The Court of Justice of the European Union (“CJEU“) has just recently re-confirmed in its judgment dated 8 December 2022 (case C-694/20, Orde van Vlaamse Balies) the fundamental principle of professional secrecy for lawyers, tax advisors and accountants.
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, infringes on 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 that Article 7 of the Charter grants enhanced protection to exchanges between a lawyer and his client in 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 (…)”.
Based on this decision professionals that are protected under the legal privilege should not communicate on potential reporting obligations under DAC 6 with other intermediaries in connection with cross border arrangements, unless the tax payer explicitly requests so.
This judgement finally will pave the way to much needed changes within the EU Commisison’s thinking.