EU States must permit court challenge to tax information exchange request order, CJEU rules

by Julie Martin

EU States must allow a court challenge to the legality of an information order issued to implement a tax-related exchange of information request on the grounds that the request lacks “foreseeable relevance,” the Court of Justice of the European Union (CJEU) ruled today.

Berlioz Investment Fund SA v Directeur de l’administration des Contributions directes (Case C‑682/15) involves a 2014 competent authority request issued by the French tax administration to the Luxembourg tax administration.

The French tax authority sought information from the Luxembourg tax authority to ascertain whether French stock company, Cofima SAS (Cofina) was entitled to an exemption from withholding tax when it paid dividends to its Luxembourg parent, Berlioz Investment SA (Berlioz).

To comply with France’s request, Luxembourg ordered Berlioz to divulge information. Berlioz complied, in part, but refused to provide information regarding the names and addresses of its members, the amount of capital held by each member, and the percentage of share capital held by each member.

According to Berlioz, the information was not foreseeably relevant to the French government’s tax inquiry within the meaning of Council Directive 2011/16/EU of 15 February 2011 on administrative cooperation in the field of taxation.

Berlioz was fined € 250 000 on account of its failure to divulge the information. It challenged the fine in Luxembourg’s tribunal administratif (Administrative Tribunal), which refused to determine the validity of the information order under Luxembourg law.

Berlioz then appealed before the Cour administrative, arguing that the administrative tribunal violated its right to an effective judicial remedy under Article 47 of the Charter of Fundamental Rights of the European Union (the Charter), titled ‘Right to an effective remedy and to a fair trial.’

The administrative court stayed the proceedings, requesting a preliminary ruling from the CJEU in the matter.

The CJEU has concluded that, to comply with Article 47 of the Charter, Berlioz must be given the opportunity to challenge the legality of the penalty and thus the information order on which the penalty is based before an independent and impartial tribunal.

Court reasoned that the Luxembourg penalty was based on a national provision which implements EU law within the meaning of Article 51(1) of the Charter, and thus the provisions of the Charter, in particular Article 47, are applicable.

Protection against arbitrary or disproportionate intervention by public authorities in the sphere of the private activities of any natural or legal person constitutes a general principle of EU law and thus Berlioz may invoke that protection, the Court said.

The Court said further that compliance with the “foreseeable relevance” standard is a condition of the legality of the information order to a relevant person and thus also for the penalty imposed on that person for failure to comply with that information order.

The Court said also that the requested authority (here Luxembourg) should verify that that information sought was not devoid of any foreseeable relevance to the investigation being carried out by the requesting authority.

To do so, the requesting authority must provide an adequate statement of reasons explaining the purpose of the information sought in the context of the tax procedure underway in respect of the taxpayer identified in the request for information. The requested authority may also follow up by the requesting authority for more information.

The Court further said that, for a national court to review the case, it must have access to the request for information and to any additional information which the authorities of the requested State obtained from the requesting State.

The person to whom the information order is addressed may, however, be barred from having access to the request for information because it is secret. Nevertheless, to be given a fair hearing, that person must have access to key information in the request for information (namely the identity of the taxpayer concerned and the tax purpose for which the information is sought), and the court may provide that person with certain other information if it considers that the key information is not sufficient, the CJEU ruled.

Julie Martin

Julie Martin

Founder & Editor at MNE Tax

Julie Martin is the founder of MNE Tax. She edits the publication and regularly contributes articles on new developments in cross-border business taxation.

Martin has worked as a tax journalist and editor for more than 13 years. Prior to that, she worked as an in-house tax attorney in New York. She also holds an LLM in taxation from New York University School of Law.

Julie Martin


Don't miss the latest tax and transfer pricing news! Sign up for our FREE newsletter