France: Criteria for tax information requests of EU Member States

France: Criteria for tax information requests

The Court of Justice of the European Union (CJEU) today issued a judgment in a case concerning the legality of requests for tax information sent by one EU Member State to another EU Member State. The CJEU found that review by the tax agency receiving the request is limited to verifying whether the information sought is not—manifestly—devoid of any foreseeable relevance to the tax investigation concerned.

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The case is: Berlioz Investment Fund SA v. Directeur de l'administration des contributions directes, C-682/15 (16 May 2017)

Summary

As explained in a release [PDF 156 KB] from the CJEU, the French tax administration, in reviewing the tax affairs of a French company, sent a request for information to the Luxembourg tax authorities concerning the French company’s Luxembourg parent company. In response to the Luxembourg tax authorities’ request, the parent company provided all the information sought, except for the names and addresses of its members, the amount of capital held by each member and the percentage of share capital held by each member. According to the parent company, that information was not “foreseeably relevant” to the investigation being conducted by the French tax administration.

The Luxembourg tax administration imposed a €250,000 administrative penalty on the parent company for its failure to provide the information (the penalty was later reduce to €150,000 by a Luxembourg tribunal). The tribunal declined to determine whether the information order was well founded. The parent company filed an appeal with a Luxembourg court, asserting that its right to an effective judicial remedy under EU law had been infringed. The case was referred to the CJEU, for a determination, in particular, as to whether it can examine the validity of the information order and, therefore, of the French tax administration’s request for information serving as the basis for the information order.

The CJEU found that an information order can be lawful only if the requested information is “foreseeably relevant” for the purposes of the tax investigation in the EU Member State seeking it. The obligation imposed on the tax authorities of one Member State to cooperate with the tax authorities of another Member State extends only, according to the wording of the directive itself, to the communication of information that is “foreseeably relevant.” The CJEU noted that the tax authorities cannot engage in “fishing expeditions” or request information that is unlikely to be relevant to the tax affairs of the taxpayer concerned. 
 

It is certainly for them to determine the information they consider that they would need. They cannot, however, request information that is of no relevance to the investigation concerned, since the person to whom an information order is addressed must be entitled to rely in court on the non-compliance of the request for information with the directive and, therefore, on the resulting illegality of the information order.

 

Read a May 2017 report prepared by KPMG’s EU Tax Centre

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