Tax consultancy and accounting

The Court of Justice of the European Union questions the compatibility of MDR legislation with the Charter of Fundamental Rights of the European Union!


The Court of Justice of the EU in Luxembourg has ruled on Belgium’s rules on professional attorneys.


The case concerned a preliminary question raised by the Belgian Constitutional Court regarding the correctness of regulations there regarding reporting of tax schemes, MDR for short.


On December 8, 2022. The Court of Justice of the European Union (hereinafter: “the Court”), in a judgment under case number C-694/20 (in the case of Orde van Vlaamse Balies and others), ruled that provisions that mandate that professional attorneys must report information about tax schemes to other intermediaries and taxpayers are incompatible with the Charter of Fundamental Rights of the European Union, despite their reliance on applicable professional secrecy.


The Court held that the DAC Directive6 (i.e., the March 13, 2018 amendment to Council Directive 2011/16/EU of February 15, 2011 on administrative cooperation in the field of taxation) cannot oblige attorneys or any others (e.g., tax advisors) to perform activities that are the duty of bystanders in connection with compliance with the MDR. The Court also stated that: Disclosure by notified third-party intermediaries to the tax authorities of the identity of the intermediary’s attorney and the fact that he or she was consulted also does not seem necessary to achieve the objectives of that directive (excerpt from the grounds of the judgment).


Thus, the Court decided that: “the obligation imposed on the lawyer to inform the other intermediaries involved is unnecessary and violates the right to respectful communication between the lawyer and his client” (Court of Justice of the European Union – Press Release No. 198/22).


In Poland, there are also regulations on MDR. Therefore, it is worth mentioning at the end what tax scheme reporting is in general – against the background of the Polish legal system. MDR is nothing more than regulations related to the obligation to provide the Head of KAS with information on tax schemes. In specific situations (which may bear the hallmarks of tax avoidance), they obligate taxpayers to fulfill certain reporting obligations, and in some cases obligate them to introduce and use the so-called internal procedure. The information provided by taxpayers is to be used by tax authorities to possibly improve procedures and “seal” the tax system. The information provided is also to guarantee a prompt response through possible changes and amendments to tax laws. Regulations covering MDR obligations were introduced into Chapter 11a of the Tax Ordinance (Articles 86a-86o) on January 1, 2019.


These provisions have been criticized by the Polish tax law doctrine since their introduction. An example of this is the January 2020 application to the Constitutional Court by the National Chamber of Tax Advisors in connection with doubts not only against the background of the aforementioned provisions of the Tax Ordinance, but also in connection with the questionable compatibility of the MDR regulations with the content of the Polish Constitution. So far, the Polish legislator has not found contradictions and inconsistencies in the provisions of the Tax Ordinance and the provisions of the Constitution of the Republic of Poland, however, this situation may change in connection with the aforementioned judgment. This is because it is worth noting that the Court has exclusive jurisdiction to rule on the validity of acts issued by EU institutions or bodies – such as the Council of the European Union (Article 267 of the Treaty on the Functioning of the European Union).


It is therefore worth following further initiatives at the level of the European Union, as well as the Polish legislator on the issue in question.