C-276/12 Sabou : Exchange of Information among Tax Authorities and the Reach of EU Fundamental Rights

“De nos jours, il est difficile d’échapper au monde du football. Le football intéresse pratiquement tout le monde, même l’administration fiscal.” This deep sigh introduces Advocate General Kokott’s opinion (not yet available in English) in Sabou, and it seems to me that the Advocate General feels just as enthusiastic about this sport as I tend to do. To both our luck, the decision handed down last Tuesday only marginally touches upon the sport itself (I hope that the esteemed football-aficionados among our readers will forgive me and nonetheless bear with me), and rather quickly turns towards the topic of mutual assistance among Member States authorities on direct taxation under Directive 77/799; more specifically, the extent to which EU fundamental rights need to be respected in the process of requesting and receiving such assistance. For the Court, EU fundamental rights apply in principle, but do not have much impact in practice due to the rules of EU law at issue.

Mr Sabou, a Czech footballer player, claimed in his Czech income tax return for 2004 expenditure incurred in other Member States with a view to a possible transfer to another football club in the future. The Czech tax authorities had doubts and requested information from the tax authorities of those Member States. Indeed, they received the information that the clubs in question did not even know Mr Sabou. Furthermore, there were a number of invoices for services provided by a company in Hungary; upon requests for information, the Hungarian authorities informed the Czech authorities that the company was only an intermediary of a company established outside the EU and that only an inspection in that non-Member State could produce reliable answers. Based on all this information, the Czech authorities reassessed Mr Sabou’s amount of tax. Mr Sabou appealed against the decision and claimed during the procedure before the Supreme Administrative Court that the information obtained against him had been acquired illegally, since he had not been informed of the requests for information and not been able to take part neither in formulating the questions to the foreign tax authorities nor to take part in the examination of witnesses in the other Member States. In his view, this violated his rights of defence, also in comparison to the rights he would have been granted in the Czech Republic.

Asked by the Supreme Administrative Court, the Court of Justice had to examine first to what extent EU fundamental rights applied in principle and second whether there was some basis in the Directive for rights of defence to be granted to a person on whom information is being exchanged by tax authorities.

The jurisdiction of the Court and the applicability of EU fundamental rights

The Court stated that it certainly had jurisdiction over the case. Interestingly enough, the Commission saw matters quite differently: the purpose of requests for assistance was the correct assessment of income tax as a non-harmonised area, and the Directive itself said nothing about how to deal with the information received upon request. Whether the taxpayer had to be informed thus was an issue of national law for the Commission (para 24). In the Court’s view, however (para 26),

the fact that the requesting Member State is not bound to submit a request for assistance to another Member State does not mean that the rules relating to the request for information and the use of the information obtained by that Member State can be considered to be outside the scope of European Union law. Where a Member State decides to make use of that assistance, it must comply with the rules laid down in Directive 77/799. It is clear, in particular from the fifth recital in the preamble to that directive, that Member States must respect certain obligations in the context of mutual assistance.

The jurisdiction of the Court was thus given because the questions referred concerned the ‘implementation’ of EU law (para 27). The Court then quoted the cases of Sopropé, a case concerning the applicability of EU fundamental rights when Member State authorities apply EU customs law, and ERT, one of the landmark cases laying down the applicability of EU fundamental rights where Member States use the discretion EU law grants them to deviate from the fundamental freedoms of the internal market. It held that the rights of the defence, among which the right to be heard, were among the ‘fundamental rights that form an integral part of the European Union legal order’ and that ‘where national legislation comes within the scope of European Union law’ the Court was to provide all the criteria of interpretation required by national courts to determine the compatibility of national law with fundamental rights (para 28).

There are two striking elements in this first part of the judgment. The absence of any reference to Article 51 (1) Charter of Fundamental Rights on the scope of application of EU fundamental rights can be relatively easily explained: the Court emphasized that the Charter only became applicable after the facts of the case (para 25; compare to this, however, Kokott’s opinion paras 38-39). The second, more remarkable feature are the cases the Court cites, or perhaps the one case it does not cite: There is no reference to Åkerberg Fransson, although one could have expected this case to become the new frame of reference (see also on this decision the posts on this blog here and here). Instead, two ‘pre- Åkerberg Fransson’ decisions justify the Court’s decision. Although as regards the content, the solution found appears convincing, this silence is deplorable and contributes little to building a predictable and convincing post-Charter fundamental rights architecture for the EU.

Directive 77/799 and the rights of individuals

Referring in the process to an earlier case on a similar matter (Twoh International), the Court then examined the Directive and concluded that the Directive aimed mainly at the coordination of the transfer of information between tax authorities of the Member States and did not address individuals, neither conferring rights upon them as taxpayers nor imposing any obligation on the tax authorities to consult taxpayers (para 36). Based on the Directive itself, Mr Sabou could thus not invoke a violation of his rights of defence.

However, the Court held that as a general principle of EU law, the rights of defence also applied – as already set out in Sopropé – where Member State authorities planned to adopt a measure that would ‘adversely affect an individual’; an individual whose interests were ‘significantly’ affected had to be put in a position where they could make their views on the information known on which that decision was to be based. This obligation would apply to Member States authorities when their decisions came ‘within the scope of European Union law’, even if the EU legislation at issue did not contain express provisions on the subject (para 38).

Still, the Court concluded that the respect of the rights of defence – though applicable (see in this regard para 44) – did not require concrete guarantees for the taxpayer during the process of exchange of information between tax authorities. As intervening Member States had pointed out (para 40), this part of the procedure concerned merely the collection of information in the investigatory stage and not yet the contentious stage of a procedure implemented by the tax authority in question; therefore, the taxpayer did not have to be notified of the authorities individual steps (para 41) and also did not need to be heard when inquiries including examinations of witnesses were carried out in another Member State upon request (para 44). Of course, in their national law Member States were perfectly free to extend the right of defence to this investigatory stage according to the Court (para 45).

Furthermore, the Directive also did not contain any right or impose any obligation as regards a possibility for the taxpayer to challenge the accuracy of the information conveyed between tax authorities (para 48) or require national authorities to mention the sources of information gathered and how this information was obtained. Such rights and obligations could, of course, again be laid down in national law (para 49).


The case’s outcome is not a spectacular development, in particular given the fact that the Court had already in Twoh International interpreted Directive 77/799 as not containing rights for individuals. However, in the post-Åkerberg Fransson context it constitutes a further piece in the still incomplete jigsaw puzzle of the scope of application of EU fundamental rights. The most remarkable aspect of the case seems to be in my view yet another disagreement as to whether EU fundamental rights should apply or not. In Åkerberg Fransson, the Court and the Advocate General held differing views. Here, the Commission had suggested that the field of the correct assessment of income tax was not harmonised and that because of the limited content of Directive 77/799 the questions asked by the Czech court fell simply within the scope of national law. Based on the similarity of the case with Sopropé, the Court, by contrast, admitted the applicability of EU fundamental rights and then examined whether the rules at issue affected the taxpayer with sufficient significance to require e.g. a right to be heard as part of the rights of the defence. While the Commission may be right in principle about the harmonisation of the field of direct income tax, at least for me the Court’s solution is more convincing, as the case concerns Member State authorities applying rules set out by EU law, as in Sopropé. Of course, the more limited content of these rules in a non-harmonised field also led to little obligations being imposed by EU fundamental rights. This also meant for Mr Sabou that the more advantageous rules he claimed to possess under Czech law (para 17) did not have to be extended to requests for information addressed to other Member States’ tax authorities.