Luxembourg rules for exchange of information in the light of the EU Fundamental Rights chapter

Since December 1st 2014, Luxembourg applies new procedural rules regarding the exchange of information on request under inter alia the double tax treaties and the Council Directive 2011/16/EU of February 15th 2011 on administrative cooperation in the field of taxation (meanwhile amended by the Council Directive 2014/107/EU of December 9th 2014) (the “EU DAC”).

These new rules enacted in the law dated November 25th 2014 (the “2014 Law”) abolish any right for the taxpayer and/or the holder of the requested information to appeal against the order to exchange information.A fine up to EUR 250.000 may be imposed by the Head of the Tax Authorities to any recalcitrant information holder. For a more detailed overview of the content of the 2014 Law, please refer to our February 2015 newsletter.

In a ruling issued on December 17th 2015, the Luxembourg higher administrative Court decided to ask the European Court of Justice (the “ECJ”) for a preliminary ruling on the question of the compliance of the aforementioned abolition of any judicial remedies against the order to provide information with the EU Fundamental Rights Charter, proclaimed on December 7th 2000 in Nice and legally binding as from the entry into force of the Lisbon Treaty in December 2009 (the “Charter”).

Even though the taxpayer did not invoke a violation of the Charter in its appeal, the judges of the higher administrative court ex officio raised the issue. After having held that the request for exchange of information was inter alia based on the EU DAC and that the Charter applies to the national authorities when they are implementing EU law, the judges came to the conclusion that article 47 of the Charter, providing that “everyone whose rights and freedoms guaranteed by the law of the Union are violated has the right to an effective remedy before a tribunal”, might apply and defeat the prohibition of any judicial remedies as provided for by the 2014 Law. The rights and freedoms guaranteed by the laws of the EU at stake in the present case could, for example, be the respect for private and family life and/or the protection of personal data according to the Luxembourg judges.

Should the applicability of the Charter to the 2014 Law be confirmed, the ECJ is asked to rule on the question whether a taxpayer might rely on article 47 of the Charter to have the legality of a request for exchange of information, addressed to its Member State of residence by another EU Member State, examined by an independent judicial authority notwithstanding the prohibition by the 2014 Law, notably with respect to (i) the criteria of foreseeable relevance of the information to be exchanged or (ii) exhaustion of all usual domestic sources of information.

"The Luxembourg higher administrative court has asked the ECJ to rule according to an expedited procedure, given that an important number of similar disputes could potentially arise and that Luxembourg’s obligation to sincere cooperation under the Treaty on the European Union might be affected."