Advocate General of the CJEU - 5x “yes” for MDR (DAC6)

Polski

On February 29, 2024, Advocate General Nicholas Emiliou delivered his opinion in Case C-623/22 of a preliminary ruling request from the Belgian Constitutional Court. With regard to all five questions posed by said court, the Advocate General found no evidence for the provisions of Council Directive (EU) 2018/822 of May 25, 2018 (DAC6), to be incompatible with EU law.

The questions raised by the Belgian Constitutional Court concerned the following matters:

1. does Directive 2018/822 [‘DAC6’] infringe Articles of the Treaty on European Union [TEU] and Articles of the Charter of Fundamental Rights of the European Union [Charter] and, more specifically, the principles of equality and non-discrimination as guaranteed by those provisions, in that DAC6 does not limit the reporting obligation in respect of cross-border arrangements to corporation tax?
2. does DAC6 infringe the principle of legality in criminal matters as guaranteed by the European Convention on Human Rights [‘the ECHR’], the general principle of legal certainty and the right to respect for private life as guaranteed by the Charter and by the ECHR, in that the concepts of ‘arrangement’ (and therefore the concepts of ‘cross-border arrangement’, ‘marketable arrangement’ and ‘bespoke arrangement’), ‘intermediary’, ‘participant’, ‘associated enterprise’, the terms ‘cross-border’, the different ‘hallmarks’ and the ‘main benefit test’ that DAC6 uses to determine the scope of the reporting obligation in respect of cross-border arrangements, are not sufficiently clear and precise?
3. does DAC6  infringe the principle of legality in criminal matters, and infringe the right to respect for private life as guaranteed by the Charter and the ECHR, in that the starting point of the 30-day period during which the intermediary or relevant taxpayer must fulfil its reporting obligation in respect of a cross-border arrangement is not fixed in a sufficiently clear and precise manner?
4. does DAC6 infringe the right to respect for private life as guaranteed by the Charter and the ECHR, in that the DAC6 provides that, where a Member State takes the necessary measures to give intermediaries the right to a waiver from filing information on a reportable cross-border arrangement where the reporting obligation would breach legal professional privilege under the national law of that Member State, that Member State is obliged to require the intermediaries to notify, without delay, any other intermediary / relevant taxpayer, of their reporting obligations?
5. does DAC6 infringe the right to respect for private life as guaranteed by the Charter and by the ECHR, in that the reporting obligation in respect of cross-border arrangements interferes with the right to respect for the private life of intermediaries and relevant taxpayers?

Not only CIT

The Advocate General took a stand on whether the DAC6 infringes the principles of equality and non-discrimination by introducing an obligation to report cross-border arrangements that is not limited to corporate income tax.

The Advocate General did not see any reason why corporate income tax and other taxes covered by the DAC6 should be treated differently.

Referring to the Commission's position, the Advocate pointed out that if the reporting obligation were to apply only to one type of direct taxation (corporate tax) to the exclusion of other forms of direct taxation (for example, individual income tax) and indirect taxation, some taxpayers could turn certain taxable profits of companies into other types of income not subject to the reporting obligation, and this would undermine the achievement of the objective pursued by the directive in question.

DAC6 is transparent and clear

The Advocate General concluded he was not convinced by claims that DAC6 infringes the Charter's principle of legality of penalties. In this regard, he indicated i.a. that:

• the 30-day rule laid down in DAC6 is sufficiently clear and precise,
• does not perceive the main benefit test to lack clarity or precision (he specified that what matters is not the subjective view of the taxpayer / intermediary in question, but the expectation that a prudent and reasonably informed person would have to that effect, and that this test entails an evaluation of elements which are largely of an objective nature),
• term "implementation" can hardly be considered as lacking clarity (in doing so, he noted that activities such as providing general advice unrelated not linked to a specific and concrete tax arrangement for one or more specific clients, or the simple participation in discussions and exchanges between intermediaries and taxpayers, or between different intermediaries, do not require an intermediary to file a report under the DAC6),
• The term " arrangement" is general in nature and has a broad scope - but this does not mean that such terms are vague or ambiguous.

Justified interference in privacy

The Advocate General pointed out that whilst there is indeed interference with the private life of taxpayers and intermediaries under the DAC6, that interference may be justified as necessary and proportionate to attain certain objectives in the public interest recognized by the EU.

In the Advocate General's view, the limitation on the exercise of rights (the right to respect for private life) is framed by the rules whose application is sufficiently clear and predictable. The predictability and clarity of the provisions is not called into question by the fact that they are rather broad in scope.

In the Advocate General's view, any reportable arrangement, regardless of its monetary value, may be capable of revealing a significant loophole in the legislation that may, actually or potentially, be exploited by other, possibly more sizable, arrangements.

At the same time, the Advocate General pointed out that the fact that the information to be reported in light of the DAC6 may concern lawful transactions is consistent with the objective pursued by the DAC6, which is meant to enhance transparency by making some information concerning certain tax arrangements available to the tax authorities, and does not imply any (positive or negative) evaluation of the lawfulness of those arrangements, nor of the taxpayers' or intermediaries' compliance with, for example, the relevant tax and financial rules. He did not perceive as problematic the fact that the reporting obligation may also extend to arrangements that may be neither "aggressive" nor motivated by the prospect of obtaining some tax advantage, and that the entire system of taxation, both within and outside the EU, is based on reporting and disclosure obligations imposed upon taxpayers concerning information on activities which are, in principle, presumed lawful.

On the scope of the right to waiver from the obligation to report a tax scheme

The Advocate General addressed the issue of waiver from reporting obligation due to professional secrecy. His considerations in this regard may be questionable. This seems to result from different manners in which the matter of professional secrecy is regulated in various EU member states. It is worth noting that the starting point for the Advocate General's considerations was a question from the Belgian Constitutional Court. The Advocate General did not explicitly refer, for example, to Polish regulations.

The Advocate General stated that under the DAC6, member states may grant intermediaries the right to a waiver in relation to filing information on reportable cross-border arrangements only where the reporting obligation would be in breach of the legal professional privilege, which is recognised in relation to lawyers and other professionals which are, in exceptional circumstances, treated in the same way as lawyers.