Application of the new procedure on exchange of information on demand

On August 13th 2015, the Luxembourg Administrative Court (tribunal administratif) (the “Court”) took the first decision in the matter of exchange of information in application of the law of November 25th 2014 relating to the new procedure applicable to exchange of information on demand (the “Law”). The Law significantly reduces the rights of taxpayers to appeal against a request of information on demand and provides for an administrative fine in case of non-communication of the required information.

In the case at hand the company refused to communicate certain information requested by the tax authorities on the ground that they were not foreseeably relevant. The tax authorities consequently imposed an administrative fine of EUR 250,000 in application of the Law. The company appealed against the decision of the tax authorities before the Administrative Court.

The Court held that the foreseeable relevance of the request of information can no longer be contested in application of Article 6 of the Law.

The Court also confirmed that the request of information is a preliminary tax decision which cannot be challenged on the ground of Article 6 of the European Convention on Human Rights (“ECHR”); the application of Article 6 ECHR being excluded in tax matters and from the preliminary stages of a procedure.

The analysis of the Court was therefore limited to the validity of the administrative fine against which an appeal is possible under the Law.

In this respect, the Court referred to an instruction issued by the head of the Luxembourg tax authorities detailing the criteria relevant for the determination of the amount of an administrative fine in the framework of a request of exchange of information (the “Instruction”) and concluded that by immediately imposing the highest fine on the company, the proportionality and progressivity rules expressly mentioned in the Instruction were not respected. The Court decided that the fine was excessive and reduced it to an amount of EUR 150,000.