DAC6 violates attorney legal privilege

According to the European Court of Justice, the DAC6 directive violates the right to respect for communication between a lawyer and his or her client.

According to the DAC6 directive, all intermediaries involved in potentially aggressive cross-border tax planning must report it to the tax authorities. These are constructions that can lead to tax avoidance. Some intermediaries are exempt from this obligation if this would violate their duty of confidentiality, e.g. lawyers. However, a lawyer-intermediary is then obliged to inform the other intermediaries or the relevant taxpayer about their duty to report.

Reason for the case EU Court of Justice

The Belgian Constitutional Court (the referring court) had to decide whether the notification obligation constituted an unlawful interference with the right to respect for communications between lawyers and their clients. The referring court has requested a preliminary ruling from the European Court of Justice.

Position in Belgian professional associations for lawyers

Does a lawyer act as an intermediary and is he bound by a duty of confidentiality? In that case, he must inform other relevant intermediaries in writing and with reasons that he cannot comply with his obligation to notify. According to the professional associations of lawyers, it is impossible for them to comply with the duty of notification without violating the duty of confidentiality. It is not necessary either. The client can inform the other intermediaries themselves and ask them to comply with their obligation to notify.

DAC6 constitutes a violation of the attorney-mediator’s legal privilege

The DAC6 Directive interferes with the guaranteed right to respect for communications between lawyers and their clients. The directive informs the other intermediaries about the identity of the notifying lawyer-intermediary. They are also informed of his assessment that the scheme in question should be notified, and that he has been consulted on this. There is also another indirect interference with respect for the communication between the client and his lawyer. The Tax Agency also gets to know the lawyer-intermediary’s identity and consultation.

Notification obligation for lawyer-intermediary not necessary

The notification duty of the lawyer-intermediary to inform other intermediaries is legitimate and serves a public interest. However, the reporting obligation is not necessary to combat tax avoidance and evasion. If there are no other intermediaries, Tax can be informed by the taxpayer, possibly after consulting his lawyer. Tax also has all kinds of instruments to obtain information from the taxpayer.

Notification obligation from DAC6 guidance for legal intermediaries invalid

The CJEU declares Article 8bis of the DAC6 directive invalid when a lawyer-intermediary is bound by a duty of confidentiality to immediately inform any other intermediary who is not his client of his reporting obligations under DAC6.

Directive: Art. 8ab Directive 2018/822 (DAC6 Directive)

Source: CJEU 8 December 2022, Orde van Vlaamse Balies et al., C-694/20, ECLI:EU:C:2022:963

Online MDR/DAC6 case study course

Since 1 January 2021, intermediaries and/or taxpayers must report potentially aggressive cross-border tax schemes in the Tax and Customs Administration’s online portal on the basis of the European directive Mandatory Disclosure Rules (MDR)/DAC6. During this online course, specialist Drs. Mark Nieuweboer’s case studies to zoom in on the first practical experiences with the reporting obligation.

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