Obligation To Notify Intermediaries Violates The EU Charter Of Fundamental Rights

• Published date: 21 December 2022
• Subject Matter: Tax, Tax Authorities
• Law Firm: PLMJ
• Author: Isaque Ramos and Serena Cabrita Neto

In response to the request for a preliminary ruling made to it by the Constitutional Court of Belgium, the Court of Justice of the European Union ("CJEU") has held that lawyers who are exempt from reporting cross-border arrangements to their tax authorities under their duty of professional secrecy should also be exempt from the obligation to notify other intermediaries.

Brief introduction obligations to report arrangements with a tax impact

In 2018, the Council of the European Union enacted Directive 2018/822 of 25 May 2018 ("DAC 6"). This Directive introduced an obligation to report certain cross-border arrangements with a tax impact to the tax authorities of each country with the aim of combating aggressive tax planning.

The reporting obligation must be complied with by any intermediary involved in the design, marketing, organisation or implementation of these types of arrangements, unless the intermediary is subject to a duty of professional secrecy. In such cases, the intermediary subject to professional secrecy must notify the other intermediaries involved in the transaction that it will not report the arrangement.

The reporting obligation may also be the responsibility of the client itself when no intermediary is considered subject to the reporting obligation.

The Orde van Vlaamse Balies Case (C-694/20)

When incorporating DAC 6 into national law, the Belgian State considered that lawyers are subject to professional secrecy and, as such, are excluded from the obligation to communicate arrangements to the tax authority. Despite this exclusion, the obligation to notify other intermediaries (e.g., accountants, consultants,...) that they will not communicate a given arrangement to the Belgian tax authority is nevertheless maintained.

Considering this, the Constitutional Court of Belgium made a request for a preliminary ruling to the CJEU. In the request, it questioned the compatibility of the Belgian implementation of DAC 6 with Articles 7 and 47 of the Charter of Fundamental Rights of the European Union.

In its decision, the CJEU found that this legislation is primarily aimed at lawyers and is not compatible with Article 7 of the EU Charter of Fundamental Rights, which protects the inviolability of citizens' correspondence and the confidentiality of the relationship between client and lawyer. Therefore, the CJEU considers that if, by virtue of professional secrecy...