The Court of Justice of the European Union rendered its judgment in Case C-694/20 (Orde van Vlaamse Balies and Others) regarding the compatibility of the provision of Council Directive 2011/16/EU on administrative cooperation in the field of taxation, as amended by Council Directive (EU) 2018/822 of 25 May 2018 (the so-called “DAC 6 Directive”), requiring lawyer-intermediaries (acting within the limits of their profession and therefore bound by the legal professional privilege) to notify other intermediaries which are not his or her client of their reporting obligations in relation to a cross-border reportable arrangement.
The Court found this provision to be invalid in the light of Article 7 of the Charter of Fundamental Rights of the European Union. For instance, the Court considered that, although the DAC 6 Directive forms part of international tax cooperation aimed at contributing to the prevention of the risk of tax avoidance and evasion, which constitutes one of the objectives of general interest recognised by the European Union, imposing a notification obligation on a lawyer subject to legal professional privilege is not necessary in order to attain that objective. Indeed, the Court acknowledged that the reporting obligation on other intermediaries who are not subject to legal professional privilege and, if there are no such intermediaries, that obligation on the relevant taxpayer, ensure, in principle, that the tax authorities are informed and in a position to request information from the taxpayer or perform an audit.
Olivier THILL, Counsel - Head of Tax