CJEU clarifies the scope of client-attorney privilege on tax matters in Luxembourg
This decision emphasises the fundamental right to privacy for clients while clarifying the scope of reporting obligations for other tax professionals.
Background of the case
Further to a request from the Spanish tax authorities issued on the basis of the DAC, the Luxembourg tax authorities addressed a request to a Luxembourg lawyer seeking information on the tax advice and documents provided by the Luxembourg lawyer to his client, a Spanish company. The lawyer declined to provide the requested information on the basis that he was bound by legal privilege.
On this basis, the Luxembourg tax authorities fined the lawyer for non-compliance. The lawyer, with the support of the Luxembourg bar, challenged the decision before a Luxembourg administrative tribunal.
On appeal, the Higher Administrative Court of Luxembourg proceeded to submit certain questions to the CJEU for a preliminary ruling to seek clarity on the scope of the protection of client-attorney communication which is covered by article 7 of the Charter of Fundamental Rights of the European Union (the Charter), more specifically, under which conditions information could be disclosed (or not) to the tax authorities.
Decision of the CJEU
The CJEU confirmed in its judgement that legal advice, irrespective of the subject matter, is covered by client-attorney privilege and that while it is not an absolute right, any limitation must be strictly provided for by law and satisfy the principle of proportionality.
The CJEU took the view that the current Luxembourg law, and more precisely § 177 (2) Abgabenordnung which excludes in almost all cases client-attorney privilege on advice provided on tax matters, is in breach of the Charter and hence indirectly confirmed that client-attorney privilege should cover all areas of law, including tax law.
Case C-432/23 (only in French) can be found here.
Implications for Lawyers and Tax Advisors
This judgement affirms that legal professional privilege is fundamental to protecting clients' privacy. Lawyers are exempt from certain reporting requirements under DAC, but non-lawyer tax advisors remain fully bound by the directive.
