CJEU judgment on tax information requests between EU Member States

In its judgment in Joined Cases C-245/19 and C-246/19 the Court of Justice of the European Union (“CJEU”), held that, in the context of the exchange of information between tax authorities of EU Member States, a person who holds information requested by a national tax authority must be able to bring a direct action against such a request for information.

Cyprus tax authorities are regular recipients of requests for exchange of information from other EU Member States.  As such, this latest ruling by the CJEU is bound to impact the manner in which such requests for information are dealt with, by both taxpayers and the tax authorities of Cyprus.

EU Member States may deny the taxpayer subject to the tax investigation and the third parties concerned by the information in question the right to bring such a direct action, provided that there are other remedies enabling them to obtain an incidental review of that request.

The CJEU’s judgment concerned references for a preliminary ruling to the CJEU by the Luxembourg tax authorities, concerning, in particular, the interpretation of Article 47 of the Charter of Fundamental Rights of the EU (the “Charter”).  The referring court asked the CJEU whether Article 47 precludes national legislation that excludes a person holding information, a taxpayer subject to a tax investigation and third parties concerned by such information from bringing a direct action against an information order.

Inevitably, the provisions of Council Directive 2011/16/EU of 15 February 2011 on administrative cooperation in the field of taxation and repealing  Directive 77/799/EEC, as  amended  by  Council  Directive 2014/107/EU of 9 December 2014 (the “Directive”) became relevant in the joined cases discussed.  Specifically, the referring court was uncertain as to the scope of the possibility, under the Directive 2011/16, for Member States to exchange information provided that it is ‘foreseeably relevant’ to the administration and enforcement of national tax law.

The CJEU held that the Charter precludes national legislation (which transposes the Directive) from preventing a person who holds information from bringing an action against a decision by which the competent authority of that Member State orders that person to provide it with that information, in the context of an exchange of information request by another Member State.

However, the CJEU ruled that national legislation can prevent the taxpayer subject to the investigation and the third parties concerned by the information in question from bringing an action against that decision.

The protection of natural and legal persons against arbitrary or disproportionate intervention by public authorities in their private sphere is a general principle of EU law and may be relied on by a legal person which is the addressee of a decision ordering that information be provided to the tax administration, in order to challenge that decision before a court of law.

Contact our dispute resolution practice for more information.