CJEU: DAC6 (MDR) complies with EU law

Polski

CJEU ruled in Case C-623/22 of a preliminary ruling request from the Belgian Constitutional Court. With regard to all five questions posed, CJEU found no evidence for the provisions of Council Directive 2011/16/UE amended by the 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 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 fulfill 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  in so far as the effect of that obligation is to oblige an intermediary bound by legal professional privilege subject to criminal sanctions under the national law of that Member State to share with another intermediary, not being his client, information which he obtains in the course of the essential activities of his profession?

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 which is not reasonably justified or proportionate in the light of the objectives pursued and which is not relevant to the objective of ensuring the proper functioning of the internal market?

Not only CIT

The CJEU found that nothing in the case files allows it to conclude that aggressive tax planning practices may only be implemented in the field of corporate income tax. 

The CJEU shared the opinion of the Advocate General of 29 February 2024 that, while the impact assessment carried out by the Commission on 21 June 2017 enclosed to the proposal to amend Directive 2011/16, attaches greater importance to direct taxes, it further clarifies that any type of tax or fee may be the subject of aggressive tax planning. 

In CJEU’s view, it is clear that different types of taxes subject to the reporting obligation laid down by the amended Directive 2011/16 fall within comparable situations in the light of the objectives pursued by that directive in the field of combating aggressive tax planning and tax avoidance and evasion in the internal market and that being subject to that obligation, in an area in which the EU legislature has a broad discretion in the exercise of the powers conferred on it, is not manifestly inappropriate in the light of those objectives.

DAC6 is transparent and clear

The CJEU concluded that the examination of the aspects to which the second and third questions of the preliminary ruling referred has disclosed no factor of such a kind as to affect the validity of amended Directive 2011/16, in the light of the principle of legal certainty, the principle of legality in criminal matters of the Charter and the right to respect for private life guaranteed by the Charter.

The CJEU pointed out that the  principle of legal certainty requires, on the one hand, that the rules of law be clear and precise and, on the other, that their application be foreseeable for those subject to the law, in particular, where they may have adverse consequences. In the opinion of the CJEU, however, these requirements cannot be understood as precluding the legislator from applying abstract legal notions within the norms it adopts, nor as an element obliging such an abstract norm to indicate various specific situations in which it can be applied, as the legislator is not able to determine all these situations in advance. The fact that the legislation refers to broad concepts which must be clarified gradually does not, in principle, preclude it from being regarded as laying down clear and precise rules allowing a legal entity to predict which acts and omissions may be the subject to penalties of a criminal nature.

Referring to the definitions cited in request of the Belgian Constitutional Tribunal for preliminary ruling, CJEU indicated i.a.:

• that the term "arrangement" appears to be sufficiently clear and precise in the light of the requirements stemming from the principles of legal certainty and legality in criminal matters,
• hallmarks relate to specific and concrete characteristics of tax arrangements which the intermediaries, within the meaning of DAC6, who are as a general rule tax specialists, or (in the absence of an intermediary), the taxpayers who themselves design cross-border tax-planning arrangements, are able to identify without undue difficulty,
• the starting point of the period for carrying out the reporting is defined in a sufficiently clear and precise manner in the light of the requirements arising from the principles of legal certainty and legality in criminal law in relation to the different categories of intermediaries and in relation to the relevant taxpayer (where the reporting obligation rests with him).

Legal professional privilege and the obligation to inform other intermediaries

The CJEU addressed the issue of exemption from the obligation to inform other intermediaries about the reporting obligation due to legal professional privilege. The Court’s considerations in this regard may raise doubts, especially considering the recent judgment of the Constitutional Tribunal* (reference no K13/20). 

The CJEU indicated that of the unique position accorded to the profession of lawyer within society and for the purposes of the proper administration of justice, it must be held that the solution thus adopted in the judgment of 8 December 2022, Orde van Vlaamse Balies and Others (C‑694/20, EU:C:2022:963) as regards lawyers can extend only to persons pursuing their professional activities under one of the professional titles referred to in Article 1(2)(a) of Directive 98/5 (in case of Poland: advocate and attorney-at-law).

The Court pointed out that, as regards other professionals who are also authorized by the Member States to represent parties in court, such as university professors in certain Member States, there is nothing to support the conclusion that Article 8ab section 5 of the amended Directive 2011/16 is invalid.

DAC6 and the right to protection of private life 

The CJEU pointed out that the information provided in the reporting does not appear to go beyond what is strictly necessary to enable the Member States to have a sufficient understanding of the cross-border arrangements concerned and to be able to act promptly, either solely on the basis of the information communicated or by contacting the intermediaries or relevant taxpayers for the purpose of obtaining additional information. 

The Court emphasized that further to DAC6 the reporting obligation concerns, for the intermediary and, failing that, for the relevant taxpayer, only information that is within his or her knowledge, possession or control. Accordingly, that obligation does not entail, for the obligor, an obligation to investigate and seek information beyond the scope of the information which he or she already controls.

Should you have any questions with regard to the discussed regulations, we remain at your disposal.

***

*The adjudicating panel of the Constitutional Tribunal: Constitutional Tribunal judge Bartłomiej Sochański - chairman, Constitutional Tribunal judge Rafał Wojciechowski - rapporteur, Constitutional Tribunal judge Stanisław Piotrowicz, Constitutional Tribunal judge Justyn Piskorski, President of the Constitutional Tribunal Julia Przyłębska.