CJEU opinion on court challenge to French tax information exchange request

10 January 2017, an opinion issued by the EU Court of Justice (CJEU) found that Luxembourg should allow a company to challenge the legality of an information order issued in support of a French exchange of information request on the grounds that the request lacks “foreseeable relevance”.

In Berlioz Investment Fund SA v Directeur de l’administration des Contributions directes (Case C‑682/15), the French tax authority issued a request for information to its Luxembourg counterpart in 2014 in the context of an application for a withholding tax exemption by French subsidiary Cofima in respect of dividends paid to its Luxembourg parent company, Berlioz.

The French tax administration sought to ascertain whether the relevant conditions of French law had been complied with. To comply with France’s request, Luxembourg ordered Berlioz to divulge information. Berlioz complied, in part, but refused to provide information regarding 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 Berlioz, the information was not foreseeably relevant to the French government’s tax inquiry within the meaning of Council Directive 2011/16/EU of 15 February 2011 on administrative cooperation in the field of taxation. Berlioz was fined €250,000 on account of its failure to divulge the information. It challenged the fine in Luxembourg’s tribunal administratif, which refused to determine the validity of the information order under Luxembourg law.

Berlioz then appealed to Luxembourg’s Cour administrative, arguing that the tribunal administratif had violated its right to an effective judicial remedy under Article 47 of the EU’s Charter of Fundamental Rights. The Cour administrative stayed proceedings, requesting a preliminary ruling from the CJEU.

Advocate General Melchior Wathelet issued an opinion that the CJEU should rule that, to comply with Article 47 of the Charter, the Luxembourg Cour administrative must examine the legality of the information order on which the penalty is based. “I consider that the right to an effective remedy and to an impartial tribunal enshrined in Article 47 of the Charter necessarily entails the right of access to justice, that is to say, the possibility for an individual to secure a rigorous judicial review of any act capable of adversely affecting his interest,” he said.

Wathelet further said that compliance with the “foreseeable relevance” standard was condition of a tax information request, and therefore of a subsequent information order, so it should be for a court to verify “that the information order is based on a request for information which demonstrates a link between, on the one hand, the information requested, the taxpayer concerned and any third party asked to provide information and, on the other, the tax objective pursued.”

He said further that the request for information must be communicated to the court hearing the action against the pecuniary sanction, and also to the third party holding the information.