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In brief

The topic of taxpayer’s rights in the age of tax transparency is discussed in a pending case before the ECJ. The ECJ has earlier ruled in favour of the taxpayer on the application of the right to a fair trial on a cross-border exchange of information upon request from a tax authority in another EU Member State, and will now address right of effective legal remedy directly against an information request under the same exchange procedure.

In light of the growing global trend of combating tax avoidance by increasing transparency, the exchange of information between EU Member States has been a hot topic. However, the growing tax transparency often comes at the cost of the taxpayer’s rights. There are different methods of exchanging information between authorities: automatic exchange (of financial account information, of tax rulings and of cross-border arrangements), spontaneous exchange (of information obtained during the inspection of a taxpayer’s affairs) and on request (furnishing information on a particular case to a requesting state). Exchange of information upon request requires ‘foreseeable relevance’. As automatic information exchange only requires ‘possible relevance’, it remains to be seen if the massive scope of automatic information exchange can be constitutionally justified on the basis of proportionality. The ECJ has earlier ruled in favour of the taxpayer on the application of the right to a fair trial on an exchange upon request, and now addresses the right of effective remedy on exchange upon request.


The first questions in the combined FC vs Luxembourg case (C‑245/19 and C‑246/19) concern whether the right to effective remedy requires that a decision to provide information concerning a taxpayer may be challenged before the courts of the requested Member States by (i) the addressee of the information request, (ii) the taxpayer concerned by the information request or (iii) a third party affected by the information request. The second question concerns whether the requesting authority must state the reasons for the request for information in order to enable the requested authority to assess whether the requested information is not manifestly lacking in foreseeable relevance to the tax assessment conducted by the requesting authority.

The case relates to two requests for information addressed to the Luxembourg tax administration by the Spanish tax administration in relation to the artist F.C. The Luxembourg authorities have extended the information requests to a bank and company B. Under the laws of Luxembourg, no direct action could be brought against the information request. Nevertheless, the addressee, the taxpayer concerned and a third party affected by the information request asked the Administrative Tribunal to annul the information request.

The ECJ partially ruled in favour of the parties that challenged the information request. The ECJ noted that only the addressee of the information request that is required to provide the information is able to challenge the legality of that request.

Contrary to the above, the ECJ ruled that the exclusion of legal protection for the taxpayer concerned and other third parties affected by the information request is not a violation of the right for legal remedy. Both the taxpayer and other affected third parties are not the addressee of the information request and, therefore, are not subject to any legal obligation arising from it or the risk of a penalty being imposed. Furthermore, they have the possibility to challenge the consequences of the information request indirectly at a later stage, when the requesting tax authority used the requested information, for example, to impose a tax assessment to the taxpayer.

Practical impact

On the one hand, the increasing flow of information between countries enables tax authorities to better assess taxes due. On the other hand, exchange procedures between countries could result in significant risks for taxpayers. Persons facing information requests from tax authorities should be able to safeguard their rights by questioning the scope and relevance of the information request. In that context, the ECJ ruling is a step forward with respect to the addressee of an information request. However, for the taxpayer concerned and other third parties affected by an information request, the ruling of the ECJ is not satisfactory.

Addressees of an information request about third parties should always carefully evaluate whether such a request meets the applicable standards (e.g. by assessing the foreseeable relevance of the requested information). Sharing information about third party taxpayers or other third parties may lead to liabilities or penalties (e.g. under the GDPR) if the information request does not meet the applicable standards and thus the information exchange lacks a legal basis. Therefore, even though such taxpayers or other third parties cannot directly contest the information request (EU law at least does not require this), the safeguards provided by the GDPR indirectly offer some degree of protection, provided the addressee of the information request properly complies with the GDPR standards and carefully assesses the legal basis for each information request.