• Confidentiality under Private Law and Collection of Information Subsequent To a Request from a Tax Investigation
  • August 17, 2013 | Author: Michael Rainer
  • Law Firm: GRP Rainer LLP - Hamburg Office
  • The confidentiality of tax information is privately agreed, but this does not prevent the collection of information from a tax investigation subsequent to request for confidential information.

    GRP Rainer Attorneys and Tax Advisors in Cologne, Berlin, Bonn, Bremen, Düsseldorf, Essen, Frankfurt, Hamburg, Hanover, Munich, Nuremberg and Stuttgart www.grprainer.com/en explain: The Federal Fiscal Court decided in its judgment from May 16, 2013 (file ref. no.: II R 15/12) that confidentiality agreements under private law do not stand contrary to requests for the collection information request as part of a tax investigation.

    In this case, the tax revenue office demanded to learn which user of an internet platform had achieved annual sales over 17,500 EUR via a certain internet platform; income earnings above this amount become subject to value-added tax (VAT) in Germany. The operator of this platform is established in Luxembourg, and the request was made to its affiliate in Germany. The tax revenue office did make the request for information which included the names, addresses, bank details, and a detailed listing of all sales made.

    The German affiliate company had first operated the platform, but then responsibility for operations transferred to the Luxembourg company and in the framework of this relocation and operations transfer, the Luxembourg location is responsible for providing data processing services for the company and none of the processed data may be passed on to third parties.

    Accordingly, the German affiliate company submitted its argument in its lawsuit. The German affiliate presented before the tax court that it was not authorized to obtain the information for the tax revenue office because on the one hand it does not hold such an authorization and on the other hand it would not even have access to the information because the data is stored on servers in a foreign country.  Also, it would be impossible for the German affiliate to obtain the consent of the Luxembourg company. The tax court upheld the standing of the lawsuit and the request for information was canceled due to the actual impossibility of providing the information.

    The Federal Fiscal Court apparently overturned the decision and remitted the matter. In its justification, the Federal Fiscal Court maintained that sufficient findings were not determined by the tax court which would establish the impossibility of the claimant to provide the information because the foreign location of the servers would not prevent the possibility of accessing the server to the effect that no obligation on the points of fact would exist from the side of the Federal Fiscal Court.

    The Federal Fiscal Court held that confidentiality agreements under private law may not successfully be used to decline requests for information which have been issued by public authorities so that, accordingly, it must now be considered whether or not it is actually impossible for the claimant to access the serve and therefore also to the information requested.

    Tax law is a complex issue. It is oftentimes not possible for non-experts to keep track of the scope of this area of law. An attorney working in the area of tax law can help keep an overview.