In a judgment dated 25 February 2021, the Higher Administrative Court (Cour administrative) confirmed a judgment of the Lower Administrative Court (Tribunal administratif) concerning the lawfulness of injunction decisions issued to a Luxembourg company following a request for information from the Belgian tax authorities.
The claimant company argued that the lawfulness of the injunction is conditional upon the requesting authority exhausting all its domestic means of obtaining the information sought by the exchange of information. In this case, the claimant company considered that the information requested could have been obtained from a Belgian company, a company that was part of the same group as the claimant and the subject of the Belgian authorities’ investigation.
When analysing the legality of the injunction, the Court firstly considered that both the Convention for the elimination of double taxation signed between Luxembourg and Belgium on 17 September 1970, as modified (the “Convention”) and Directive 2011/16/EU of 15 February 2011 on administrative cooperation in the field of taxation (the “Directive”) may apply in parallel. Where the Convention does not provide for a broader scope of the exchange of information than the Directive, then the Court may limit its analysis to the Directive. Secondly, the Court confirmed that a request for information issued by the Belgian tax authorities did not seem to be manifestly lacking in foreseeable relevance and adequately identified the taxpayer, the object and purpose of said request for information. Finally, the Court took the view that following a combined reading of the European Court of Justice judgment in Berlioz (C-682/15) and the wording of Article 18(2) of the Law of 29 March 2013 transposing the Directive, the exhaustion of domestic sources to obtain the information is a condition of the legality of the exchange of information request, and therefore of the injunction enforcing such a request.
In the case at hand, the Court ruled that the Belgian authority had exhausted the sources of information available to it in Belgium. The Court noted that a request could not be found unlawful on the sole ground that the Belgian authorities failed to request a particular document such as a transfer pricing report from the Belgian company in light of the fact that the Belgian authorities were contesting the group’s transfer pricing policy. As such, the Belgian authority was entitled to request information beyond that report. The Court added that the Belgian authority is, in the context of its tax investigation, sovereign in determining the evidence, which, under its domestic law, it considers relevant for the tax audit of the Belgian company.