Belgium - Constitutional Court assesses Legal Professional Privilege in light of DAC6 reporting obligations

“DAC6” or the 6th Directive on the Administrative Cooperation between EU Member States (2018/822/EU) aims at improving the functioning of the internal market by discouraging the use of aggressive cross-border tax planning arrangements.

In a nutshell, the directive requires intermediaries (such as lawyers, consultants, financial institutions and other service providers) – or in certain circumstances the taxpayers themselves – to report any advice and/or implementation of a cross-border arrangement of potentially aggressive tax planning to the local tax authorities. The presence of such aggressive tax planning is evaluated on the basis of certain objective indicators (called “hallmarks”). Some of these hallmarks only become relevant if one of the arrangement's primary motives is to obtain a tax advantage. Others will just be reportable on the basis of specific indications that the intermediary is (supposed to be) aware of.

For some professions (such as for lawyers or tax consultants) the intermediary reporting obligation is at odds with their legal professional privilege (or LPP). Although the DAC6 Directive allows member states to exempt intermediaries from the reporting obligation when they are bound by a legal professional privilege, there are still circumstances where the LPP must be breached, either pursuant to the Belgian implementation or even following the provisions of the DAC6 Directive itself. For those reasons and following the objection by several professional associations, on 15 September 2022 the Belgian Constitutional Court partially annulled the reporting obligation where it was deemed contrary to the LPP, and partially referred some preliminary questions to the European Court of Justice, where potential breaches of LPP find their basis in the directive itself (case 103/2022).

Lawyers’ Legal professional privilege

Firstly, the Constitutional Court confirmed its well-established jurisprudence on the lawyers' LPP. The Court considers the lawyers' LPP to be an essential component of the right to respect for private life and the right to a fair trial, as guaranteed by the Charter of Fundamental Rights of the European Union and the European Convention on Human Rights.

The Court also reiterates that the information obtained by a lawyer during the defence and representation of the client in court and in the provision of legal advice, even outside any litigation, remains covered by the LPP. Only when the lawyer engages in an activity that goes…

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