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Berlioz - ECJ confirms that third parties can challenge 'foreseeable relevance' of tax information exchange requests

03 July 2017.

In Berlioz Investment Fund SA v Directeur de l'administration des Contributions directes (Case C-682/15), the ECJ has confirmed that a Member State's national court can review a tax information request made by another Member State in order to assess whether the requested information is 'foreseeably relevant'.


Directive 2011/16/EU (the Directive) provides an inter-state regime for the exchange of information under which third parties can be requested to supply information in relation to taxpayers.

The preface to the Directive provides:

"The standard of 'foreseeable relevance' is intended to provide for exchange of information in tax matters to the widest possible extent and, at the same time, to clarify that 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 a given taxpayer. While Article 20 of this Directive contains procedural requirements, those provisions need to be interpreted liberally in order not to frustrate the effective exchange of information."  

Berlioz Investment Fund SA (Berlioz) is the Luxembourg parent of Cofima, a French subsidiary. Cofima was subject to a French tax enquiry in relation to its entitlement to an exemption from French withholding tax in respect of a dividend it had paid to Berlioz. 

As part of that enquiry, the French tax authorities sought information from the Luxembourg authorities under the Directive. The Luxembourg authorities in turn ordered Berlioz to provide information. The questions that the Luxembourg authorities raised largely concerned the nature of Berlioz's activities. Berlioz answered most of the questions asked of it but refused to provide certain other financial information on the grounds that the information sought was not 'foreseeably relevant' for determining whether Cofima was entitled to the French withholding tax exemption. 

Luxembourg law provides for a financial penalty in the case of non-compliance with an information request. A penalty in the sum of €250,000 was imposed on Berlioz for not providing all of the information which had been requested. This was later reduced to €100,000 by the Luxembourg Administrative Tribunal. Berlioz progressed its appeal and a reference was made to the Court of Justice of the European Union (ECJ).    

ECJ's judgment 

The ECJ largely agreed with the opinion expressed by the Advocate General in this case.

The ECJ confirmed that Article 47 of the EU Charter of Fundamental Rights (the Charter), which provides a right to an effective remedy for everyone whose rights are guaranteed by EU law, applied to penalty proceedings. 

Although the Charter only applies to Member States when they are implementing EU law, the domestic penalty imposed by Luxembourg could be regarded as doing so because it enabled the requested tax authority to comply with the Directive’s obligations. The ECJ therefore concluded that in order to satisfy the requirements of Article 47, the domestic court was required to examine the legality of the information request. That examination was, however, limited to verifying that the information request was not manifestly devoid of any 'foreseeable relevance'. In order to carry out such an examination, the domestic court required access to the entire information request sent by the French authorities to the Luxembourg authorities. However, given the confidential nature of exchange of information requests, Article 47 did not require the entire information request to be supplied to Berlioz. The ECJ confirmed that it was sufficient for the taxpayer’s identity, and the tax purpose for which the information was sought, to be provided to Berlioz.

Given that the number of inter-state tax information requests are unlikely to diminish in the foreseeable future, the ECJ's judgment is important for third parties seeking to ensure that they do not provide confidential information unnecessarily.

The ECJ has confirmed that Article 47 of the Charter entitles a person to challenge the legality of a tax information request received from another Member State. In order to satisfy the requirements of Article 47, the domestic court is required to determine the legality of the information request by verifying that the information requested is not devoid of any foreseeable relevance. A Member State is not permitted  to engage in ‘fishing expeditions’ or to request information that is unlikely to be relevant to the tax affairs of the taxpayer concerned.  

A copy of the judgment can be found here.