Tax consultants’ professional secrecy and capital commitment for firms are the subject of current proceedings before the ECJ. The German Tax Consultants Association (DStV) provides a brief overview of this.
Background: Professional law issues at the ECJ
The ECJ (Court of Justice of the European Union) is the judicial body of EU legislation and is responsible for the interpretation of Union law. In three cases, the ECJ is currently dealing with professional law issues that have a direct impact on professional secrecy and capital commitment for tax consultants and law firms.
Reporting obligation for cross-border tax arrangements
On July 29, 2024, in the preliminary ruling procedure in Case C-623/22, the ECJ commented, among other things, on the question of whether professional secrecy applies to professions for which there is a duty of confidentiality under national law, but which are not lawyers, to the same extent as it applies to lawyers. The plaintiffs, French and Belgian organizations of professionals, had previously argued that the duty of confidentiality of lawyers in the reporting obligation for cross-border tax arrangements (in Germany, Sections 138dff. AO) must apply to the same extent to tax consultants, auditors or notaries, for example, insofar as they are subject to the national duty of confidentiality.
With reference to the special position of lawyers In the court proceedings, however, the ECJ rejected in its ruling an extension of the lawyer’s professional privilege with regard to the obligation to report cross-border tax arrangements (ECJ, ruling of 29 July 2024, C‑623/22).
DStV position: The ECJ missed the opportunity to regulate professional secrecy in a simple and legally secure way for all those who hold professional secrecy. Instead, it is trying to support the reporting obligations for cross-border tax arrangements. In doing so, it is cementing a Two-class society in professional secrecy. Curbing aggressive tax planning is certainly an honourable goal. However, the DStV made it clear in its statement that the obligation to report cross-border tax arrangements is not suitable for combating tax avoidance. Rather, it is ineffective and bureaucratic.
Requests for information from the tax administration
Professional secrecy is also the subject of Case C-432/23, in which the Luxembourg Bar Association is challenging a request for information from the tax authorities.
In the ongoing request for a preliminary ruling, the Advocate General in its conclusion, it stated, among other things, that the special protection of lawyer-client privilege exists in connection with legal advice within the framework of a specific mandate. However, these principles would “not only for lawyers, but also for tax consultants and other professional groups apply insofar as they are treated as independent organs of the administration of justice on an equal footing with lawyers under the respective national law and are thus authorised to provide legal advice and represent clients in court.”
DStV position: We welcome the opinion of the Advocate General, who has clearly understood the nature and position of tax consultants in Germany. It remains to be hoped that this position will also be reflected in the ECJ’s pending judgment.
Participation in a professional practice company
The case C-295/22 concerns the question of whether an Austrian company that is not authorized to provide legal advice may acquire part (51%) of the share capital of a law firm operating in Germany. The Munich Bar Association had prohibited this acquisition on the grounds that it was not compatible with the provisions of the professional law governing lawyers in Germany. In fact, only members of certain professions may participate in law firms. The issue is therefore the criteria according to which participation in a professional practice company is determined.
In his closing statement, the Advocate General the BRAO regulations lack the necessary coherence. It would be not compatible with the provisions of the free movement of capitalthat certain professions may participate in a law firm but not others, even though they could objectively also fulfil the necessary criteria.
DStV position: The free movement of capital and the protection of the independence of tax consultants must be carefully balanced against each other. The Advocate General makes it clear that a mere demarcation according to professional groups in professional practice companies cannot determine who is allowed to participate in a law firm. If the ECJ follows the Advocate General’s opinion, then the criteria for participation in professional practice companies may have to be redefined.
German Tax Consultants Association (DtSV) dated 13.8.2024
