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Belgian Constitutional Court Partially Suspends DAC6, Makes Referral to CJEU — Orbitax Tax News & Alerts

The Belgian Constitutional Court on 17 December 2020 issued its decision in a case challenging the constitutionality of the Flemish decree transposing the sixth iteration of the EU Directive on administrative cooperation in tax matters (DAC6). DAC6 requires intermediaries to report tax planning arrangements falling under specified hallmarks. An intermediary who is prevented from reporting due to legal professional privilege is required to notify other intermediaries, if any, and the relevant taxpayer. Further, with respect to specified arrangements, intermediaries are required to file quarterly recapitulative reports.

The case was brought before the Court by the Flemish Bar association and the association of Belgian tax advisors. The claimants argued for the suspension of the Flemish regulations transposing DAC6 on the grounds of incompatibility with the Belgian constitution, notably with respect to the principle of legal professional privilege and its impact on the fundamental values of due process and fair trial.

The Constitutional Court stayed its final decision on the matter. Instead, it referred prejudicial questions on the matter to the Court of Justice of the European Union (CJEU) and ordered the partial suspension of the DAC6 implementing regulations pending the decision of the CJEU and the ensuing decision of the Constitutional Court.

The referral asks the CJEU whether Article 1(2) of Council Directive (EU) 2018/822 of 25 May 2018 amending Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements infringes the right to a fair trial as guaranteed by Article 47 of the Charter of Fundamental Rights of the European Union and the right to respect for private life as guaranteed by Article 7 of the Charter of Fundamental Rights of the European Union.

With respect to the implementing regulations, the Court ordered the suspension of (a) the obligation to inform other intermediaries in case the intermediary is prevented from reporting due to legal professional privilege, and (b) the obligation to file quarterly recapitulative reports with respect to specified arrangements. In contrast, the Court denied the claimants' request to suspend "regular" DAC6 reporting.

The decision of the Constitutional Court concerns the DAC6 Decree issued by the Flemish region. The implementation of DAC6 in Belgium is in addition governed by regulations issued by the central government and by the Walloon region. Similar legal challenges against those implementing regulations have also been filed with the Constitutional Court.

Note that in addition to the litigation pending in Belgium, similar legal challenges have been raised in France. The National Bar association, the Conference of Bar associations and the Paris Bar association have indeed filed an injunction before the French Supreme Administrative Court for the suspension of the administrative regulations (BOFiP DAC6) dealing with the implementation of DAC6 in France. The Supreme Court held a hearing on the injunction on 29 January 2021.