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ECJ Says EU States Can Block Tax Info Fishing Requests

Friday, May 19, 2017

The European Court of Justice has ruled that the courts of one member state may review the legality of requests for tax information sent by another member state. However, it said that review must be limited to verifying whether the information sought is not – manifestly – devoid of any foreseeable relevance to the tax investigation concerned.

The ruling was released on May 16, 2017, in Berlioz Investment Fund v. Director of the Direct Taxation Administration, Luxembourg (Case C-682/15).

In the course of a review of the tax affairs of French company Cofima, the French tax administration sent to the Luxembourg tax administration in 2014 a request for information concerning Cofima's Luxembourg parent company, Berlioz Investment Fund.

In response to the Luxembourg tax authorities' request, Berlioz 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 Berlioz, that information was not foreseeably relevant to the checks being carried out by the French tax administration.

As a result of Berlioz's refusal to provide that information, in 2015 the Luxembourg tax administration imposed an administrative fine of EUR250,000 (USD277,300). Berlioz applied to the Luxembourg administrative courts for cancellation of the fine and annulment of the "information order" (the decision of the Luxembourg authorities directing Berlioz to provide the information at issue).

At first instance, the Administrative Tribunal of Luxembourg reduced the fine to EUR150,000 but declined to determine whether the information order was well founded. The Tribunal relied in that regard on Luxembourg law, under which it is possible to apply for cancellation or reduction of the fine, but not annulment of the request for the exchange of information or of the information order.

Berlioz then lodged an appeal with the Administrative Court of Luxembourg, arguing that its right to an effective judicial remedy, as guaranteed by the Charter of Fundamental Rights of the EU, had been infringed. The Administrative Court of Luxembourg referred the matter to the Court of Justice 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.

In its May 16 judgment, the European Court of Justice said, first of all, that the Charter of Fundamental Rights of the EU is applicable, since, by imposing a fine on Berlioz because of its refusal to provide the information sought, the Luxembourg tax authorities implemented the EU directive on administrative cooperation in the field of taxation.

Next, the Court notes that such an information order can be lawful only if the requested information is "foreseeably relevant" for the purposes of the tax investigation in the member state seeking it. It said 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." Accordingly, the 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 the taxpayer concerned.

On the checks to be undertaken, the Court said that the authorities of the requested member state (the Luxembourg tax authorities, in this case) must not confine themselves "to a brief and formal verification of the regularity of the request for information but must also satisfy themselves that the information sought is not devoid of any foreseeable relevance for the purposes of the tax investigation, having regard to the identity of the taxpayer under investigation and the purpose of that investigation."

The Court said that the taxpayer must be able to argue against the legality of the information order and therefore the court in the requested state (the Luxembourg court, in this case) must be able to review the legality of the request.

The Court said, however, "it must only verify that the information order is based on a sufficiently reasoned request for information concerning information that is not – manifestly – devoid of any foreseeable relevance to the tax investigation concerned." In addition, it said, "if the court of the requested State is to be able to conduct its judicial review, it must have access to the request for information and to any additional information which the authorities of the requested state may have been able to obtain from the authorities of the requesting state."

The Court of Justice adds that "the person to whom the information order is addressed may, however, be barred from having access to the request for information because it is secret, and that that person does not therefore have a right of access to the whole of that request. Nevertheless, in order to be given a fair hearing, that person must have access to key information in the request for information (namely the identity of the taxpayer concerned and the tax purpose for which the information is sought), and the court may provide that person with certain other information if it considers that the key information is not sufficient."

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Offshore Trusts Guide: Introduction

The History of Offshore Trusts
Development of Professional Competence in the Jurisdictions
What Future for the Trust?
The New Age of Transparency
The Swiss Association of Trust Companies
The Society of Trusts and Estates Practitioners

Offshore Trusts Guide: Jurisdictions

Bahamas

Bahamas: Legal Framework and Formation Rules and Fees
Bahamas: 2006 Private Trust Companies Legislation

Barbados

Barbados: Legal Framework and Formation Rules and Fees
Barbados: Supervisory and Licensing Regime and Fees

Bermuda

Bermuda: Legal Framework and Formation Rules and Fees
Bermuda: Supervisory and Licensing Regime and Fees

British Virgin Islands

British Virgin Islands: Legal Framework and Formation Rules and Fees
British Virgin Islands: Special Trusts Act 2003
British Virgin Islands: The Trustee Act 2003
British Virgin Islands: :Supervisory and Licensing Regime and Fees
British Virgin Islands: New Laws on Private Trust Companies
British Virgin Islands: New Private Trust Company Regulations

Cayman Islands

Cayman Islands: Legal Framework and Formation Rules and Fees
Cayman Islands: Supervisory and Licensing Regime and Fees

Cook Islands

Cook Islands: Legal Framework and Formation Rules and Fees
Cook Islands: Supervisory and Licensing Regime and Fees

Cyprus

Cyprus: Legal Framework and Formation Rules and Fees
Cyprus: Supervision, Licensing and Tax

Gibraltar

Gibraltar: Legal Framework and Formation Rules and Fees
Gibraltar: Legislation, Regulation and Supervision

Guernsey

Guernsey: Legal Framework and Formation Rules and Fees
Guernsey: Trusts Law 2007

Isle of Man

Isle of Man: Legal Framework and Formation Rules and Fees
Isle of Man: Supervisory and Licensing Regime
Isle of Man: Uses Clients and Tax Treatment

Jersey

Jersey: Legal Framework and Formation Rules and Fees
Jersey: Supervisory and Licensing Regime
Jersey: Trusts Amendment Act 2006
Jersey: Foundations

Liechtenstein

Liechtenstein: Legal Framework and Formation Rules and Fees
Liechtenstein: Regulation Supervision and Transparency
Liechtenstein: Characteristics of Liechtenstein Trusts
Liechtenstein: Foundations

Madeira

Madeira: Legal Framework and Formation Rules and Fees

Malta

Malta: Legal Framework and Formation Rules and Fees
Malta: The Trust and Trustees Act 2004

Mauritius

Mauritius: Legal Framework and Formation Rules and Fees
Mauritius: Characteristics of the 2001 Trusts Act
Mauritius: Additional Provisions of the 2001 Trusts Act
Mauritius: Tax Treatment

Monaco

Monaco: Legal Framework and Formation Rules and Fees

Nevis

Nevis: Legal Framework and Formation Rules and Fees

Panama

Panama: Legal Framework and Formation Rules and Fees
Panama: Requirements for Acting as Trust Company in Panama

Seychelles

Seychelles: Legal Framework and Formation Rules and Fees

Turks & Caicos

Turks & Caicos: Legal Framework and Formation Rules and Fees
Turks & Caicos: The Voidable Dispositions Ordinance

Vanuatu

Vanuatu Legal Framework and Formation Rules and Fees




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