On 29 February 2024, Mr Nicholas Emiliou, Advocate General at the Court of Justice of the European Union (“CJEU”) , commented on a preliminary question referred to the CJEU by the Belgian Constitutional Court concerning the legality of the application of Council Directive (EU) 2018/822 (“DAC 6 Directive”), which, by introducing a reporting obligation on cross-border arrangements, is intended to contribute to the fight against tax avoidance and evasion in the internal market, to the Belgian legal system.

The Belgian Constitutional Court asks the CJEU 5 questions.

The Advocate General responds negatively to the first question, which deals with the principle of equality and non-discrimination in view of the fact that the DAC 6 Directive does not only apply to corporate income tax but also affects other direct and indirect taxes, stating, for example, the concern that the exclusion of other taxes could lead some taxpayers to transform certain taxable profits of companies into other types of income that are not subject to reporting, which would be contrary to the achievement of the objective pursued by the DAC 6 Directive. It therefore considers the Directive to be proportionate in this respect, while also stating that the simplification represents a limitation of the notification obligation to cross-border transactions only.

The Advocate General consolidated the second and third questions concerning the clear and precise definition of the basic concepts (e.g. “main tax benefit”, among others) and the clear and precise definition of the 30-day time limit for the intermediary or taxpayer to comply with the notification obligation on the cross-border arrangement, which may be contrary to the general principle of legal certainty and the right to respect for private life guaranteed by Article 7 of the Charter of Fundamental Rights of the European Union (“the Charter”). In both cases he discussed the concepts in detail, and in both cases he came to the same conclusion that the concepts must be clear and precise in order to be able to impose penalties based on them, but that this is not precluded by the fact that the concepts will be refined over time. These facts, in his view, cannot therefore lead to the illegality of the DAC 6 Directive.

The essence of the fourth question is the possibility of a breach of professional confidentiality, which may occur in certain situations (a situation where an intermediary has to report to another intermediary in very specific circumstances that he has participated in tax planning for a particular taxpayer), which could lead to a violation of the right to respect for private life guaranteed by Article 7 of the Charter. As in the previous cases, the Advocate General is convinced that DAC 6 Directive is not contrary to law because there is no unacceptable interference with the right of intermediaries. In his opinion, the so-called “professional secrecy” in this case is granted only to lawyers or related professions of the legal profession, not to accountants, auditors, tax advisors, etc.

The final question deals with the compatibility of the DAC 6 Directive with the right to respect for private life guaranteed by Article 7 of the Charter, both for intermediaries and taxpayers, by requiring, without sufficient justification or proportionality, the reporting of a wide range of private information, even in arrangements that are lawful, non-abusive and without priority for tax benefits. He found no conflict in this case either, arguing in particular that there is a public interest in discouraging the creation of illegal cross-border arrangements.

In conclusion, the Advocate General has virtually brushed aside all the issues raised and maintains the legality of DAC Directive 6 in the areas mentioned. The question remains, whether or not his opinion will be followed by the court itself – but that usually happens. We will continue to monitor developments in the case.