International Legal Assistance

Our tax-lawyers, tax advisers and tax law specialists in Cologne and Zurich follow the current developments in legal assistance

Legal assistance means investigative measures taken by a foreign country to assist in criminal proceedings conducted in another country. Many press articles over the last years confused the term with administrative assistance, which must be distinguished from legal assistance (see our page on the exchange of information).

An overview of legal assistance

Legal assistance has also seen a tightening of the rules due to an intensified cooperation between the countries. We would like to provide an initial overview, which cannot replace a thorough analysis of the legal situation for individual cases.

1. What is legal assistance?

2. What is the legal basis for legal assistance?

There is now a large number of bilateral treaties, which partly overlap each other:

A. European Treaty on Legal Assistance dated 20.4.1959:

Under Art 1 of the European Treaty on Legal Assistance (Europäisches Rechtshilfeübereinkommen, EuRHÜbk), participating countries are obligated to provide ancillary legal assistance. Liechtenstein and Switzerland have also joined the treaty. Legal assistance may however be refused under Art 2a EuRHÜbk in cases of fiscal offences. Fiscal offences are offences relating to taxation.

B. European Treaty on Legal Assistance dated 29.05.2000:

The European Treaty on Legal Assistance dated 29.05.2000 (Europäisches Rechtshilfeübereinkommen, Eu-RHÜbk) supplements the previously mentioned preceding EuRHÜbk. The following measures are provided for:

Return of possessions
Interrogation via telephone and/or video conference
Undercover investigations
Telephone surveillance

C. supplementary protocol to the Eu-RHÜbk dated 16.10.2001

The supplementary protocol mainly deals with information on financial institutions in the requested country. Request for information on bank accounts must be performed under Art 1 of the supplementary protocol, including requests for information on the beneficiaries of accounts.

Searches of bank offices are permitted under Art 2 of the supplementary protocol. It is possible to track payments to and from targeted accounts and thereby discover accounts in other countries.

The surveillance of accounts is provided for in Art 3 of the supplementary protocol. In this case, the requested country will report information automatically for certain transactions.

D. Swedish Initiative

The so-called <link schwedische-initiative/index.html>Swedish initiative</link> expedites legal assistance:

Until recently, the procurement of information from a foreign country by the tax inspection authorities was rather cumbersome. Numerous formal requirements and in particular the prescribed postal dispatch via a number of responsible authorities had to be complied with. Once a request was received by the requested authority, this did not mean that information would be provided promptly. Things have changed: Based on the “Swedish Initiative”, the EU member countries agreed on 18.12.2006 on the framework directive 2006/90/JI in respect of a streamlined exchange of information and investigative insights between their respective prosecution authorities (http://eur-lex.europa.eu) This regulation was implemented in national law by Germany with effect on 26.7.2012 in the Act on the Simplification of the Exchange of Information and Investigative Insights. (Bundestag-printed matter. 17/5096). The new regulation can be found in §§ 117a, 117b AO, §§ 92 et sqq. IRG It is of particular significance, that Switzerland and Liechtenstein will also apply the rules of the framework directive, because they are Schengen-associated countries and as such generally adopt the regulations of the Schengen area. The new rules pertaining to the exchange of information will increase investigative pressure.

Our tax-lawyer Dirk Beyer has discussed the practical significance of the Swedish Initiative in an expert contribution (periodical AO-StB 2013, p. 351).

Legal Assistance Example Switzerland

If an accusation of contributions fraud under Swiss law is made, then Switzerland will provide legal assistance. Under Swiss law, contributions fraud has been committed, if the perpetrator withholds of a significant amount of taxes, levies or contributions from the public administration by wilful deceptive conduct. Deception presupposes, that

the perpetrator used specific means or tricks, or an entire web of lies for the purpose of deceit;
it may however suffice in certain circumstances, that the perpetrator merely gives false information, if the validation of such information requires special effort, is impossible or unreasonable.

Example: The mere non-disclosure of capital income is not considered to constitute contributions fraud. A contributions fraud may however be assumed in the following cases:

Interposing a domicile company in the supply chain, for the purpose of manipulating the financial results of the purchaser;

Bogus invoices are issued for services that have never been rendered;
the taxpayer conceals his residency, e.g. by signing a bogus rental agreement;
In certain circumstances, the use of a company’s set of accounts may suffice, if the accounting does not comply with the accounting standards.

Prohibition of exploitation

Under the rules pertaining to legal assistance with Switzerland, it must be observed that the use of information may be restricted in certain circumstances:

Switzerland has made legal assistance subject to conditions, which must be met by German authorities or courts (compare § 72 of the Act on International Legal Assistance in Criminal Matters). A prohibition of exploitation exists, if evidence was adduced under conditions preventing their unlimited utilization. Whether the evidence procured from Switzerland is permitted for unlimited use or only for certain purposes, depends on whether Switzerland has expressly restricted their use to certain purposes.

Example: The information reported by Switzerland may not be utilised by the German Tax Authority in taxation proceedings, if such an exclusion was expressly ordered by Switzerland (prohibition of exploitation). This even applies, if the offence committed is a contributions fraud (compare with above). The information is then only permitted for use in prosecution for tax fraud, but not in other taxation procedures. This is however alleviated by the option of requesting administrative assistance.

Process of legal assistance in Switzerland:

The Swiss enforcement authority will initially scrutinise the German request for legal assistance. If it is ruled admissible by the Swiss authority, a non-countervailable provisional injunction will be made. This provisional injunction is the basis for subsequent individual investigative measures (e.g. search of premises, seizure, etc.). The accused are subsequently informed of the accusations and the ongoing proceedings. This is called a fair hearing. In this sense, the accused is the individual who is the account holder as specified in the account opening form. This may also be a charitable foundation, if it is specified as the account holder. The accused is thereby given the opportunity to assist with the inquiries. A so-called final injunction is then handed down. This allows for the procured documents and information to be transmitted to the requesting country (Germany). The accused may contest the final injunction by way of lodging a complaint with the Swiss Federal Criminal Court. The complaint has suspensive effect.