The Court of Justice of the European Union (CJEU) will soon rule on the compliance of the Luxembourg law of 25 November 2014 laying down the procedure applicable to the exchange of information on request in tax matters (the “Law of 25 November 2014”) with the European Directive 2011/16 on the exchange of information on request and the Charter of Fundamental Rights of the European Union and especially the right to an effective remedy.
The question was brought before the CJEU following a request for a preliminary ruling from the Luxembourg administrative court of appeal lodged in a matter opposing a Luxembourg entity to the Luxembourg tax authorities acting on request by the French tax authorities. In this particular case, the requested Luxembourg entity considers that some of the information it was ordered to provide by the Luxembourg tax authorities have obviously no connection to the tax objective pursued by the French authorities.
Yet, further to the Law of 25 November 2014, it is not possible, neither for the Luxembourg Tax authorities nor for the requested Luxembourg third party (which may notably be a bank, a trust company, etc.) to examine, respectively to challenge in court, the information request made by the Tax authorities from another member state of the European Union (“Member State Tax Authorities”). It is in particular not possible to verify the condition of foreseeable relevance of the requested information regarding the links to the particular tax case and the stated fiscal purpose. The condition of foreseeable relevance is however a condition provided for by the Directive 2011/16, on the basis of which the French tax Authorities had based their demand.
The Law of 25 November 2014, which is particularly severe, was elaborated in the particular climate of disclosures of tax advantages that some Member States would have granted to certain companies. For its part, the State of Luxembourg wanted to be above reproach.
Now, the question put to the European supreme court is whether Luxembourg has not gone too far and to the point where some fundamental rights are at stake.
On 10th January of this year, the Advocate General of the CJEU has expressed its views. According to him, there is no doubt that both the Luxembourg tax authorities and the requested third party holder should have an effective opportunity to respectively review summarily and challenge in court the foreseeable relevance of the request of information from another Member State Tax Authority.
Should the CJEU go in the same direction, it should radically change the approach of the Luxembourg requested third parties when they receive a request for information that they consider to be obviously abusive.