MDR regulations continue to cause problems in practice

For a long time, the question of whether the question regarding the provisions on reporting tax schemes can be resolved by issuing an individual tax interpretation also remained unresolved. The authorities initially refused to issue individual interpretations in this respect, and the jurisprudence of administrative courts was unable to develop a uniform line of rulings. This state of affairs was changed by the judgment of the Supreme Administrative Court of 28 January 2021. (ref. no.: I FSK 1703/20), which unequivocally determined that it is possible to issue individual interpretations regarding the provisions on reporting tax schemes.

There is no prohibition in the regulations

The NSA pointed out, first of all, that there are no provisions in the Tax Ordinance which prohibit the issuance of individual interpretations regarding the provisions of MDR. In the NSA’s view, the protection to which an applicant is entitled on the basis of an individual interpretation issued against it is a right to legal security stemming from Article 2 of the Constitution and should not be artificially limited if the law does not expressly so indicate.

It was also important to the NSA that the tax scheme reporting obligations are subject to particularly severe fiscal penalties. This is another circumstance in favour of granting protection to the taxpayer on the basis of an individual interpretation.

In addition, the provisions of the directive, on the basis of which regulations on the reporting of tax schemes were introduced into the legal systems of EU member states, have also started to be looked at by the CJEU.

The case was also analysed by the CJEU

A case initiated by a preliminary question from the Belgian Constitutional Court concerning the compatibility with the Charter of Fundamental Rights of the provisions of the directive requiring lawyers covered by professional secrecy to inform other scheme intermediaries who are not their clients of their obligation to report a tax scheme concerning their client has come to the CJEU’s court of justice.

In its judgment of 8 December 2022 (ref. C-694/20), the Court of Justice held that such a solution violates Article 7 of the Charter of Fundamental Rights, which establishes the right to privacy, including the right to professional secrecy. This ruling is important in that it gives precedence to the obligation of professional secrecy over the obligation to inform other intermediaries of the tax scheme about the obligation to report, which can also be applied to other professions of public trust obliged to maintain watered-down secrecy, such as: legal advisers or tax advisers.

The CJEU pointed out, first of all, that each intermediary of the scheme has an individual obligation to report the tax scheme, from which they can only exempt themselves if it can be proven that another entity has already done so. Therefore, there is no need for a person bound by professional secrecy to break it in order to inform other intermediaries of the reporting obligation, when these entities are themselves obliged to fulfil this obligation.

– Although some time has passed since the judgments in question, the MDR regulations still generate a lot of controversy as well as interpretation disputes. Therefore, it should be borne in mind that if we are dealing with an event that may potentially fulfil the characteristics of a tax scheme, it is worth reaching for specialist advice, concludes Wojciech Jezusek of Thedy & Partners.