Advocate General Clarifies DAC6 for lawyers

In his opinion delivered on 5 April 2022, in Flemish Bar Association v. Flemish Government, C-694/20, Advocate General Rantos found that DAC6 does not require a lawyer who participates as an intermediary to report the name of the other lawyer acting as an intermediary as that would violate that lawyer’s right to professional secrecy. Disclosing the name of the other attorney would also contravene article 7 of the Charter of Fundamental Rights of the European Union.

Rantos held that "a lawyer who acts as an intermediary and who, by relying on his professional secrecy, has a declaration waiver to notify without delay to another intermediary the reporting obligations incumbent on him under [DAC6] . . . does not violate the right to respect for private life guaranteed by article 7 of the Charter of Fundamental Rights of the European Union, provided that the name of this lawyer is not disclosed to the tax authorities in the context of the performance of the reporting obligation."

In the case of Orde van Vlaamse Balies and Others (Case C-694/20) on the DAC6 reporting obligation of cross-border arrangements, the AG concluded that the transfer of the reporting obligation, generally, does not infringe the right to respect of private life as guaranteed by Article 7 of the Charter of Fundamental Rights of the European Union.


DAC6 refers to EU Directive (EU)2018/822 of 25 May 2018 that aims to combat aggressive tax planning arrangements. DAC6 requires intermediaries, and in some cases taxpayers, to disclose tax information concerning cross-border arrangements that present a high risk of tax avoidance or tax evasion.

Cross-border tax arrangements that contain one of the hallmarks in the Directive must be reported to the tax authorities. The information reported is then exchanged between EU Member States. Non-compliance with the reporting obligations can lead to fines of up to €50.000 or €100.000 in case of fraudulent intent.

These reporting obligations are imposed on all players involved in devising, offering, setting up or managing the implementation of a reportable cross-border transaction or a series of reportable cross-border transactions, as well as on those who provide assistance or advice, including lawyers. However, if the player in question has a legal privilege of non-disclosure – such as the privileged lawyer-client relationship – the reporting obligations are transferred to another intermediary, and when there is no other intermediary to the relevant taxpayer.

That could oblige a lawyer when he is an intermediary to share with another intermediary information about his client which are covered by lawyer-client privilege.
Article 8ab(5) of Directive 2011/16 on Administrative Cooperation (the original DAC) provides that each Member State may take the necessary measures to grant intermediaries the right to waive the obligation to provide information about a reportable cross-border arrangement where the obligation to notify would infringe their legal privilege under the national law of that Member State. In those circumstances, each Member State must take the necessary measures to oblige the intermediaries to notify without delay any other intermediary or the relevant taxpayer of its reporting obligations.

The Belgian legislation provides that when an intermediary is bound by professional secrecy, he is obliged to inform the other intermediary or intermediaries in writing and provide reasons why he cannot comply with the notification obligation. In the absence of another intermediary, he must inform the relevant taxpayer or taxpayers in writing and provide reasons for his or their notification obligation.

As Belgium is a federal state, transposing DAC6 into Belgian law requires decisions of the federal parliament and the regional parliaments.

The Order of the Flemish Bars of Belgium and the Belgian Association of Tax Lawyers in 2020 asked the Constitutional Court to suspend the increased scope of the reporting requirements and annul the Flemish Decree and annul the law in whole or in part.

The court suspended the disputed requirement and stayed the proceedings in December 2020 while it requested a preliminary ruling from the Court of Justice of the European Union. The court asked whether the reporting requirements under DAC6 infringe on EU rights to a fair trial and respect for private life (articles 47 and 7 of the EU Charter of Fundamental Rights.

    Does 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 infringe 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, in that the new Article 8ab(5) which is inserted in Council Directive 2011/16/EU of 15 February 2011 on administrative cooperation in the field of taxation and repealing Directive 77/799/EEC, provides that, where a Member State takes the necessary measures to give intermediaries the right to waiver from filing information on a reportable cross-border arrangement where the reporting obligation would breach the legal professional privilege under the national law of that Member State, that Member State is obliged to require the intermediaries to notify, without delay, any other intermediary or, if there is no such intermediary, the relevant taxpayer, of their reporting obligations, in so far as the effect of that obligation is to oblige a lawyer acting as an intermediary to share with another intermediary, not being his client, information which he obtains in the course of the essential activities of his profession, namely, representing or defending clients in legal proceedings and giving legal advice, even in the absence of pending legal proceedings?

The Advocate General’s Opinion.

The AG notes that the intermediary's intervention is the cornerstone of the reporting system and any restriction on its functioning would undermine the core objectives of DAC6.

When intermediaries invoke professional secrecy, they must pass on limited information to another intermediary or the taxpayer about the reporting obligations. However, DAC6 does not specify how and how much they must notify. It is sufficient that they state to which cross-border arrangement the notification relates and that the other intermediary is reminded of the notification obligation. They must give the identification data of the intermediaries.
Both the ECJ and the European Court of Human Rights regard the professional secrecy as one of the general principles of EU. It is guaranteed by the Articles 6 and 8 ECHR and 7 and 47 of the Charter.

The AG recalls that Article 47 guarantees the right to a fair trial and includes the right of any person whose rights and freedoms guaranteed by Union law have been violated to be informed, defended and represented. It includes the rights of the defence, the principle of equality of arms, the right of access to justice and the right to a lawyer. With respect to reporting obligations, the ECJ has held that the reporting activities generally take place in circumstances unrelated to legal proceedings and thus are outside the scope of the right to a fair trial. In the context of legal proceedings or the preparation thereof, a lawyer must be able to invoke his professional secrecy and a breach thereof may be incompatible with Article 6 ECHR.

For the case at hand, the AG considered that an intermediary does not act as a defender of his client in a dispute with the tax authorities. There is no link to a legal procedure because the notification obligation may already arise before the implementation of the notifiable cross-border arrangement. Moreover, DAC6 is preventive in nature and the notification obligation relates to lawful activities.

Because there is no link with a legal procedure, the AG opined that the obligation to inform an intermediary who is not a lawyer to inform the tax administration about a structure cannot affect the rights protected by Article 47 of the Charter and does not fall within the scope of that provision.

The AG held that the notification obligation is also not incompatible with Article 7 of the Charter on the right to respect private life.
The professional secrecy is guaranteed by Article 8 ECHR and it is not limited to activities related to the legal defence of a client, but has a broader scope also involving the protecting of the relationship between a lawyer and his client outside a judicial context. The protection applies to all correspondence between lawyers and their clients, including advice. Activities of a lawyer outside the legal proceedings are not covered by Article 8 ECHR. Services offered by a lawyer as an intermediary are not covered by Article 8 ECHR because they are not part of the usual activities of the lawyer's profession of defending and determining the legal position of his client.

According to the AG, the professional secrecy is included in DAC6 because a lawyer may be asked to provide legal advice. A lawyer should be able to invoke his professional secrecy if he acts as a lawyer while activities that go far beyond the specific duties of representation and advice should not be covered.
Due to the fact that the professional secrecy is not harmonized, the AG indicated that it is for the national courts to determine which activities are within the scope of the professional secrecy.

With respect to the compatibility of the notification obligation laid down in the contested provision with Article 7 of the Charter, the AG observed that a lawyer only has to transfer limited information concerning the notification of his exemption from reporting and the notification obligation that consequently rests on this other intermediary. The notification does not include the content, the legal assessment of the lawyer or the communication between him and his client. Because intermediaries and taxpayers know which tax arrangements are subject to notification, the AG assumes that there is no breach of the professional secrecy.
This means that the contested provision cannot infringe the rights protected by Article 7 of the Charter if the information provided by the lawyer to the other intermediary, including his name, have already been brought to the attention of that intermediary.

In some cases, however, the notification obligation may infringe on the right to respect private life. The notification obligation pursues an objective of general interest recognized by the European Union, because it aims to combat the risk of tax avoidance and evasion and abusive arrangements. Furthermore, the need to maintain a balanced allocation of taxing powers between Member States may justify restrictions. The DAC6 obligations for intermediaries seek to protect national tax bases from erosion by monitoring potentially aggressive tax planning schemes. Consequently, the AG held that interference with the right to privacy is justified if it is necessary and proportionate. The AG held that these conditions are met because the contested provision ensures the effectiveness of the system of reporting cross-border arrangements to the tax authorities.

Lastly, the AG noted, however, that the disclosure of the lawyer's name to the tax authorities by a non-lawyer intermediary or by the taxpayer is unnecessary to achieve the objective of combating aggressive tax planning and is not consistent with the principle of proportionality. This information is not necessary to assess the cross-border arrangements in question. Disclosing that name conflicts with the objective to protect a lawyer's professional secrecy and the general principles of the Charter.