CJEU upholds right of review of inter-state information requests

Thu 22 Jun 2017

The Court of Justice of the European Union (CJEU) has held that a Member State’s National Court can review tax information requests from another Member State made under the Directive on administrative cooperation, to assess whether that request is ‘foreseeably relevant’. This assessment must be made having regard to the identity of the taxpayer concerned and that of any third party asked to provide the information, and also to the requirements of the tax investigation concerned.

In view of the increasing pace of exchange of tax information, the Berlioz Investment Fund SA v Directeur de l’administration des contributions directes (C-682/15) decision may be important for taxpayers seeking to ensure they do not pass on confidential information unnecessarily.

The preface to the EU Directive on Administrative Cooperation in the field of taxation (2011/16/EU) provides:

“The standard of ‘foreseeable relevance’ is intended to provide for exchange of information in tax matters to the widest possible extent and, at the same time, to clarify that Member States are not at liberty to engage in ‘fishing expeditions’ or to request information that is unlikely to be relevant to the tax affairs of a given taxpayer. While Article 20 of this Directive contains procedural requirements, those provisions need to be interpreted liberally in order not to frustrate the effective exchange of information.”

Berlioz Investment Fund SA was a Luxembourg company with a French subsidiary, Cofima. Cofima applied a French withholding tax (WHT) exemption to dividends it paid to Berlioz.  The French tax authorities requested the Luxembourg authorities obtain from Berlioz various information to check Cofima’s entitlement to the exemption, including the names, addresses and interests held by all shareholders of Berlioz.  Berlioz responded to all the questions except for the details of its shareholders, on the grounds that this was not foreseeably relevant for determining whether Cofima was entitled to the French WHT exemption.

Luxembourg law provides for a financial penalty in the case of non-compliance with an information request, which it accordingly levied on Berlioz for the missing information. Berlioz challenged that penalty on the grounds the information requested was not foreseeably relevant to clarify the tax position for the French authorities.

In broad summary, the CJEU held that Berlioz was entitled to challenge the penalty and the National Court did have authority to review the legality of the information request. It also held that the National Court can have access to the requesting Member State’s information request, in order to “satisfy itself that the information sought is not devoid of any foreseeable relevance having regard to the identity of the taxpayer concerned and that of any third party asked to provide the information, and to the requirements of the tax investigation concerned”. The full details of the information request could be withheld from Berlioz.