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DAC6 : the CJEU reaffirms the importance of respecting the lawyer's professional secrecy

The Court of Justice of the European Union ("CJEU") has just strongly reaffirmed in its judgment dated 8 December 2022 (case C-694/20, Orde van Vlaamse Balies) the fundamental character of the principle of professional secrecy for lawyers.

In this case, the Belgian Constitutional Court referred a question to the CJEU for a preliminary ruling in order to know whether Article 1 (2) of Directive 2018/822 (the so-called DAC 6 Directive, as regards mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements) infringes the right to privacy guaranteed by Article 7 of the Charter of Fundamental Rights of the European Union (the “Charter”). Such clause in the Directive obliges a lawyer who is subject to professional secrecy, and therefore not subject to the obligation to declare such tax schemes, to notify any intermediary, who is not the lawyer’s client, without delay, of their reporting obligations to the competent tax authorities.

The CJEU concluded, after recalling that Article 7 of the Charter grants enhanced protection to exchanges between a lawyer and his client in the name of what the CJEU describes as " a fundamental role in a democratic society" and that professional secrecy also encompasses legal advice, that Article 1(2) of Directive 2018/822 " is invalid in the light of Article 7 of the Charter".

In line with the principle of proportionality, the CJEU went on to state that although "combating aggressive tax planning and preventing the risk of tax avoidance and evasion constitute objectives of general interest recognised by the European Union (...)", the relevant provision of the Directive cannot "(...) be regarded as strictly necessary to attain those objectives (...)".

It should be noted that Article 3, (1) para. 1. and (2) of the Luxembourg law of 25 March 2020 on reportable cross-border arrangements (implementing the DAC6 Directive into Luxembourg law) provides, like the Belgian law, an exemption for lawyers from transmitting information on potentially aggressive cross-border tax planning arrangements to the tax authorities, replacing it with the above mentioned obligation to notify other intermediaries and, where appropriate, the relevant taxpayer.

This judgment paves the way for a possible legislative amendment.

Please do not hesitate to contact our tax and European law team to assess the consequences of this decision.

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