Belgian Constitutional Court decision concerning DAC6
On 15 September 2022, the Belgian Constitutional Court (hereafter: the Court) ruled in the joint cases of Belgian lawyers and the Institute of Tax Advisors and Accountants (ITAA) concerning the implementation of the DAC6 Directive (2018/822 EU) into Belgian legislation (hereafter: DAC6 legislation). The DAC6 legislation obliges intermediaries to disclose qualifying reportable arrangements to the Tax Authorities but facilitates a conditional exemption for those bound by legal professional privilege. The plaintiffs of the current case all have legal professional privilege and, in that context, challenged the DAC6 legislation based on fundamental rights.
In its judgement ( FR / NL ), the Court annulled the “unprivileged” periodic reporting of marketable arrangements, and raised several questions to the Court of Justice of the European Union. These questions are in addition to the those raised by the Court in the case of C-694/20 launched by the Orde van Vlaamse Balies and Others, which case is still pending.
In more details, the Court concluded as follows:
- The Court annulled the provisions of the Belgian national legislation which provide that an intermediary bound by a professional privilege sanctioned by criminal law, cannot invoke its professional privilege with respect to the periodic reporting of marketable arrangements (e., “unprivileged” periodic reporting).
- The Court raised prejudicial questions to the Court of Justice EU whether the DAC6 Directive infringes:
- the principle of equality and non-discrimination (see Art. 6(3) of the EU Treaty and Art. 20-21 of the EU Charter of Fundamental Rights) to the extent that the DAC6-reporting obligation in Belgium does not only apply to corporate income tax but also to other taxes, including direct taxes other than corporate income tax as well as registration duties;
- the principle of legality in criminal cases and the general principle of legal certainty and the right to respect for private life (see Art. 49(1) and Art. 7 of the EU Charter of Fundamental Rights and Art. 8 of the European Convention on Human Rights) to the extent that the terms which are used to determine the scope and application of the DAC6-reporting obligation may not to be sufficiently clear and precise. These terms include “arrangement” (incl. “cross-border arrangement”, “marketable arrangement”, “customized arrangement”); “intermediary”, “participant”, “associated enterprise”, the qualification of “cross-border”, the different “hallmarks” and the “main benefit test”;
- the principle of legality in criminal cases and the right to respect for private life (see Art. 49(1) of the EU Charter of Fundamental Rights and Art. 7 of the European Convention on Human Rights) to the extent that the trigger date for the 30 days reporting period may not to be sufficiently clear and precise;
- the right to respect for private life (see Art. 7 of the EU Charter of Fundamental Rights and Art. 8 of the European Convention on Human Rights) when a Member State, which provides for an exemption from DAC6-reporting obligations based on a national professional privilege, is required to oblige intermediaries to notify without delay other intermediaries (or in their absence, the relevant taxpayer) about the intermediary’s reporting obligation, to the extent that the consequence of this notification requirement is that an intermediary who is bound by professional privilege sanctioned by criminal law under that Member State’s legislation, is obliged to disclose information acquired in the course of exercising his/her profession, to another intermediary that is not his/her client;
- the right to respect for private life (see Art. 7 of the EU Charter of Fundamental Rights and Art. 8 of the European Convention on Human Rights) to the extent that the DAC6-reporting obligation would lead to an interference with this right of the intermediary and the relevant taxpayer, which is neither reasonable nor proportional to the aimed objectives and which is not essential regarding the objective of safeguarding a good functioning of the internal market?
In sum, the Belgian Constitutional Court acknowledges the application of legal professional privilege of lawyers, tax advisors and accountants, and questions the rules of the DAC6 Directive in light of the meaning and objective of such privilege. Next, the judgements of the European Court of Justice in both pending cases should provide more clarity.