The CJEU rules on the interpretation of certain matters related to the exchange of information

Deloitte Malta Tax Alert

26 October 2020

Luxembourg State v B and Others, Joined Cases C-245/19 and C-246/19

On 6 October 2020, the Court of Justice of the European Union (‘CJEU’) ruled that the right to an effective remedy guaranteed by the Charter of Fundamental Rights of the European Union (‘EU Charter’) requires that, subject to some exceptions, persons who hold information that is requested by the national administration of a Member State, in the context of a cooperation procedure between Member States, must be able to bring a direct action against such a request.


Following two requests for exchange of information made by the Spanish tax administration pursuant to an investigation on a natural person resident in Spain (‘F.C.’), Luxembourg’s tax administration issued decisions to Luxembourg entities ordering them to provide:

  • information regarding bank accounts and financial assets held or beneficially owned by F.C., and
  • information regarding various legal, banking, financial and economic transactions that may have been carried out by F.C. or by third parties acting on her behalf or in her interest.

Under Luxembourg’s tax legislation, an action could not, at the time, be brought against the aforementioned orders. Nevertheless, the orders were challenged before Luxembourg’s administrative court, resulting in references for a preliminary ruling to the CJEU. In its request, the referring court asked the CJEU whether the EU Charter excludes a person holding information, a taxpayer subject to a tax investigation and third parties concerned by such information from bringing a direct action to challenge an information order.

The referring court also questioned the scope of the possibility for Member States to exchange information provided that it is ‘foreseeably relevant’ to the administration and enforcement of national tax law under Directive 2011/16/EU of 15 February 2011 on administrative cooperation in the field of taxation (‘DAC’).


Judicial review

The CJEU considered the application of article 47 of the EU Charter (the right to an effective remedy), read together with articles 7 and 8 thereof (the right to privacy and the right to the protection of personal data, respectively) and article 52(1) thereof (allows the exercise of certain fundamental rights to be restricted in certain circumstances) and made the following determinations:

  • The EU Charter precludes legislation of a Member State implementing the procedure for the exchange of information on request established by DAC from preventing a person who holds information from bringing an action against a decision by which the competent authority of that Member State orders that person to provide it with that information, with a view to following up on a request for exchange of information made by the competent authority of another Member State.
  • However, this rule does not preclude such legislation from preventing the taxpayer subject to the investigation giving rise to that request for information and the third parties concerned by the information in question from bringing an action against that decision.

Specifically in relation to article 47 and 52(1) of the EU Charter, the court found that under Luxembourg’s tax law applicable at the time, it is only where the addressee of the information order does not comply with that order and subsequently receives a financial penalty on that ground that that person has the possibility of challenging that order incidentally. In the view of the CJEU, such legislation does not comply with the provisions of the EU Charter.

The situation of taxpayers and third parties

With regards to the right to an effective remedy of the taxpayer, the CJEU acknowledged that the taxpayer is entitled to the right to privacy, the right to the protection of personal data and, in the case in question, the communication of information concerning him or her to a public authority is liable to infringe those rights, in which case it is justified for the person concerned to be granted the benefit of the right to an effective remedy.

Nonetheless, this requirement does not mean that the taxpayer must have access to a direct remedy aimed primarily at challenging a particular measure, provided that there are one or more remedies available before the various competent national courts or tribunals enabling him to obtain, in an incidental manner, an effective judicial review of that measure without running the risk of being penalised for doing so.

To this end, the CJEU held that legislation preventing a taxpayer from bringing a direct action against an information order does not damage the essence of the right to an effective remedy. In the view of the court, this position is in line with the objective of combating international tax evasion and avoidance by strengthening cooperation between the competent national authorities in that area, and that it complies with the principle of proportionality.

This rule should similarly apply to the case of third parties concerned by the information in question, provided that such third parties have a remedy that enables them to obtain effective respect of their fundamental rights, such as an action to establish liability.

The question of ‘foreseeably relevant’

Finally, the CJEU ruled that information should be considered to be foreseeably relevant within the meaning of DAC where it:

  • states the identity of the person holding the information in question, that of the taxpayer subject to the investigation giving rise to the request for exchange of information and the period covered by that investigation, and
  • relates to contracts, invoices and payments which, although not expressly identified, are defined by personal, temporal and material criteria establishing their links with the investigation and the taxpayer subject to that investigation.

Maltese law perspective

The CJEU’s decision in Luxembourg State v B and Others clarifies that Maltese taxpayers who are asked for information on another taxpayer from the Commissioner for Revenue in order to provide such information to another Member State’s tax authority by virtue of the powers enshrined in the Income Tax Acts should be granted the right to appeal such information order.

The ruling also provides new interpretation to the term ‘foreseeably relevant’ within the context of DAC. Member States, including Malta, should ensure that, in every case, the information requested is not manifestly devoid of any foreseeable relevance.  

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