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Tax Controversy and Criminal Finance Law

The growing complexity of tax law and the financial administration's increased propensity for dispute mean that international and national companies are facing greater potential for conflict. Differences of opinion with the financial administration cannot always be prevented - at WTS Austria we help our clients with all disputes.

The number of voluntary disclosure cases within the meaning of Sec. 29 of the Financial Criminal Code has recently been on the rise. Accordingly, the financial crime authorities - even with allegedly minor offences and low assessment bases - are increasingly initiating criminal proceedings for tax offenses. To make matters worse, in associations it is not only the physical perpetrators (usually the management), but also the association per se that is held as suspect, or in subsequent proceedings as defendant (Association Responsibility Act).

Austrian financial criminal law recognises various offences, ranging from a mere financial irregularity (Sec. 49f Financial Criminal Code) to a grossly negligent tax evasion to deliberate tax evasion and fraud. In terms of customs law, also worthy of note are the offences of smuggling and evading import and export duties, customs evasion, the (rare) offence of tax concealment, infringements of monopoly rights, etc.

If malversation or a mistake is discovered in a company or association, its scope and extent will be evaluated under financial criminal law. Subsequently, if a prerequisite is met (deed not yet discovered by the financial administration), the question of a voluntary disclosure within the meaning of Sec. 29 of the Financial Criminal Code must be considered. The "benefit" of voluntary disclosure may lead to total impunity, provided that all prerequisites are met. This requires professional and comprehensive guidance and support.

At WTS Austria we have decades of experience in this field. For many years our Senior Partner Dr Hartwig Reinold was posted by the KSW (Chamber of Tax Advisors and Auditors) to act as associate judge at the appraisal court, so he understands the procedures from the "other" side. We have extensive experience in handling tax law proceedings and highly specialised expertise in procedural law and material tax law.

In practice, once a possible tax and/or customs breach has been discovered, it is essential to delve down to the bottom of the issue and formulate a clear and convincing line of argumentation. There are several important formalities when it comes to voluntary disclosures. Firstly, it must be ensured in advance that the disclosed tax liability is actually paid or can be paid within a maximum payment period of two years. It is also important not to lose any time during this period, otherwise the voluntary disclosure for the outstanding tax arrears will be forfeited.

WTS Austria also operates in this field on behalf of other tax advisors and lawyers who turn to us for reasons of conflict of interest or lack of sufficient experience.

Ignorance of the law is no excuse! Financial criminal law defines tax penalty law. This usually relates to fiscal criminal proceedings for tax evasion or smuggling. Financial criminal law imposes heavy penalties for such offenses.

The penalty is usually a fine, for which alternative custodial penalties are imposed in the event of non-payment. However, unconditional imprisonment is imposed following a conviction within the meaning of Sec. 39 of the Financial Criminal Code (tax fraud).

Depending on the sum of the penalty value, the financial administration is responsible as the financial criminal authority of the first instance up to a penalty value of € 33,000.00 (for smuggling and evasion of import or export duties, and for tax concealment the penalty value amounts to € 15,000.00).

Where a penalty value amounts to over € 33,000.00 and up to a maximum of € 100,000.00, the appraisal court is responsible; the appraisal court has three members (Sec. 66 of the Financial Criminal Code). Presidency of the appraisal court is held by a judge; a financial official from the higher financial service acts as reporter and committee member. The third person to be appointed is a lay associate judge, who is sent by the professional representation of the accused party (e.g. the Austrian Federal Economic Chamber, Chamber of Civil Engineers, lawyers, doctors, etc.).

The appraisal court is also exclusively responsible for negligent tax evasion within the meaning of Sec. 34 of the Financial Criminal Code and financial offences within the meaning of Sec. 49 Financial Criminal Code with a penalty value of over € 33,000.00 without a further value limit.

Legal jurisdiction begins with a penalty value of € 100,000.00. Proceedings before a financial penalties officer as a financial criminal authority of the first instance or at the appraisal court are administrative procedures, whilst judicial financial criminal proceedings are handled by the ordinary criminal courts.

The financial penalty aspect is gaining increasing importance due to its often dramatic consequences (as well as the considerable fines for the perpetrator, for the association a major issue following conviction is a criminal record and possible imprisonment or an alternative custodial penalty in the event of non-payment of the fine).

Our WTS experts represent clients vis-à-vis the financial administration during company audits. There is often a high potential for conflict during such audits. A main aim of our advisory services is therefore to settle any disputes out of court. In doing so, we support our clients through expert opinions on the disputed issues, for example on issues with the auditors or through participating in joint talks.

At WTS we handle all instances of judicial financial proceedings for our clients. Before doing so, we evaluate the chances of success of such financial proceedings. We also represent our clients in appeal proceedings at the administrative court.

Our tax law experts also support clients in tax-related proceedings at the constitutional court or the European Court of Justice (e.g. with VAT or consumption tax issues). In such cases, we cooperate with specialist law firms.

Main Contact
Dr. Hartwig Reinold
Of Counsel
Certified Tax Consultant, Certified Public Accountant
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