Search for:

European Union: DAC 6 — a year full of developments and more is to come

By , and 4 Mins Read

In brief

On 8 December 2022, the Court of Justice of the EU (CJEU) rendered its first judgment with respect to the EU directive n° 2018/822 of 25 May 2018, i.e., DAC 6 (please see our prior news alert here for a refresher on DAC 6). The CJEU ruled that the legal obligation for a lawyer-intermediary, subject to legal professional privilege (LPP), to inform other intermediaries is invalid in light of the right to privacy, as protected by Article 7 of the Charter of Fundamental Rights of the European Union (the EU Charter).

The CJEU’s decision entails that lawyer-intermediaries subject to LPP should no longer be required to notify other intermediaries. However, the decision does not have any effect on any of the other DAC 6 obligations. In particular, the lawyer-intermediary is still required to inform the relevant taxpayer (client) in case LPP applies.

Although the decision is much welcomed as it underscores the importance of the right to privacy and LPP, the practical implications of the decision will remain somewhat limited when it comes to the DAC 6 reporting obligations, which unequivocally remain applicable.

That being said, more is expected to come at the level of the CJEU in the DAC 6 sphere. The CJEU will, in particular, need to consider questions that are far more fundamental to DAC 6 as a whole, as the Belgian Constitutional Court has submitted a new request for preliminary ruling to the CJEU with no less than five pertinent questions relating to the substance of the directive. Additionally, the French Council of State has submitted a request for a preliminary ruling with respect to the application of privilege. It will remain to be seen how the CJEU deals with these requests, hopefully in 2023.

Key takeaways

  • The CJEU ruled for the first time on DAC 6 and held that the legal obligation for a lawyer-intermediary, subject to LPP to notify other intermediaries to the arrangement (Article 8ab(5) of the Directive 2011/16/EU), is invalid in light of the right to privacy, enshrined in Article 7 of the EU Charter that protects the confidentiality of exchanges between lawyers and their clients (not only in the activity of legal defense but also in the context of legal advice).
  • This decision forms part of a string of decisions by the CJEU that show that the CJEU is particularly firm when it comes to protecting personal and/or privileged data under the EU Charter (for example, the CJEU recently limited the public access to beneficial owner registers when reviewing the Fourth Anti-Money Laundering Directive in its decision of 22 November 2022). The message is clear: even if the objective of the relevant European legislation is considered to be in the general interest, the rules should remain proportionate in that they need to be strictly necessary to meet the objective, considering that they infringe upon the right to privacy protected under the EU Charter.
  • Although the CJEU’s decision is much welcomed and underscores the importance of the right to privacy and LPP, it only impacts the particular aspect of the notification obligation in the context of LPP applying and does not have an impact on the other DAC 6 reporting obligations. In particular, the lawyer-intermediary subject to LPP will still need to notify the relevant taxpayer (if it is their client). Other intermediaries not subject to LPP or, as the case may be, the relevant taxpayer, will still need to adhere to the applicable DAC 6 reporting obligations.
  • That being said, more is expected to come at the level of the CJEU in the DAC 6 sphere. The CJEU will particularly need to consider questions that are far more fundamental to DAC 6 as a whole, as the Belgian Constitutional Court has submitted a new request for preliminary ruling to the CJEU with no less than five pertinent questions. Additionally, the French Council of State — the Supreme Administrative Court — has submitted a request for a preliminary ruling on the conformity of the directive with the right to a fair trial. It will remain to be seen how the CJEU deals with these requests, hopefully in 2023.
  • The answer from the CJEU to these questions could have a major impact on the viability of the DAC 6 Directive, as most of the national implementing legislations adopted by the EU member states, including the Belgian and French ones, are literal implementations of the directive itself.

Click here to access the full alert.

Categories:
Author

Julie Permeke is a partner in the Tax Practice Group of the Brussels office. She joined Baker McKenzie in 2016 after several years of experience as a tax lawyer in other well reputed Benelux law firms. She also works as a voluntary researcher in the tax department of the Free University of Brussels (VUB). Julie has been listed as a recommended tax lawyer in Legal 500.

Author

Renaud Jaune has joined Baker McKenzie Paris as Senior Counsel in September 2020. He is a member of the Compliance & Investigations team of the Paris office. He brings his unique experience as a former senior member of the French Anti-corruption Agency (AFA). Before joining the Firm, Renaud was deputy director of the AFA where he promoted anti-corruption compliance policies both for public and private entities. He also significantly contributed to the development of international cooperation in the fight against corruption. During his tenure as a member the AFA’s leadership team, he helped define France’s strategy to combat corruption. His experience also covers general corporate taxation, transfer pricing and international taxation, reporting obligations, DAC 6, tax litigations, tax audits and local taxation. Renaud has held several positions in the French Tax and Public Finance administrations. Beginning as an inspector in the French directorate competent on the tax audit of the largest companies, he held various positions in the ministry and acquired a strong experience in legislation and ruling processes. He notably served in the Tax Legislation Service as head of unit E1, in charge of negotiating international tax treaties and mutual agreement procedures. Renaud also served as a Judge in the French administrative Supreme Court (“Conseil d’Etat”) and Legal Advisor to the Government.

Author

Olivier Dal Farra is Counsel in the tax group of Baker McKenzie's Luxembourg office. He is specialized in corporate tax and international tax planning. He has more than 10 years of experience in Luxembourg. Before joining the Firm in 2019, Olivier worked as a senior tax manager for an audit firm in Luxembourg and several international law firms in Paris and Luxembourg.

Related Posts

Write A Comment