The Court of Justice of the European Union (CJEU) confirmed the validity of DAC6 in its decision of 29 July 2024 in the case of the Belgian Association of Tax Lawyers and Others (see C-623/22 ). DAC6 is the sixth amendment to the Directive on administrative cooperation in the field of taxation and introduced reporting obligations for potentially aggressive cross-border tax planning arrangements (hereafter: DAC6). In the current case, the CJEU upheld the validity of DAC6 in the questions raised by the Belgian Constitutional Court.
The context
This current case is the second time that the Belgian Constitutional Court raised questions to the CJEU concerning DAC6. The first case of C-694/20 had been launched by the Orde van Vlaamse Balies and Others (hereafter: first DAC6 case) and addressed the notification requirement of a lawyer-intermediary who is bound by legal professional privilege (LPP). In that first DAC6 case, the CJEU ruled in 2022 that the obligation of a lawyer-intermediary to notify other non-client intermediaries involved, infringed the right to respect for communications with their client (see: DAC6 LPP-notification requirement - KPMG Belgium ).
In the current (second) case, the Belgian Constitutional Court extended the scope of the above question to other intermediaries with LPP (incl. tax advisors and accountants). Moreover, in light of general principles and fundamental rights incorporated in EU law, it also sought answers to questions of precision and clarity of the DAC6 terminology as well as the proportionality of the DAC6 measure (see: Belgian Constitutional Court decision concerning DAC6 - KPMG Belgium ).
CJEU judgment in the case of the Belgian Association of Tax Lawyers and Others
The CJEU concluded in the current (second) case that the examination of the questions raised by the Belgian Constitutional Court did not reveal any issues that affected the validity of DAC6. More specifically, the Court ruled as follows:
- Taxes covered by DAC6: The fact that DAC6 does not limit the reporting obligation solely to the area of corporate taxes does not affect its validity in the light of the principles of equal treatment and non-discrimination.
- DAC6 terminology: The criticism with respect to the degree of precision and clarity of the DAC6 terminology (esp. arrangement, intermediary, associated enterprise, hallmarks, 30-day period) is unfounded. The examination of the degree of precision and clarity does not disclose any issues which affect the validity of DAC6 in the light of the invoked principles, esp. those of legal certainty and legality in criminal matters.
- Legal professional privilege (LPP) rules and notification: As explained above, in the first case, the CJEU ruled that the obligation of a lawyer-intermediary to notify other non-client intermediaries involved, infringed the right to respect for communications with their client. In the current (second) case, the question was broadened to address the notification obligations of an “intermediary bound by LPP subject to criminal sanctions under the national law of that Member State” (e.g., tax advisors not being lawyers). In its response, the CJEU rules that the conclusion in the first DAC6 case applies only with respect to lawyers within the meaning of the “Directive to facilitate practice of the profession of lawyer on a permanent basis in a Member State other than that in which the qualification was obtained” (Directive 98/5/EC of 16 February 1998, as amended; hereafter: Directive). The CJEU examines the background and the objectives of DAC6, together with the corresponding OECD model rules, and concludes that the notification requirements are designed to protect the LPP only for lawyers and other professionals who, like lawyers, are generally authorized to ensure legal representation. However, considering the unique role of lawyers in the proper administration of justice, the scope of application of the CJEU’s first judgment can extend only to persons pursuing their professional activities under one of the national titles listed in the Directive, and cannot extend to other professionals authorized by a Member State to ensure legal representation.
- Proportionality of DAC6: Whilst the reporting obligation constitutes interference in the right to respect for private life of taxpayers and intermediaries, that interference is proportionate and justified. The CJEU also confirms that the reporting obligation does not imply a requirement to investigate and seek information but only covers information that is available.
Conclusion and future implications
The CJEU upheld the validity of the DAC6 and the accordingly transposed national legislation of EU Member States. This may imply that the national tax authorities will pay more attention to the enforcement and correct application of the reporting obligations, and that the European Commission can put more emphasis on the effective implementation of DAC6, incl. data utilization by national tax authorities.
Concerning the conclusion on the notification requirements, it must be noted that, following the first decision of the CJEU in 2022, DAC8 (Directive (EU) 2023/2226 of 17 October 2023) already implemented certain changes to DAC6. Under the amended notification rules, an intermediary bound by LPP should notify their client, if that client is an intermediary or, where there is no such intermediary, that client is the relevant taxpayer. These new rules must be transposed into national legislation by 31 December 2025.
Notwithstanding the above, the current (second) judgment results in an outcome that is different from the current Belgian practice of tax advisors. Pending formal statements by the Institute for Tax Advisors and Accountants (ITAA) in Belgium on the implications of the judgment, the question of equal treatment of all professionals providing tax advice can be raised.
KPMG Belgium awaits the subsequent decision of the Belgian Constitutional Court, follows the guidelines of ITAA and adheres to the highest professional standards. It will liaise with all stakeholders to determine the precise implications for its professional practice and LPP-notification requirements under DAC6. If you have any questions in this respect, do not hesitate to reach out to your trusted KPMG advisor.
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