Panama and Paradise Papers – the different money hiding places in tax havens worldwide

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According to reports in the online edition of the German newspaper Süddeutsche Zeitung dated 05.11.2017, which was involved in the processing of the new data leaks, new data sets with the names of numerous persons suspected of hiding their assets using letterbox entities abroad have been published under the name "Paradise Papers".

The Paradise Papers which have now come to light apparently also include companies that are purported to have set up a system rigged to avoid taxes, in some cases amounting to several millions. Data sets of two financial service providers and 19 so-called tax havens were analysed for this newspaper. While the publication of the Panama Papers a good 1.5 years ago caused a great deal of excitement, the Paradise Papers that have now been uncovered can, due to the volume of the processed data, offer even more potential for uncovering tax saving schemes that have been kept secret so far, and to process them in investigation procedures. According to the Süddeutsche Zeitung, one of the financial service providers of which the data are now being published is the law firm Appleby, a market leader in the establishment of offshore companies, as they are termed. In addition, according to media reports, data from the Singapore-based trust company Asiaciti Trust has also been evaluated. The business registers analysed include such hitherto popular tax havens as the Isle of Man, the Caiman Islands, Malta and Bermuda. According to the Süddeutsche Zeitung, about a thousand names are to be included in the records in Germany.

The Panama Papers have already led to the initiation of several criminal proceedings in Germany, according to Ecovis’ lawyers. As a rule, the evaluation of the Panama data with regard to the business relations between private individuals and the offshore law firm Jürgen Mossack-Ramon Fonseca, Panama, is taking precedence.

The investigators will be informed of various documents found in these records, including bank records, company records and contracts on the basis of which transactions have been pursued. Some of these are only snapshots, such as an international bank transfer worth millions, the establishment and closure of inactive companies or the maintenance of various international bank accounts with unexplained incoming and outgoing funds.

If it is not possible to ascertain that this process has found its way into the tax declarations submitted, by seeking to reconcile the circumstances of the individual or entity concerned, as revealed in the Panama Papers, with their tax declarations, the German Public Prosecutor's Office usually opens an investigation procedure, at the beginning of which a warrant to search the client's premises is obtained and executed.

Business dealings involving an offshore company do not necessarily serve as a cover-up having consequences under criminal tax law. Nevertheless, the reactions of the German legislature and the investigating authorities to the Panama Papers have shown that the German tax authorities and the judiciary are not willing to refrain from criminal proceedings solely because of the complexity and laborious processing of investments in foreign tax havens. However, the preparation of the Paradise Papers now published and their reconciliation with the tax data of the individuals and entities concerned will take some time, as experience with the Panama Papers also shows.

Any individuals and companies affected should take advantage of this grace period to initiate all measures necessary for the preparation of a precautionary voluntary declaration to avoid punishment, as advised by the experts at Ecovis. At it is already possible to check whether your own company is included in the Panama Papers data set. Beneficiaries or heirs of such foreign company constructions are also advised to act now and consider disclosure. At Ecovis you will find consultants who have extensive experience in dealing with the tax and criminal law aspects of such complex foreign matters and who are experienced and discreet in dealing with voluntary declarations in cases of doubt, also involving the respective advisors in the countries concerned.

Alexander Littich, LL.M., lawyer and specialist in criminal law, ECOVIS L+C Rechtsanwaltsgesellschaft mbH,
Dr. jur. Janika Sievert, LL.M. Eur, lawyer, ECOVIS L+C Rechtsanwaltsgesellschaft mbH,
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