10.08.2017 | KPMG Law Insights

Steuerstrafrecht – German criminal authorities involved for the first time in search in Israel

German tax investigators and prosecutors involved in search in Israel for the first time

Criminal Tax Law

I. Search by German Authorities on Israeli Soil

According to press reports, for the first time in the history of the Federal Republic of Germany, German criminal authorities tracked an alleged tax evader to Israel and searched his apartment in Israel with the help of Israeli authorities.

What was considered unthinkable for decades due to German-Israeli history has now become reality with the approval of politicians in both countries.

The person searched in Israel is an alleged client of a Swiss branch of the Israeli bank Leumi, who is said to have evaded German taxes in a considerable amount.

The account relationship was discovered as a result of the tax CD purchased by the state of North Rhine-Westphalia in 2013, which contained information on possible black money accounts held by the Swiss branches of the Israeli bank Leumi. However, due to the explosive nature of the issue, the large number of cases discovered in this regard were resolved quietly, even though searches had already been carried out in Germany in the past.

II Automatic exchange of information

Article 6 of the Convention on Mutual Administrative Assistance in Tax Matters (as last amended on 27 May 2010) provides that two or more Contracting Parties may exchange tax information automatically in categories of cases determined by them and according to a specified procedure.

The above-mentioned Convention is the first and only multilateral and global set of rules available for all types of tax cooperation in the fight against tax evasion and tax avoidance and has already been signed by 112 countries. Israel also acceded to this convention on November 24, 2015. On December 1, 2016, the Convention entered into force with respect to Israel.

Finally, based on Article 6 of the Convention, a standard for the automatic exchange of financial account information was developed by the OECD (so-called “CRS MCAA”). This standard requires financial institutions to report information on financial assets to the German tax authorities.

Israel has also joined the CRS MCAA, as have 80 other countries currently, and has committed to automatically sharing information with other participating countries as of September 2018.

III. recommendation for action

In light of the developments described above and the clear objective also of the Israeli policy of combating tax evasion and lack of tax discipline, individuals who have previously undeclared taxable capital gains from assets in Israel should consider correcting their tax returns by way of a voluntary disclosure in their country of residence before September 2018.

In principle, an effective voluntary disclosure can lead to immunity from prosecution in many European countries for taxpayers until possible discovery by the competent authorities.

Against the background of the most recent case law of the Federal Supreme Court (Urt. V. 9.5.2017, Az.: 1 StR 265/16), according to which voluntary declarations can also already be invalid if relatives of foreign authorities have discovered the offense, haste may be required in particular due to the automatic exchange of information starting in September 2018 and the reporting of Israeli financial institutions to the Israeli state.

In this regard, KPMG Law offers holistic and solution-oriented advice on the correction of tax returns or voluntary disclosures in connection with domestic and foreign assets. The combination of our expertise in tax and criminal tax law, more than 20 years of experience and the support of more than a thousand clients whose issues with the tax authorities have been successfully resolved to date, provide those who decide to make a voluntary declaration with the appropriate security.

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Dr. Heiko Hoffmann

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