Tax dawn raids

Tax dawn raids leading to criminal investigations are becoming common in many jurisdictions, even for relatively vanilla tax planning by multinational groups.

Coordinated actions between tax and other regulatory authorities are also common. A tax dawn raid may therefore trigger parallel and/or related regulatory or criminal investigations across the EU and around the world.

Exchange of information and experience between tax authorities across the EU and the OECD states is now the norm. As a consequence, a tax dawn raid in one jurisdiction may have spill-over effects in several jurisdictions.

Tax investigations typically involve taxpayers and withholding tax agents, but may also involve third parties (eg banks and financial intermediaries) which may face penalties or prosecution if they have helped a taxpayer achieve tax benefits.

Tax dawn raids are often unannounced. It is advisable to appoint an inspection co-ordinator in advance in case of a tax dawn raid. The co-ordinator must be prepared for the inspection and know which measures to take and what the company's rights and obligations are in general terms. Specific internal protocols and training sessions for high risk groups are recommended.

When a tax raid starts, it is advisable for a tax lawyer to be present. Specialist criminal counsel may also be needed.

In most jurisdictions, tax authorities have extensive powers and can download servers and access and seize documents, electronic files, email accounts, computers, notebooks, phone devices, etc.. Legal privilege apply to the same extent in all jurisdictions.

Depending on the investigation, there may be criminal or administrative penalties for employees who have been involved in the relevant violations. See Employees issues: dealing with employees targeted by the inspection.

Tax dawn raids may attract national and international media interest and the tax authorities may give a tip-off or statement to the press. A press release should be prepared in case the press picks up the raid.