On 24 October 2019, the Court of Justice of the European Union (ECJ) delivered the judgement in the joined cases of IN and Belgische Staat concerning the usage of evidence for VAT assessment, right to respect for private life and application of Charter.
Summary of the facts
The facts pertaining to the two disputes are, mutatis mutandis, identical in Cases C‑469/18 and C‑470/18.
The appellants are managing directors of undertakings trading and distributing computers and computer parts. Those undertakings were the subject of a criminal investigation following a complaint by the Belgian tax authorities who had started investigations into value added tax (‘VAT’) carousel fraud. As part of the criminal investigation, a letter rogatory was executed in Luxembourg in connection with which the director of a Luxembourg bank handed over the banking documents concerning the appellants, however, without an approval from the pre-trial division of the District Court (Chambre du conseil of the tribunal d’arrondissement de Luxembourg, Luxembourg) required under Article 20 of the Treaty on Extradition and Mutual Assistance in Criminal Matters between the Kingdom of Belgium, the Grand Duchy of Luxembourg and the Kingdom of the Netherlands.
Having obtained authorisation to consult the case file in the criminal proceedings, the Belgian tax authorities issued notices of assessment adjusting the personal income tax returns submitted by the appellants and ordering the payment of tax on profit from industrial and commercial undertakings, which had been paid to a Luxembourg account.
After the complaints brought against those notices of assessment by the appellants were rejected, those individuals brought actions seeking an exemption from the tax imposed on them, claiming that the banking documents had been improperly obtained and therefore could not be used as the basis for a tax decision. Those actions were upheld by a judgment of the court of first instance which was overturned on appeal. The appellants then brought appeals in cassation before the Court of Cassation (Hof van Cassatie, Belgium).
Questions referred to the ECJ
Should Article 47 of the Charter …, in cases of [VAT], be interpreted as precluding in all circumstances the use of evidence obtained in violation of the right to respect for private life as guaranteed by Article 7 of the Charter, or does it leave room for a national regulation under which the court which has to decide whether such a piece of evidence can be used as the basis for a VAT assessment has to make an evaluation such as the one set out [in the grounds of the request for a preliminary ruling]?
Conclusion by the ECJ
Since these proceedings are a step in the action pending before the national court, the decision on costs is a matter for that court.
The Court upheld that the requests for a preliminary ruling made by the Hof van Cassatie (Court of Cassation, Belgium) by decisions of 28 June 2018 are inadmissible.
For more information on this case, please contact:
Franco Falzon C.P.A. LL.M
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