In our newsletters Q1 and Q2 2017, we announced a paradigm shift in Luxembourg concerning the exchange of tax information on request by another EU member state since 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”) had been fundamentally challenged by a judgment of the Court of Justice of the European Union (“CJEU”) of 16 May 2017.
As a reminder, the CJUE held in its decision that the requested tax authority shall verify, not only the procedural regularity of the request of another member state, but also that the information sought is not deprived of any foreseeable relevance to the tax affairs of a given taxpayer. Likewise, the Luxembourg administrative court should have jurisdiction to review the foreseeable relevance of the requested information.
Well, the repercussions of this CJEU decision in Luxembourg quickly became tangible.
First, the Luxembourg administrative Court of Appeal, which had referred the question to the CJEU for a preliminary ruling, and by consequent raised the above mentioned decision, delivered its decision on 26 October 2017 taking up the conclusions of the CJEU and excluding the application of the challenged provisions of the Law of 25 November 2014. In the present case, the administrative Court of Appeal sanctioned the Luxembourg tax authorities for failure to verify the foreseeable relevance of the request and annulled the administrative fine which had been imposed on the requested third party.
Moreover, the Ministry of Finance has included in the bill regarding the budget of 2018 an article 11 setting out the changes in cooperation with foreign tax authorities and proposed to amend two articles of the Law of 25 November 2014, as follows:
(i) The proposed amended article 3 of the Law of 25 November 2014 now provides that the competent tax authorities shall ensure that the requested information is foreseeably relevant to the typologies of taxpayer and of holder of the information and with respect to the needs of the tax investigation in question.
(ii) The proposed amended article 6 now authorizes to any person covered by the administrative decision of the Luxembourg tax authority and to any third party concerned to apply for annulment of the administrative decision... For the purpose of this application for annulment, the claimant and the court shall have access to a minimum amount of information permitting to verify the foreseeable relevance of the request for information. The action shall have suspensive effect.
However, the Ministry of Finance wanted to accelerate the procedure in comparison with standard procedures. Thus, the application must be brought within one month of the notification of the decision to the holder of the requested information. Moreover and by way of derogation from the legislation on proceedings before the administrative court, there may be no more than one written submission by party, including the motion initiating proceedings and the court shall take its decision within one month from the filing of the last written submission.
It remains possible to lodge an appeal before the administrative Court of appeal within a period of 15 days from the notification of the decision.
As of today, any taxpayer or requested third party may rightly object to an injunction from the tax authorities if he/she has good reason to believe that the request is not relevant.