Introduction
An informal email from the criminal investigation department requesting that a tax advisor submit a former client’s “financial records”—a delicate situation for many tax advisors. Tax advisors are accustomed to disclosing information as representatives of their clients. However, once the client relationship ends and authorities then request documents related to that relationship, different rules apply.
In this article, you’ll learn—using a real-life case—how far the duty of confidentiality under Section 80 of the Tax Advisory Act (WTBG) 2017 extends, who can release the tax advisor from this duty, how the right to refuse to testify differs from the right to withdraw from representation, and how to respond appropriately during a search of premises.
In summary: Without an effective release from the client, a tax advisor may not hand over any documents to investigative authorities. But even after such a release, he may invoke his own right to refuse to testify or his right to withdraw from the case in criminal, fiscal criminal, and tax proceedings.
The Case Study: Insolvency of a GmbH and Investigations Against the Managing Director
A tax advisor represented a GmbH. Following the company’s insolvency, the public prosecutor’s office launched an investigation against the former managing director and against the GmbH itself. The criminal investigation department sent an email to the tax advisor demanding that he hand over documents—in particular, the financial accounting records. The central question is: Is he permitted or required to do so, and who can release him from his duty of confidentiality?
What Does a Tax Advisor’s Duty of Confidentiality Entail?
The duty of confidentiality under § 80 WTBG 2017 obligates the tax advisor to keep all matters entrusted to him confidential—regardless of whether other persons are already aware of this information. It is a cornerstone of the profession: Only those who can rely on confidentiality will disclose sensitive information, thereby enabling effective advice.
What information is protected?
The relationship of trust between the tax advisor and the client is protected as such—not just information that objectively requires confidentiality. Two categories are covered:
- Matters entrusted to the tax advisor: everything the client directly communicates to the tax advisor.
- Facts that have come to light: everything the tax advisor learns in the course of their work, including information from third parties.
This protection extends to the content of the consultation, the client’s personal circumstances, trade and business secrets, and all internal firm documentation. Third-party documents are also protected if they were provided to the tax advisor as part of the client relationship. What matters is not the origin of the information, but whether it became part of the client relationship.
Does the duty of confidentiality also apply to employees?
Yes. Section 80(5) of the WTBG 2017 extends the duty of confidentiality to all agents acting on behalf of the tax advisor, including firm staff. Confidentiality cannot therefore be compromised by internal disclosure within the firm.
How long does the duty of confidentiality apply?
The duty of confidentiality begins as soon as the tax advisor learns of information within the scope of the client relationship and applies indefinitely. It does not end upon termination of the client relationship, nor does it end due to the client’s death or insolvency. It applies to all third parties, in particular to government agencies.
Who can release the tax advisor from the duty of confidentiality?
Pursuant to Section 80(4)(2) of the Tax Advisory Act (WTBG) 2017, the duty of confidentiality ceases to apply if the client expressly releases the tax advisor from it. Tacit consent to the disclosure of information is therefore insufficient; in practice, written documentation is recommended.
Who is authorized to release the tax advisor from confidentiality in the case of a GmbH?
The client is the party whose privacy is affected. In the case of a GmbH, this is the company itself—not the managing director as a natural person. The release from confidentiality is granted by the company’s authorized governing bodies.
What applies in the event of insolvency?
In insolvency proceedings, the insolvency administrator assumes the role of the company’s body authorized to represent it. He alone may thus release the tax advisor from confidentiality obligations regarding all matters pertaining to the insolvency estate; the former managing director no longer has this right. According to prevailing legal doctrine, there is no duty of confidentiality toward the insolvency administrator himself with regard to matters pertaining to the insolvency estate.
Does the former managing director also have to give consent?
No—this is a common misunderstanding in practice (although a different view is sometimes expressed in the legal literature). The duty of confidentiality protects the privacy of the legal entity, not that of its former representatives. An exception applies only to information pertaining to the former managing director’s highly personal sphere of life, such as his or her health status or personal tax data. In such cases, only the former managing director himself or herself can release the tax advisor from this duty.
What other exceptions are there?
In addition to a waiver, the reporting and disclosure obligations for combating money laundering (Section 80(4)(1) WTBG 2017) as well as disclosure to avert personal harm—such as when the tax advisor is himself a defendant in disciplinary or criminal proceedings—override the duty of confidentiality. However, disclosure may only take place to the extent absolutely necessary.
Right to Remain Silent or Right to Refuse to Testify: What Is the Difference?
These terms are often used interchangeably, but they refer to protective mechanisms of varying strength. Most importantly: the duty of confidentiality and the right to refuse to testify are not the same thing. The right to refuse to testify is a strictly personal right of the tax advisor that the client cannot waive.
| Procedure | Legal Basis | Does it continue to apply after release from the duty of confidentiality? |
| Civil Procedure | § 321 ZPO | No—after being excused, the tax advisor must testify |
| Tax proceedings | § 171(1)(c) and (2) of the Federal Tax Code (BAO) | Yes – additional right to refuse to testify as a professional party representative |
| Administrative criminal tax proceedings | § 104(1)(d) of the Financial Penal Code (FinStrG) | Yes – regardless of whether the client has waived the right |
| Judicial (financial) criminal proceedings | § 157(1)(2) StPO | Yes—the strongest form, safeguarded by the prohibition against circumvention |
Why is the right to withdraw from representation so strong in criminal proceedings?
The right to refuse to testify under § 157(1)(2) of the Code of Criminal Procedure (StPO) applies to defense counsel, attorneys, notaries, and certified public accountants, and serves to safeguard the right to a fair trial under Article 6 of the European Convention on Human Rights (ECHR) as well as the right to a defense. § 157(2) of the Code of Criminal Procedure expressly prohibits circumventing the right to withdraw by seizing, securing, or questioning support staff—failure to comply renders such actions null and void. In tax proceedings, however, no such sanction exists: there, evidence obtained unlawfully may generally be admitted.
How does the prohibition on circumvention protect against house searches and seizure?
If a tax advisor does not voluntarily hand over documents, the tax authority may respond with a search and seizure. A court order is required for this. Even this order must not circumvent the right to refuse to disclose evidence (Section 157(2) in conjunction with Section 144(2) of the Code of Criminal Procedure); evidence seized in violation of this prohibition is null and void.
What is the effect of an objection under § 112 StPO?
If documents are seized, the tax advisor may file an objection under § 112 StPO. The documents are sealed, and the court independently reviews whether a legally recognized right to confidentiality exists. In doing so, the court is not bound by the legal opinion of the public prosecutor’s office or the criminal investigation department.
Which documents are protected—and which are not?
The decisive factor is the context in which the documents were created, not their location:
- Protected: Documents created in the course of the consultation, such as telephone notes, file annotations, and working papers.
- Not protected: documents that already existed prior to the consultation and were not created for consultation purposes, such as receipts, work records, and invoices, as well as financial accounting records and annual financial statements.
Practical tip: Although consulting documents held by the client are also covered by the prohibition on circumvention, the tax advisor cannot file an objection there under Section 112 of the Code of Criminal Procedure (StPO). Therefore, genuine protection is provided primarily by documents kept by the tax advisor themselves.
When Does the Protection Cease to Apply?
Under Section 144(3) of the Code of Criminal Procedure (StPO), the prohibition against circumvention does not apply if the person bound by professional secrecy is themselves a prime suspect in the offense. The decisive factor is the time of the order or authorization from an ex ante perspective. However, even then, the protection of confidentiality applies only to documents related to the alleged offense—other client matters remain protected.
How should a tax advisor respond correctly during a search of their premises?
A standardized procedure is crucial. The following steps are recommended:
- Consulting a representative of the professional association (Section 121(2), last sentence, of the Code of Criminal Procedure [StPO])—a mandatory right that also protects uninvolved clients; the person conducting the search must notify the association in advance.
- Consult a lawyer experienced in criminal proceedings or a trusted representative (Section 121(2), first sentence, StPO)—however, there is no provision for waiting until that person arrives.
- Filing an objection pursuant to § 112 of the Code of Criminal Procedure (StPO).
- Motion to seal the protected documents and have them reviewed by the court.
- Exercise restraint in communication and maintain a complete record.
If the right to withdraw is nevertheless violated, an objection on the grounds of a violation of rights (Section 106 of the Code of Criminal Procedure) and an appeal (Section 87 of the Code of Criminal Procedure) are available.
What sanctions apply in the event of a breach of the duty of confidentiality?
A breach of the duty of confidentiality results in several sanctions:
- An administrative offense under § 124(1)(3) WTBG 2017, punishable by a fine of up to 20,000 euros.
- A professional misconduct offense under § 128(2) of the WTBG 2017, with possible disciplinary consequences.
- Civil claims for damages by the client.
Solution to the Case Study
The tax advisor, who no longer has the authority to represent the client, may not voluntarily hand over any documents to the criminal investigation department as long as the insolvency trustee has not effectively released him from his duties. Even after such release, he may refuse to hand over the documents based on his right to refuse—in which case a search and seizure is highly likely to follow, against which he may file an objection.
From a pragmatic perspective, however, the requested financial accounting records are likely not protected by professional secrecy (though they are certainly protected by the duty of confidentiality owed to the client); the public prosecutor’s office may include them in the case file at the latest after the often protracted review process. A sensible solution may therefore be to hand over the financial records after the insolvency administrator has granted a release—provided they do not contain any protected notes or telephone logs.
Practical Checklist for Tax Accounting Firms
- Store protected consulting and working papers separately from the client’s original documents—including in the digital client management system.
- In financial accounting, file only original supporting documents; do not include notes from the tax advisor.
- Always obtain and document written releases in unclear situations.
- Train all employees on the right to refuse and the prohibition against circumvention.
- Establish a standardized procedure for searches of business premises.
Conclusion: No disclosure without a waiver—and a clear plan for emergencies
The duty of confidentiality under § 80 WTBG 2017 and the right to refuse to testify under § 157 StPO, together with § 171 BAO and § 104 FinStrG, form a coherent protective framework for the relationship of trust between tax advisors and clients. The practical implication: no voluntary disclosure of documents without an effective waiver, and a clear, standardized procedure in the event of coercive measures.
Have you received a request for information, or would you like to prepare your firm for a search of the premises? The team at KINDL.trusted supports tax advisors and companies at the intersection of tax law, economic and financial criminal law, and forensic accounting. Contact us for a confidential initial consultation.
Contact
Caroline Kindl
Partner | Attorney at law, Tax advisor, Court-certified expert
Klemens Fischl
Associate | Legal trainee
