search or seizure report. The phrase "voluntarily disclosed" should not be signed if voluntary disclosure is not actually desired.

Electronic data

With DMS, DATEV, and email systems, it is essential to insist that the backup be limited to the client, time period, and business transaction in question. Indiscriminate backup of the entire firm's data is generally disproportionate for a professional bound by confidentiality. The Federal Constitutional Court requires the greatest possible exclusion of data unrelated to the proceedings. Federal Constitutional Court, Decision of April 12, 2005 – 2 BvR 1027/02

A global administrator password should not be disclosed without oversight. Instead, restricted access or selection by law firm staff should be offered.

The following applies:

A tax advisor who is accused of wrongdoing is not obligated to contribute to their own conviction.

However, a tax advisor who is not accused may be required to provide technical assistance with access.

Access must be restricted to specific clients and objects as much as possible.

Protected electronic files should be encrypted or sealed before being submitted for judicial review.

III. When is a client file exempt from seizure?

The term "client file" alone does not provide protection from seizure. The professional client file under Section 66 of the German Tax Advisory Act (StBerG) and the protection afforded by criminal procedure under Section 97 of the German Code of Criminal Procedure (StPO) are not identical. The decisive factor is the specific content of each document.

1. Requirements of Section 97 StPO

A document is generally exempt from seizure if:

• its content pertains to the confidential relationship protected by Section 53 Paragraph 1 Sentence 1 No. 3 StPO,

• it is in the possession of the tax advisor or an accompanied person,

• the client has not released the tax advisor from the duty of confidentiality,

• there is no suspicion of involvement against the tax advisor based on specific facts, and

• the document itself is not an instrument of crime, a product of crime, or obtained through a criminal offense.

Section 97 of the German Code of Criminal Procedure (StPO) protects, in particular, the following:

|Regularly protected | Regularly not protected or not securely protected|

|--- | ---|

|Correspondence between client and advisor| Original receipts and business documents of the client|

|Meeting and telephone notes| Accounting records and account statements|

|Own legal and tax notes| Tax assessments|

|Internal working papers|Tax returns approved by the client|

|Draft balance sheets and tax returns not yet approved|Final, approved annual financial statements|

|Documents for preparing a voluntary disclosure|Items handed over for safekeeping only|

|Copies of documents with professional annotations|Documents unrelated to the advisory relationship|

|Client-related emails and electronic notes|Instruments, products of the crime, or proceeds of the crime|

The seizure of accounting records and receipts is not assessed entirely uniformly in each individual case. According to the prevailing legal practice, documents entrusted to a tax advisor solely for bookkeeping or the preparation of financial statements are generally subject to seizure. In cases of doubt, an objection should be raised, the documents should be sealed, and a judicial decision should be sought.

Of particular importance: A mere suspicion of involvement by the tax advisor is insufficient to circumvent Section 97 of the German Code of Criminal Procedure (StPO). The suspicion must be based on concrete facts prior to the measure; the search must not serve to generate such a suspicion. (Federal Constitutional Court, Decision of November 30, 2021 – 2 BvR 2038/18)

IV. What are the most common mistakes made during a search of a tax office?

Spontaneous attempts at explanation

The tax advisor tries to "briefly exonerate" the client or themselves, thereby providing the initial basis for suspicion of complicity.

Voluntary surrender of documents

Employees hand over files or export data without objection and without verifying their confidentiality obligations.

Signing an inaccurate protocol

The phrases "voluntarily surrendered" or "agreed to seizure" are particularly problematic.

Blanket release from confidentiality

This can eliminate the right to refuse to testify and thus protection against seizure.

Failure to separate protected and unprotected documents

Close files, accounting records, criminal defense files, and client originals are stored in the same paper folder or document management system directory.

Unlimited access to the entire document management system (DMS)

Investigators obtain global passwords or complete server copies, even though only one client and a few years' worth of data are affected.

Leaving investigators unsupervised

This leads to searches of rooms or data sets not covered by the warrant.

Physical or technical obstruction

Resistance, disabling systems, deleting data, or hiding documents exacerbates the situation and can create new criminal risks.

Inadequate documentation

Names, times, search locations, copied directories, search terms, and a precise list of seized items are missing.

Joint defense strategy despite conflict of interest

As soon as a tax advisor is suspected of involvement, they typically require independent legal representation.

V. How should I, as a tax advisor, behave correctly after a search?

Immediately afterward, a detailed memorandum and a complete list of seized evidence should be prepared. The following should be considered in particular:

• Application for a judicial decision pursuant to Section 98 Paragraph 2 of the German Code of Criminal Procedure (StPO),

• Appeal pursuant to Section 304 of the German Code of Criminal Procedure (StPO),

• Application to suspend the evaluation until a judicial decision is reached,

• Return of business-essential documents or data carriers,

• Assertion of the prohibition against seizure and, if applicable, the prohibition of the use of evidence,

• Notification of the responsible Chamber of Tax Advisors,

• Ensuring the continued operation of the law firm.

The best preparation consists of a clear document management system (DMS) structure, separate files for staff and clients, written emergency instructions for employees, and a pre-designated defense attorney.

[For questions, please contact us: kanzlei@wild.legal (www.wild.legal/kontakt)]