Overview of legislation practices regarding exchange of information between national tax administrations in tax matters.
Date: 2017-04-05
Institutions: Directorate-General for Internal Policies of the Union
Subjects: European tax cooperation, administrative cooperation, administrative formalities, directive (EU), fiscal policy, tax convention, tax harmonisation, tax law

 
DIRECTORATE GENERAL FOR INTERNAL POLICIES 

POLICY DEPARTMENT A: ECONOMIC AND SCIENTIFIC POLICY 

Overview of Legislation Practices 
Regarding Exchange of Information 
between National Tax 
Administrations in Tax Matters 

STUDY 

Abstract 

This paper forms part of a series of analytical pieces on various key tax issues, 
prepared by Policy Department A at the request of the TAXE Special Committee 
of  the  European  Parliament.  It  deals  with  the  need  for  information  exchange 
between  sovereign  states  on  tax-related  issues,  which  is  increasing  rapidly.  In 
this vein, the Organisation for Economic Co-operation and Development (OECD) 
and  the  EU  have  developed  better  instruments  of  information  exchange.  The 
OECD  has  enlarged  the  scope  of  Articles  26,  27  of  the  OECD  Model  Tax 
Convention  (MTC)  and  has  in  parallel  proposed  a  specific  Tax  Information 
Exchange Agreement (TIEA) Model. Both sources have been increasingly used in 
the bilateral treaty practice. In parallel, the EU has enacted two new directives: 
the  Directive  concerning  Mutual  Assistance  for  the  Recovery  of  Claims  and  the 
Directive  on  Administrative  Cooperation.  This  paper  aims  at  providing  a 
systematic  overview  of  recent  developments  (including  on  the  concept  of 
'automatic exchange') and explains the content and function of the legal sources 
delimiting  each  other.  The  paper  also  deals  with  the  legal  protection  of 
taxpayers,  especially  with  the  protection  of  personal  data  and  commercial, 
industrial, business and professional secrets.  It emphasizes the necessity of an 
international tax secret as an EU minimum standard. 

IP/A/TAXE/2015-04 

PE 563.452 

October 2015 

EN 

 
 
 
 
This document was requested by the European Parliament's TAXE Special Committee. 

AUTHOR 

Prof. Roman SEER 

RESPONSIBLE ADMINISTRATORS 

Dirk VERBEKEN 
Dario PATERNOSTER 

EDITORIAL ASSISTANT 

Eva Asplund 

LINGUISTIC VERSIONS 

Original: EN 

ABOUT THE EDITOR 

Policy departments provide in-house and external expertise to support EP committees and 
other  parliamentary  bodies  in  shaping  legislation  and  exercising  democratic  scrutiny  over 
EU internal policies. 

To contact Policy Department A or to subscribe to its newsletter please write to: 
Policy Department A: Economic and Scientific Policy 
European Parliament 
B-1047 Brussels 
E-mail: Poldep-Economy-Science@ep.europa.eu 

Manuscript completed in October 2015 
© European Union, 2015 

This document is available on the Internet at: 
http://www.europarl.europa.eu/studies 

DISCLAIMER 

The  opinions  expressed  in  this  document  are  the  sole  responsibility  of  the  author  and  do 
not necessarily represent the official position of the European Parliament. 

Reproduction  and  translation  for  non-commercial  purposes  are  authorised,  provided  the 
source is acknowledged and the publisher is given prior notice and sent a copy. 

 
Legislation Practices Regarding Exchange of Information between National Tax Administrations in Tax Matters  

CONTENTS 

LIST OF ABBREVIATIONS 

LIST OF TABLES 

EXECUTIVE SUMMARY 

1.  LIMITATION BY TERRITORIALITY PRINCIPLE 

2.  INFORMATION EXCHANGES BASED ON BILATERAL LEGAL BASIS 

2.1.  Information clauses modelled on Art. 26 OECD Model Tax Convention 

4 

6 

7 

9 

10 

10 

2.2.  Agreements on Mutual Assistance modelled on OECD Model Tax Convention 2002 

(Tax Information Exchange Agreement) 

3.  INFORMATION EXCHANGES BASED ON EU-LAW 

3.1.  EC Mutual Assistance Directive 77/799/EC and EU Directive on Administrative 

Cooperation 2011/16/EU 

3.2.  Council Directive 2003/48/EC (Saving Directive) 

3.3.  Council Directive 2014/48/EU (amended Saving Directive) 

3.4.  Council Directive 2014/107/EU (amended EU Directive on Administrative 

Cooperation) 

12 

14 

14 

15 

16 

17 

4.  INFORMATION EXCHANGES BASED ON MULTILATERAL LEGAL BASIS  20 

5.  CONCURRENCES OF THE LEGAL BASES 

6.  TYPES OF INFORMATION EXCHANGE 

6.1.  Short Overview 

6.2.  Exchange of Information on Request 

6.3.  Spontaneous Exchange of Information 

6.4.  Automatic Exchange of Information 

6.5.  Concurrences of the Information Types 

7.  USE OF INFORMATION EXCHANGE FOR STATE AID CONTROL 

8.  LEGAL PROTECTION OF TAXPAYERS 

8.1.  Legal Enterprise Secrets 

8.2.  Personal Data Protection by EU law 

8.3.  Jurisdiction of the CJEU regard personal data protection 

8.4.  Specific data protection needs regarding automatic exchange of information 

8.5.  Additional effective procedural instruments needed to protect the freedom 

rights of taxpayers 

REFERENCES 

21 

22 

22 

22 

23 

24 

25 

27 

30 

30 

31 

32 

34 

36 

39 

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Policy Department A: Economic and Scientific Policy 

LIST OF ABBREVIATIONS 

ACBR  Advance Cross-Border Ruling 

AEFI  Automatic Exchange of Financial Account Information 

AEOI  Automatic Exchange of Information 

AML  Anti-Money-Laundering 

APA  Advance Pricing Agreement 

Art  Article 

CAA  Competent Authority Agreement (CAA) 

CETS  Council of Europe Treaty Series 

CJEU  Court of Justice of the European Union 

COM  Commission 

CRS  Common Reporting Standard 

DAC1  Directive on Administrative Cooperation in direct taxation (Directive 

2011/16/EU) 

DAC2  Directive on Administrative Cooperation in direct taxation (Directive 

2014/107/EU) 

DTT  Double Tax Treaty 

EC  European Community 

ECFR  European Charta of Fundamental Rights 

ECHR  European Convention for the Protection of Human Rights and Fun-

damental Freedoms 

ECOFIN  Ministers of Economical and Financial Affairs (Council of Minsters of 

Finance of all EU Member States) 

ECR  European Cases Report 

EU  European Union 

FATCA  Foreign Account Tax Compliance Act 

IGA  Intergovernmental Agreement 

IRC  Internal Revenue Code (26 US Code) 

IRS  Internal Revenue Service (United States) 

Lit  Litera(e) 

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Legislation Practices Regarding Exchange of Information between National Tax Administrations in Tax Matters  

MCAA  Multilateral Competent Authority Agreement 

M(T)C  Model (Tax) Convention 

No  Number 

OECD  Organisation for Economic Co-operation and Development 

OJ  Official Journal 

P  Page 

Para  Paragraph 

RFI  Reporting Financial Institution 

Sent  Sentence 

TEU  Treaty of the European Union 

TFEU  Treaty of the Functioning of the European Union 

TIEA  Tax Information Exchange Agreement 

US  United States 

VAT  Value Added Tax 

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Policy Department A: Economic and Scientific Policy 

LIST OF TABLES 

Table 1:  Development of Art. 26 OECD MTC 

Table 2:  Mutual Assistance Principles 

Table 3:  Mutual Assistance Instruments 

Table 4: 

Legal Protection of Taxpayers 

12 

26 

26 

38 

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Legislation Practices Regarding Exchange of Information between National Tax Administrations in Tax Matters  

EXECUTIVE SUMMARY 

In  parallel  with  the  pace  of  globalisation,  cross-border  investments,  establishments,  per-
sonal and capital movements have increased tremendously. In contrast to this, the instru-
ments of tax assessment, tax investigation and tax enforcement are still remaining nation-
al, limited by the territoriality principle as part of the international law. Thus, the exchange 
of  information  between  EU  Member  States  and  even  between  Member  States  and  third 
countries has become very important and corrective measures needed to be taken. 

The exchange of information between national tax administrations is based on several legal 
sources which can be categorized in (i) bilateral treaties, (ii) multinational conventions and 
(iii)  EU  law.  The  information  clauses  in  the  Double  Tax  Treaty  (DTT)  are  almost  solely 
based on Art. 26 of OECD's Model Tax Convention (MTC). Since 2005, the OECD-standard 
can be characterized as an unlimited major clause without any restriction of bank secrets. 
This  standard  provides  the  classic  mutual  assistance  for  information  exchange  on  request 
and  for  spontaneous  information  exchange  in  single  examined  cases.  Besides,  OECD  has 
concluded specific Tax Information Exchange Agreements (TIEA) with a large number of tax 
havens, according to a model set by the OECD in 2002. These TIEAs provide only an infor-
mation exchange upon request. Based on the OECD Model, requests may concern groups of 
taxpayers which have common characteristics. This is substantially different from so-called 
fishing expeditions1. 

EU  law  in  direct  taxation  matters  is  very  much  drawing  on  the  OECD  standard,  which  is 
defined  by  the  Directive  on  Administrative  Cooperation  in  direct  taxation  (DAC1).  Besides 
the  Saving  Directive  of  2003,  DAC1  has  represented  the  first  step  into  an  Automatic  Ex-
change  of  Information  (AEOI)  standard  for  five  predefined  groups  of  tax  relevant  facts. 
However, the DAC standard, enacted on 1.1.2014, has been quickly overruled by the rapid 
development of Foreign Account Tax Compliance Act (FATCA) agreements and the multilat-
eral  establishing  of  a  new  standard  for  Automatic  Exchange  of  Financial  Account  Infor-
mation (AEFI). DAC2 - enactment due on 1.1.2016 - adopts a common standard on report-
ing  and  due  diligence  for  financial  account information.  As  such,  DAC2  sets  automatic  ex-
change  of  information  of  financial  accounts  for  a  wider  range  of  tax  matters  compared  to 
the  Saving  Directive,  even  in  its  new  version  (Council  Directive  2014/48/EU),  which  has 
tightened the prerequisites on the beneficial owner term.  

Indeed, several legal sources are available for the exchange of information on tax matters. 
EU Directives implemented into the national laws of  EU Member States are  superior to bi-
lateral (national) DTT or TIEA agreements (if applicable) as well as to multinational conven-
tions. However, the EU law sets only minimum standards, which may be overruled by bilat-
eral or multilateral agreements among EU Member States. 

Three fundamental types of (tax) information exchange instruments exist: information ex-
change on request, spontaneous information and automatic exchange of information. There 
is no clear hierarchy between these instruments as they are all part of a framework for ef-
fective international tax-risk-management with a specific function. Both information on re-
quest and spontaneous information are tools which focus on single cases. The spontaneous 
exchange  of  information  expresses  a  further  action  taken  by  the  resident  administration 
(country)  in  favour  of  a  foreign  administration  (country).  In  contrast,  AEOI  and  the  AEFI 
are tools for abstract-general tax risk management since they focus on a multitude of pre-

1   In general terms, a fishing expedition is an investigation undertaken with the hope, though not the stated pur-

pose, of discovering information. 

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Policy Department A: Economic and Scientific Policy 

defined  cases  without  a  concrete  suspicion  of  a  violation  of  tax  law  or  tax  losses.  In  the 
light of these differences, it may be possible to combine the above instruments, by estab-
lishing an AEOI system to give the recipient state the possibility to make a further request 
in a single case.  

This “2-step approach”  is now part of a proposal of the EU-Commission regarding tax rul-
ings and transparency. The “2-step approach” is even used herein for state aid control pur-
poses. The automatic exchange of information to enhance tax transparency will be further 
expanded  by  new  tools:  Advance  Cross-Border  Ruling  (ACBR)  and  Advance  Pricing 
Agreement  (APA).  Knowledge  of  basic  data  on  ACBR  and  APA  for  all  Member  States  will 
allow the EU-Commission to develop and maintain a systematic overview of the tax admin-
istrative policy in each Member States. Which single cases require a further state aid inves-
tigation can be decided in a second step. 

The  intensification  of  the  exchange  of  information  between  national  tax  administrations 
calls  for  an  effective  legal  protection  of  affected  taxpayers.  Legal  protection  of  personal 
data  of  natural  persons  is  provided  by  EU  primary  law  (Art. 8  of  the  European  Charta  of 
Fundamental Rights (ECFR)) as well as secondary law (Directive 95/46/EC). Meanwhile, the 
Court of Justice of the European Union (CJEU) has ruled in a number of cases on the data 
protection of individuals. Intrusions into data protection rights have to be grounded on par-
liamentarian law and have to be proportional to the pursued public interest. Important pub-
lic  interests  are  not  limited  to  state  aid  control  (Art. 108  TFEU),  but  involve  also  national 
taxation  interests  (e.g.  tax  supervision  and  prevention  of  tax  fraud  and  tax  avoidance). 
They  have  to  be  clearly  identified  by  the  law  provisions  and  the  intervention  shall  not  go 
beyond the level necessary to pursue the goal.  

An EU-standard of international tax secrecy has to be established to balance public interest 
with  the  protection  of  private  data.  This  standard  may  lead  to  a  change  of  Art.  22  of  the 
Multilateral Competent Authority Agreement (MCAA), by applying tax secrecy also for third 
countries. A lack of legal protection can be found regarding legal entities which are not fully 
covered  by  the  EU  data  protection  law.  Commercial,  industrial,  business  and  professional 
secrets shall be protected in the same way as personal data of natural persons. At present, 
enterprise secrets are protected by the freedom to conduct a business (Art. 16 ECFR) and 
property  rights,  including  intellectual  property  (Art. 17  ECFR).  Thus,  Art. 17(4)DAC  has  to 
be read as an obligation to refuse the disclosure of these secrets. Furthermore, the protec-
tion of these secrets needs a procedural remedy which is still lacking in the national laws of 
EU  Member  States.  A  notification  standard  could  be  a  minimum  standard.  A  hearing  and 
further objection in front of a court has to be weighed against the public interest of a func-
tioning mutual assistance in tax matters. Therefore, the automatic exchange of information 
(AEOI and AEFI) cannot depend on a suspicion of tax violation in a single case. 

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Legislation Practices Regarding Exchange of Information between National Tax Administrations in Tax Matters  

1.  LIMITATION BY TERRITORIALITY PRINCIPLE  

KEY FINDINGS 

The  territoriality  principle  leaves  a  tax  assessment  and  enforcement  gap,  due  to  the 
universality principle which applies in national tax laws. 

This  gap  has  to  be  closed  by  (international)  mutual  assistance  and  information  ex-
change between the fiscal authorities of the different states. 

In respect of international law field tax audits, investigation measures and other enquiries 
or determination procedures are prohibited on a foreign sovereign territory (formal territo-
riality principle). As far  as determination procedures are concerned, mutual administrative 
or  legal  assistance  of  the  foreign  sovereign  state  is  required.  The  principle  of  substantial 
territoriality does not equate to the principle of formal territoriality. The substantial territo-
riality  would  forbid  to  link  legal  consequences  according  to  national  law  to  foreign  issues. 
However, the universality principle (world income principle) has almost completely replaced 
the territoriality principle (source principle). Thus, a disparity between substantial taxation 
and its formal enforcement occurs: substantial universality only meets formal territoriality. 
Hence,  the  need  for  international  legal  and  administrative  assistance  arises.  In  recent 
years, states have enforced efforts to improve the mutual assistance in tax matters, espe-
cially within the EU. 

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Policy Department A: Economic and Scientific Policy 

2.  INFORMATION  EXCHANGES  BASED  ON  BILATERAL  LE-

GAL BASIS 

KEY FINDINGS 

The  huge  network  of  bilateral  DTCs  covers  a  widespread  range  of  information  clauses, 
ranging  from  small  to  large.  Since  2005,  the  OECD-MTC  model is  a  major  information 
clause regardless of national bank secrets. On the basis of Art. 26, primarily information 
will be transmitted on request, but the sharing of spontaneous information will also be 
possible.  The  automatic  exchange  of  information  needs  further  administrative  agree-
ments  between  the  tax  authorities  of  the  contracting  states  to  predefine  the  scope  of 
the relevant tax information which shall be supplied. 

Since 2002, many OECD members have concluded TIEA with (former) tax haven coun-
tries,  based  on  an  OECD  TIEA  MTC.  The  information  will  be  transmitted  only  in  single 
cases  and  upon  request.  However,  in  line  with  an  update  of  the  Art. 26  OECD  MTC 
commentary, information regarding specified groups of taxpayers may also be provided 
upon request. These group requests have to be distinguished from so-called fishing ex-
peditions  which  are  made  in  a  major  number  of  cases  without  a  concrete  suspicion  in 
each single case. 

2.1. 

Information clauses modelled on Art. 26 OECD Model Tax Convention 

The  information  clauses  in  bilateral  double  tax  agreements  are  generally  divided  into  so-
called  small  and  major  information  clauses.  Small  clauses  narrow  the  informational  ex-
change  requirement  to  the  accomplishment  of  the  agreement  itself.  Major  information 
clauses contribute to the accomplishment of national tax law of the contracting states. Alt-
hough Art. 26 OECD MTC is the negotiating basis for the conclusion of new DTTs, small dis-
closure clauses are found in older DTTs predominantly. However, the categorical classifica-
tion of the DTT information clauses into “small” and “major“ clauses cannot always be dis-
tinguished clearly; in fact hybrid forms exist as well as extensions. 

With the OECD MTC, the residence requirement as a restriction for the relevance of person-
al tax circumstances disappeared. Since the revision of the  OECD  MTC in  2000,  the infor-
mation  clause  extends  beyond  the  taxes  regulated  within  the  particular  DTT  to  include  all 
taxes, except social security contributions. The large information exchange is mainly need-
ed by the state of residence due to the unlimited tax liability of the taxpayer in those coun-
tries. For this reason,  major information clauses are mainly conducive to the  enforcement 
of the world income principle in the residence state.  

According  to  Art. 26(4)MTC  2005,  the  requested  state  must  not  disregard  its  domestic 
power of investigation claiming that it has no own fiscal interest in granting the requested 
information. Art. 26(5) specifies that a contracting state is not allowed to refuse the grant-
ing  of  information  solely  because  the  information  is  owned  by  a  bank  or  another  financial 
institution or by an authorized representative or trustee. The OECD MTC 2005 takes on the 
distinction  between  the  protection  of  the  banking  secrecy  and  the  protection  of  the  com-
mercial  secret.  Whilst  the  protection  of  commercial  secrets  is  necessary  to  sustain  fair 
competition, the banking secrecy may endanger competition through distorting signals (i.e. 
tax evasion and unfair competition between financial centers). Banking secrecy can basical-
ly be seen as a tool for states to keep up a location advantage.  

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Legislation Practices Regarding Exchange of Information between National Tax Administrations in Tax Matters  

On  17.7.2012  the  OECD  approved  an  update  of  Art.  26  and  its  interpretation.  Art.  26(2) 
was  amended  to  allow  the  use  of  information  received  for  tax  purposes  also  for  non-tax 
purposes,  provided  such  use  is  allowed  by  the  tax  legislation  of  both  the  recipient  and 
source  states  and  the  competent  authority  of  the  source  state  authorizes  such  use.  This 
used to be an optional provision, according to para. 4.3 of the amended commentary. Fur-
thermore, the commentary expanded the interpretation of the standard of foreseeable rele-
vance (Art. 26(1)) and of the term “fishing expeditions” to include a group of taxpayers not 
individually identified. Para. 5 of the commentary states that a reasonable possibility for the 
relevance  of  the  requested  information  has  to  exist  at  the  time  the  request  is  made,  but 
once the information is received it is immaterial if the information is actually relevant. If the 
requesting  state  clarified  the  relevance  of  the  requested  information  explicitly,  the  infor-
mation  must  be  provided. 2 Requests  of  information  cannot  be  declined  solely  because  a 
final  assessment  of  the  relevance  of  the  requested  information  is  still  ongoing.  However, 
speculative requests (fishing expeditions) are still explicitly excluded. 

The most significant amendment is the possibility for requests of information on a group of 
tax payers (referred to in para. 5.2 of the commentary) as there is no obligation to identify 
the group individually. Declining the request of information arguing that it refers to a group 
of  taxpayers  not  individually identified  (i.e.  without  a  concrete  tax  allegation  in  each  indi-
vidual  case)  will  often  be  difficult  to  justify3.  In  most  cases,  this  would  lead  to  random  or 
speculative requests.  In order to fulfill the prerequisite of  foreseeable  relevance of the in-
formation  and  the  request  not  being  determined  as  a  fishing  expedition,  the  requesting 
state  must  provide  detailed information  on  the  necessity  of  the  request.  This includes  de-
scribing  the  group  and  specific  circumstances  explicitly,  explaining  the  applicable  law  and 
why  there  is  reason  to  believe  that  the  taxpayers  in  the  group  have  been  non-compliant 
with this law. Furthermore, it has to be demonstrated that the requested information would 
lead to compliance by those taxpayers. Various countries have already interpreted Art. 26 
to  include  group  requests.  However,  for  other  countries  this  represents  a  new  interpreta-
tion. 

2   OECD, Commentary to Art. 26 OECD MTC, Para. 5. 
3   See  Dourado,  in  Reimer/Rust  (Editors),  Klaus  Vogel  on  Double  Taxation  Conventions,  4. Edition,  Al-

phen/Netherlands 2015, Art. 26, No. 187 ff. 

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Policy Department A: Economic and Scientific Policy 

Table 1: 

Development of Art. 26 OECD MTC  

OECD-information Clause Model 

Type 

Art. 26 OECD MTC 1963 =  

limited major clause 

not only in conducting the DTT, but lim-
ited on residents of the state parties and 
such tax types are mentioned in the DTT 

Art. 26 OECD MTC 1977 =  

limited major clause 

Omission  of  the  requirement  of  state 
party residency 

Art.  26  OECD  MTC  2000  =  unlimited  major 
clause 

Enlargement on all types  of taxes  of the 
state parties 

Art.  26  OECD  MTC  2005  =  unlimited  major 
clause without a restriction by bank secrets 

Examination by the requested state does 
not depend neither on its own public tax 
interests nor on a national bank secret 

Art.  26  OECD  MTC  2012  =  use  information  re-
ceived for tax purposes and for non-tax purpos-
es  

provided  such  use  is  allowed  under  the 
laws  of  both  States  and  the  competent 
authority  of  the  supplying  State  author-
izes such use  

2.2. 

Agreements  on  Mutual  Assistance  modelled  on  OECD  Model  Tax  Conven-
tion 2002 (Tax Information Exchange Agreement) 

Beyond its MTC, the OECD has published a model agreement about fiscal informational ex-
change in April 2002 – so-called “Tax Information Exchange Agreement (TIEA)“. It involves 
the exchange of fiscal information between OECD Member States and tax havens identified 
by the OECD and represents a result of the initiative “Harmful Taxation Project”. The model 
agreement is not a binding instrument. It can be the foundation for bilateral as well as mul-
tilateral  agreements,  whereby  the  latter  can  be  interpreted  /  modelled  as  an  integrated 
bundle of bilateral agreements. Hence, the OECD model displays an extension of the avail-
able resources within the informational exchange. 

In the introduction, the OECD points out the importance for the informational exchange of 
the  global  compliance  with  the  standards  based  on  this  agreement,  by  financial  centers. 
This could be a hint for the intended field of application of this model agreement. The des-
ignated disclosure type in Art 5 TIEA MC is the request disclosure. Spontaneous provision of 
information and automatic provision of information are not regulated in Art 5 (1) TIEA MC, 
but after the opinion of the TIEA MC commentary they can be included by the bilateral dis-
closure  agreements  if  requested  by  the  contracting  parties.4 Furthermore,  Art. 5 TIEA  MC 
contains  a  list  of  specifications  which  a  request  disclosure  should  include.  Regarding  the 
individual  request  disclosure,  the  model  agreement  conforms  to  Art. 26 OECD  MC.  In  ac-
cordance with Art. 6 TIEA MC also tax audits abroad are generally possible. Art. 7 TIEA MC 
deals  with  the  withholding  of  tax  information.  The  usual  clauses/limits  for  information  ex-
change  apply.  For  example,  the  right  to  withhold  information  if  the  requested  state  could 

4   OECD, TIEA-Commentary, para. 39. 

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Legislation Practices Regarding Exchange of Information between National Tax Administrations in Tax Matters  

provide the information only by violating national law or put public order at risk. Moreover, 
company and commercial secrets are protected. The granting of information held by banks 
or  other  financial  institutions  has  to  be  provided  by  both  contracting  parties.  Accordingly, 
the distinction between the protection of the banking secret and the protection of commer-
cial secrets is also made in this model agreement. Concerning the type of taxes included in 
the  agreements  (regulated  in  Art. 3 TIEA  MC),  the  TIEA  Model  Convention  commentary 
says  that  bilateral  agreements  cover  at  least  the  categories  of  direct  taxes  (taxes  on  in-
come or profits), capital and wealth taxes, real estate taxes, inheritance or gift taxes, un-
less the contracting parties waive the inclusion of one or more tax types. 5 

Art. 5(6)  TIEA  MC  contains  a  rule  to  secure  the  provision  of  answers  in  the  informational 
exchange  process.  Art. 5(6)  TIEA  MC  asks  the  requested  state  to  provide  the  requesting 
state with the requested information “as promptly as possible”. This reminds of Art. 7(1) of 
Council  Directive  2011/16/EU6,  which  calls  for  the  provision  of  information  “as  quickly  as 
possible”.  Art. 5(6a,b)  TIEA  MC  requires  specific  measures  to  speed  up  administrative  as-
sistance.  According  to  lit.  a),  the  competent  authority  of  the  requested  contracting  state 
has  to  confirm  the  receipt  of  the  request  in  written  form  and  to  brief  the  competent  au-
thority  of  the  requesting  state  on  any  shortcomings  of  the  request  preferably  within  60 
days.  Moreover,  regarding  lit.  b),  the  requested  contracting  state  has  to  inform  the  re-
questing contracting state promptly if the competent authority of the former could not ob-
tain and provide the information within 90 days from the request. The requested contract-
ing state has to inform the requesting contracting state about the reasons and obstacles for 
the failure of the request. Art. 5(6b) TIEA MC sets a time limit of 90 days for the requested 
contracting state to answer incoming requests. 

Art. 5(5a-g) TIEA Model Convention regulates the specific content of (written) information 
requests.  The  competent  authority  of  the  applicant  state  shall  provide  the  following  infor-
mation to the competent authority of the requested state: the identity of the person under 
examination  or  investigation;  a  statement  of  the  information  sought  including  its  nature 
and  the  form  in  which  the  applicant  state  wishes  to  receive  the  information  from  the  re-
quested state; (c) the tax purpose for which the information is sought; (d) grounds for be-
lieving that the information requested is held in the requested state or is in the possession 
or  control  of  a  person  within  the  jurisdiction  of  the  requested  state;  (e)  to  the  extent 
known, the name and address of any person believed to be in possession of the requested 
information; (f) a statement that the request is in conformity with the law and administra-
tive practices of the applicant state, that if the requested information was within the juris-
diction of the applicant state then the competent authority of the applicant state would be 
able to obtain the information under the laws of the applicant state or in the normal course 
of  administrative  practice  and  that  it  is  in  conformity  with  this  TIEA  agreement;  (g)  a 
statement  that  the  applicant  state  has  pursued  all  means  available  in  its  own  territory  to 
obtain  the  information,  except  those  that  would  give  rise  to  disproportionate  difficulties.  
The  latter  determines  the  principle  of  subsidiarity,  which  is  common  for  informational  ex-
change.  The  other  points  state  that  the  requesting  contracting  state  has  to  specify  very 
precisely the reasons underlying the request of information. DAC1 does not contain a com-
parable listing of specifications. Art. 17(1) DAC1 merely refers to conditional subsidiarity.  

5   OECD, TIEA Commentary, para. 9. 
6   Council Directive 2011/16/EU of 15.2.2011 on administrative cooperation in the field of taxation and repealing 

Directive 77/799/EC, OJ EU of 11.3.2011, No. L 64/1 (= DAC1). 

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Policy Department A: Economic and Scientific Policy 

3.  INFORMATION EXCHANGES BASED ON EU-LAW 

KEY FINDINGS 

Over the years, mutual assistance between EU Member States in direct taxation matters 
has remained chiefly regulated by Art. 26 OECD-MTC. With the Saving Directive, the EU 
legislator has moved a first step into the world of AEOI, admittedly only for the narrow 
scope of interest payments. The enlarging of the scope, the instruments and the speed 
of  information  exchange  between  the  Member  States  by  DAC1  in  2011  was  largely 
overdue. 

Still, the international development of the automatic exchange of information of finan-
cial  accounts  led  the  EU  in  2014  to  widen  the  AEOI  to  an  AEFI  standard  with  DAC2, 
overcoming the requirements of the Saving Directive.  

3.1. 

EC  Mutual  Assistance  Directive  77/799/EC7 and  EU  Directive  on  Adminis-
trative Cooperation 2011/16/EU 

Informational exchange between EU Member States is based not only on international law 
agreements. The progress of the European integration led to an internationalization of eco-
nomic  processes.  Already  in  the  seventies,  the  limitation  of  investigative  measures  to  the 
sovereign country according to a formal territoriality-principle resulted in difficulties for na-
tional tax administrations to monitor cross-border taxation. This led to shortfalls in tax rev-
enues and to a distortion of the capital market, hampering competition and putting at risk 
the functioning of the internal market. The result was the EC Mutual Assistance Directive of 
1977.  

30 years later the Commission considered that the Mutual Assistance Directive did not meet 
any  longer  the  requirements  for  administrative  cooperation. 8 The  proposal  of  an  EU  Di-
rective  on  Administrative  Cooperation  (DAC1)  was  endorsed  by  the  ECOFIN  on  15.2.2011 
and had to be incorporated into national law by 1.1.2013. Its aim is to strengthen the co-
operation  between  the  tax  authorities  of  the  EU  Member  States 9 with  common  principles 
and  rules.  The  Directive  gives  a  minimum  standard  for  intergovernmental  cooperation  on 
tax matters. 

7   Directive 77/799/EC of 19 December 1977, OJ EC No. L 336, p. 15-20. 
8   COM (2009) 29, Explanatory Memorandum, Context of the proposal, General context. 
9   Footnote 6, OJ EU No. L 64, p. 2, para. 7. 

14 

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Legislation Practices Regarding Exchange of Information between National Tax Administrations in Tax Matters  

DAC1 is an important step towards effective administrative assistance and exchange of in-
formation.  The  following  amendments  of  the  former  Directive  77/799/EC  can  be  empha-
sized: 

- 

- 

- 

- 

- 

- 

- 

requirement  of  a  central  liaison  office  in  every  Member  State  with  a  centralized  re-
sponsibility for the information exchange procedure (Art. 4(2)); 

possibility to earmark liaison departments with the task to exchange directly tax rele-
vant information with the competent offices of other Member States (Art. 4(3)); 

standardization  of  the  submission  forms  for  the  request  of  information  according  to 
standard  computerized  formats  (Art.  20).  The  use  of  these  standard  formats  is  ac-
companied  by  regulations  concerning  the  use  of  the  Common  Communication  Net-
work (CCN) in Art. 21; 

setting  time  limits  for  providing  the  requested  information.  Art.  7(1):  not  later  than 
six months; not later than two months if the requested tax authority possesses that 
information; Art. 7(3-6):specific short timed procedures  of sending receipt, notifying 
request deficiencies or explaining the reason for the failure of submitting the request-
ed information); 

enlargement  of  the  scope  of  spontaneous  and  automatic  exchanges  of  information 
(Art. 8 and 9); 

abolishment  of  limits  of  national  bank  secrecies  by  setting  its  outside  scope  of  pro-
tected commercial, industrial or professional secrets (Art. 17(4); Art. 18(2)); 

enabling  and  stimulating  presence  of  all  parties' administrative  tax  officers  (Art.  11) 
and simultaneous controls/audits by two or more tax authorities (Art. 12). 

These measures - already successfully implemented for VAT10 - shall make the information 
exchange faster. As language is an issue for efficient information exchange between coop-
erating countries, DAC1 states that the requests for cooperation, including requests for no-
tification and attached documents may be in any language agreed between the cooperating 
parties (Art. 21(4)).  

3.2. 

Council Directive 2003/48/EC (Savings Directive)11  

The former EC Mutual Assistance Directive 77/799/EC did not provide for a mandatory au-
tomatic information exchange system. In the field of cross-border financial transactions the 
aim of the Savings Directive is to make savings income accumulated in the form of interest 
payments by beneficial owners in one EU Member State who are fiscally resident in another 
Member  State  subject  to  effective  taxation  (Art. 1  Saving  Directive  2003/48/EC  of 
3.6.2003). For the first time in the EU tax law, the saving directive foresees in a predefined 
number  of  cases  mandatory  automatic  exchange  of  information  between  the  Member 
States  (Art. 9  Directive  2003/48/EC).  If  the  beneficial  owner  is  resident  in  a  EU  Member 
State  and  the  paying  agent  is  established  in  a  different  EU  Member  State,  the  minimum 
amount of information to be reported by the paying agent to the competent authority of its 
Member State of establishment shall consist of (see Art. 8(1) Directive 2003/48/EC): 

10   See Council Regulation No. 904/2010 of 7.10.2010 on administrative cooperation in the field of VAT, OJ EU of 

12.10.2010, No. L 268/1. 

11   Council Directive 2003/48/EC of 3.6.2003 on taxation of savings income in the form of interest payments, OJ 

EU of 26.6.2003, No. L 157/38. 

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Policy Department A: Economic and Scientific Policy 

- 

- 

- 

- 

the identity and residence of the beneficial owner; 

the name and address of the paying agent; 

the account number of the beneficial owner and 

the amount of interest paid or credited during the tax year. 

This information has to be transmitted at least once a year and within six months following 
from the end of the tax year of the Member State of the paying agent. This automatic ex-
change of information is undermined by the narrow scope of the Savings Directive which is 
limited to the taxation of savings income in the form of interest payments on debt claims, 
while excluding the taxation of pension and insurance benefits. 

Member States that exchange information pursuant Directive 2003/48/EC were not permit-
ted  to  rely  on  limits  to  the  exchange  of  information  as  set  out  in  the  former  Directive 
77/799/EEC 12.  However,  Austria,  Belgium  and  Luxemburg  were  allowed  to  not  apply  the 
automatic exchange during a transitional period.  Instead of the automatic  information ex-
change  these  Member  States  shall  levy  a  withholding  tax  at  a  rate  starting  by  15%  and 
ending by 35% (since 1.7.2011) of the interest amount (see Art. 11 directive 2003/48/EC). 
Since  1.1.2011  Belgium  takes  part  in  the  automatic  information  exchange  and  does  not 
levy  the  withholding tax  any  longer.  Luxemburg  has  followed  this  same  tax  policy  change 
as  from  1.1.2015.  Only  Austria  is  still  refusing  the  automatic  exchange  of  information  of 
savings interests.  

3.3. 

Council Directive 2014/48/EU (amended Savings Directive) 13  

The definition of the term “interest payments” has been substantially enlarged by Directive 
2014/48/EU  of  24.3.2014.  The  new  Art. 6  includes  income  from  securities,  from  the  sale, 
refund or  redemption of the debt claims and benefits from life insurance  contracts among 
interest payments. The application range of automatic exchange of information according to 
this  directive  has  therefore  been  widened.  Furthermore,  the  Directive  pursues  a  “look-
through-approach” for payments made to certain entities or legal arrangements established 
or having their place of effective management in certain countries or territories where Di-
rective 2003/48/EC or equivalent measures do not apply14. The beneficial owner according 
to  Art. 2(1)  of  the  Savings  Directive  means  any  individual  who  receives  an  interest  pay-
ment or any individual for whom an interest payment is secured, unless evidence is provid-
ed by the individual that interest payment was not received or secured for his own benefit. 
The latter case applies when the paying agent acts on behalf of a legal arrangement or on 
behalf  of  another  individual  being  the  beneficial  owner.  With  the  amending  of  directive 
2014/48/EU, a third paragraph was added to Art. 2 stating that the beneficial owner defini-
tion  of  Art.  3(6)  and  the  customer  due  diligence  measures  of  Art.  7  and  Art.  8(1b)  of  Di-
rective 2005/60/EC15 shall apply whenever an economic operator within the scope of Art. 2 
of directive 2005/60/EC (institutions and persons covered by this directive): 

12   See recital 16 of the Council Directive 2003/48/EC. 
13   Council  Directive 2014/48/EU  of  24.3.2014  amending  Directive  2003/48/EC on  taxation  of  savings  income  in 

the form of interest payments, OJ EU of 15.4.2014, No. L 111/50. 

14   Directive 2014/48/EU. 
15   Directive 2005/60/EC of the European Parliament and the Council of 26.10.2005 on the prevention of the use 

of the financial system for the purpose of money laundering and terrorist financing, OJ EU L 309/15. 

16 

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Legislation Practices Regarding Exchange of Information between National Tax Administrations in Tax Matters  

-  makes an interest payment to, or secures such a payment for, an entity or a legal 

arrangement and 

- 

- 

the entity or legal arrangement is not subject to effective taxation1 and 

the entity or legal arrangement is established or has its place of effective manage-
ment in a country or jurisdiction outside the territory of the TFEU. 

Paying  agents  subject  to  Anti-Money  Laundering  (AML)  obligations  shall  make  use  of  this 
information already available to them under these obligations.16 For contractual relations or 
transaction entered into or respectively carried out after 1 January 2004 the paying agent 
shall  establish  the  identity  of  the  beneficial  owner,  consisting  of  the  name,  address,  date 
and place of birth and  the tax identification number (Art. 3(2b)  of Directive 2014/48/EU). 
In  the  latter  case  prior  reference  is  given  to  the  official  proof  of  tax  residency  voluntarily 
provided  by  the  beneficial  owner  through  provision  of  his  passport,  identity  card  or  any 
other official document. 

The information, which shall be provided according to Art. 8 (1) of Directive 2014/48/EU, is  

- 

- 

- 

the  identity  and  residence  of  the  beneficial  owner  or,  in  cases  of  shared  beneficial 
ownership,  the  identity  and  residence  of  all  beneficial  owners  who  fall  within  the 
scope of Article 1 of the Directive 2003/48/EC;  

the name and address of the paying agent;  

the account number of the beneficial owner or, where there is none, identification of 
the  debt  claim  giving  rise  to  the  interest  payment  or  of  the  life  insurance  contract, 
security or share or unit giving rise to that payment and  

- 

information concerning the amount of the interest payment. 

3.4. 

Council  Directive  2014/107/EU  (amended  EU  Directive  on  Administrative 
Cooperation) 

Beside the field of interest taxation which is still  covered by the saving directive (see 3.2. 
and  3.3.)  the  directive  on  administrative  cooperation  (see  3.1)  has  enacted  an  automatic 
exchange of information between the Member States for the following five predefined cate-
gories of income and capital (Art. 8(1) DAC1) from 1.1.2014 on: 

- 

income from employment; 

-  director’s fees; 

- 

life insurance products not covered by other union directives like 2003/48/EC amend-
ed by directive 2014/48/EU (see 3.2. and 3.3.); 

-  pensions; 

-  ownership of and income from immovable property. 

16   Art. 3 para. 2 lit. a) of Directive 2014/48/EU (for contractual relations entered into before 1 January 2004). 

PE 563.452 

17 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                           
 
 
Policy Department A: Economic and Scientific Policy 

The Member States have to report the aforementioned information to the Member State of 
residence at least once a year, within six months following the end of the tax year  of the 
Member  State  during  which  the 
information  became  available  (Art. 8(6)Directive 
2011/16/EU).  

Despite this further progress for automatic exchange of information in tax matters, a wide 
range  of  cross-border  financial investments  and  transactions  at  the  EU  level  were  still  not 
covered. In parallel, the US government exerted a tremendous pressure on foreign financial 
industries with Foreign Account Tax Compliance Act (FATCA). FATCA requires foreign (non-
US)  financial  institutions  (FFIs)  such  as  banks,  funds,  certain  brokers,  trusts  and  trust 
companies to disclose details of all reportable accounts to the US Internal Revenue Service 
(IRS). Reportable accounts are financial accounts maintained by the FFI where the account 
holder  is  either  a  specified  person  (i.e.  any  individual  who  is  a  citizen  or  resident  of  the 
United Sates) or is a non-US entity with controlling persons that include one or more speci-
fied US persons. Controlling persons are individuals who exercise control over an entity. If 
the financial institution does not comply with this obligation it has to withhold a tax of 30% 
of  payments  from  US  sources  and  transfer  this  tax  amount  to  the  IRS  as  from  the 
1.7.201417. If the foreign state concludes a so called Intergovernmental Agreement (IGA), 
financial  institutes  resident  in  this  foreign  state  are  treated  as  “compliant  financial  insti-
tutes”  and  are  exempted  from  the  US  withholding  tax.  With  the  IGA  the  foreign  state  ac-
cepts the automatic exchange of information as the Common Reporting Standard (CRS) for 
foreign  financial  accounts18.  Until  17.6.2015  58  States  have  signed  an  IGA  type  A  and  7 
states  have  signed  an  IGA  type  B.  Further  40  states  have  already  agreed  to  sign  an  IGA 
type  A  and  7  more  an  IGA  type  B 19.  All  EU  Member  States  as  well  as  a  number  of  other 
states  featuring  strong  bank  secrecy  (like  Liechtenstein,  Switzerland)  are  affected  by  this 
new financial legislation.  

This  US  tax  policy  has  been  flanked  by  the  OECD  which  published  on  21.7.2014  has  a 
“Standard  for  Automatic  Exchange  of  Financial  Account  Information  in  Tax  Matters”.  The 
OECD standard includes two elements to secure a proper exchange of information on finan-
cial accounts: 

-  a  model  agreement  between  the  competent  authorities  of  the  contracting  states  on 
the automatic exchange of financial account information to improve international tax 
compliance (“Competent Authority Agreement – CAA”); 

-  a  common  standard  on  reporting  and  due  diligence  for  financial  account  information 

(“Common Reporting Standard – CRS”). 

As  of  29.10.2014,  51  states  have  signed  a  multilateral  competent  authority  agreement 
(MCAA)  based  on  the  OECD-CAA  standard.  With  this  international  standard  for  automatic 
exchange of financial account information the OECD has speed up EU development on this 
matter. In order to guarantee a unified common reporting standard between the EU Mem-
ber  States,  DAC1  (see  3.1)  had  to  be  adapted  to  this  new  worldwide  standard.  This  has 
been  realized  by  the  Directive  2014/107/EU  of  9.12.2014  (DAC2)  20 .  Art.  89(3a)DAC2 

17   See Sec. 1471-1473  US IRC:  an  US  withholding  agent  has  to  deduct  and pay  30% of  the  payments  to  non-

compliant foreign financial institutions. 

18   See the detailed IGA, differed as a bilateral type A and an unilateral type B on 

http://www.treasury.gov/resource-center/tax-policy/treaties/Pages/FATCA.aspx  (accessed at 21.6.2015). 
19   A list of states is published on http://www.treasury.gov/resource-center/tax-policy/treaties/Pages/FATCA.aspx  

(last update on 17.6.2015, accessed at 21.6.2015). 

20   Council Directive 2014/107/EU of 9.12.2014 amending Directive 2011/16/EU as regards mandatory automatic 

exchange of information in the field of taxation, OJ EU of 16.12.2014, No. L 359/1. 

18 

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Legislation Practices Regarding Exchange of Information between National Tax Administrations in Tax Matters  

obliges each Member State to take the necessary measures to require its financial institu-
tions to perform the CRS. The CRS stipulates that the competent authority of each Member 
State  is  obliged  as  from  1.1.2016  to  communicate  via  automatic  exchange  specific  infor-
mation  on  financial  accounts  to  any  other  Member  State.  For  Austria  this  obligation  will 
start in 1.1.2017.  

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Policy Department A: Economic and Scientific Policy 

4.  INFORMATION  EXCHANGES  BASED  ON  MULTILATERAL 

LEGAL BASIS 

KEY FINDINGS 

The  bilateral  and  EU  legal  sources  for  automatic  exchange  of  financial  account  infor-
mation  (AEFI)  are  supplemented  by  the  Joint  Council  of  Europe/OECD  Convention 
amended in 2010, which simplifies the information exchange between the EU and third 
countries to a common standard. The MCAA of 2014 provides a further common stand-
ard for the AEFI. Both sources clarify that national bank secrecies are no longer an im-
pediment for the exchange of information. 

The  main  multilateral  legal  source  for  information  exchange  on  tax  matters  is  the  Joint 
Council  of  Europe/OECD  Convention  on  Mutual  Administrative  Assistance  in  Tax  Matters 
(the  "Joint  Convention"),  signed  in  Strasbourg  on  25.1.1988.21 The  objective  of  the  Joint 
Convention is to enable each party to counter international tax evasion and to enforce bet-
ter its national laws, whilst, at the same time, respecting the rights of the taxpayers. The 
EU contracting parties are Belgium, Denmark, Finland, France, Germany, Italy, the Nether-
lands, Poland, Sweden and the United Kingdom (also Member States of the Council of Eu-
rope))  and  Canada,  Japan,  Korea,  Mexico,  New  Zealand  and  the  United  States.  The  Joint 
Convention  applies  therefore  to  countries  that  are  outside  the  scope  of  DAC1  and  DAC2 
(like  Australia,  Canada,  Japan  and  the  United  States)  easing  cross-border  cooperation 
amongst these countries. In addition, administrative assistance under the Joint Convention 
covers all forms of compulsory payments made to governments, for example, to social se-
curity  agencies 22,  which  are  not  covered  by  DAC1  and  DAC2.  The  amending  protocol  of 
27.5.201023 aligns the Joint Convention with the recent internationally agreed standard on 
the exchange of information for tax purposes, for example, by abolishing bank secrecy for 
tax purposes (Art. 21(4)). This is a sign that bank secrecy is no longer acceptable interna-
tionally.  In  addition,  the  amending  protocol  provides  for  the  opening  up  of  the  Joint  Con-
vention to non-Council of Europe and non-OECD countries. In this respect, the OECD hopes 
that the updated Joint Convention will become a powerful instrument in countering offshore 
tax evasion. 

A  further  important  multilateral  agreement  has  been  already  mentioned  in  the  context  of 
DAC2 (3.4.). The MCAA of 29.10.2014 will force several States worldwide to follow the new 
standard of automatic exchange of financial account information. 

21   CETS No. 127. 
22   Art. 2(1bii) of the Joint Convention enumerates in the list of covered taxes «compulsory social security contri-

butions payable to general government or to social security institutions established under public law».  

23   CETS No. 208. 

20 

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5.  CONCURRENCES OF THE LEGAL BASES 

KEY FINDINGS 

National laws, based  on EU-Directives are superior to bilateral DTT or  TIEA,  as well as 
to  multinational  conventions.  Therefore,  DTT  information  clauses,  TIEAs  and  multina-
tional conventions are almost only relevant in relation to third countries (non-EU Mem-
ber States). 

The variety of legal sources regulating international cooperation raises the question of con-
currences between these legal sources. EU law is superior to national legislation. EU law is 
also superior to the exchange of information articles in tax treaties (see 2.1.). Accordingly, 
EU  Member  States  are  bound  by  the  principles  of  DAC1  (see  3.1.),  as  implemented  into 
national  law.  This  can  result  in  overlaps/disagreements  in  relation  to  the  exchange  of  in-
formation  involving  articles  in  tax  treaties,  especially  if  a  tax  treaty  only  contains  narrow 
information provisions that are not up to the standard of DAC1. In these cases, the stand-
ard  of  DAC1  which  is  implemented  into  national  law  of  the  Member  States  displaces  the 
narrower information provisions of bilateral tax treaties. Only if the obligation in a tax trea-
ty to provide information goes further than that prescribed by DAC1, the provisions of the 
tax  treaty  apply.  In  this  respect,  DAC1  provides  a  minimum  standard  for  the  purpose  of 
realising  the  harmonized  exchange  of  information  between  EU  Member  States.  From  the 
perspective of the individual taxpayer and private institutions, that can lead to a more in-
tensive intrusion of private legal rights as confirmed by the irrelevance of bank secrecy as a 
former  impediment  of  a  cross-border  exchange  of  information  (regarding  legal  protection 
see further 8.).  

The arguments above  remain valid also as  regards the  relationship between  EU-Directives 
and  multilateral  sources,  like  the  Joint  Council/OECD-Convention  of  25.1.1988.  For  exam-
ple, DAC1 (also in its last amended version by DAC2, see 3.4.) sets a minimum standard of 
information  exchange  in  EU  tax  matters  which  cannot  be  undercut  by  a  multinational 
agreement.  The  EU-Commission  only  uses  an  infringement  procedure  of  Art.  258  TFEU 
when a Member State does not implement the supremacy of EU law as such. 

Thus, Art. 26 DTT provisions and multinational agreements have little relevance in the rela-
tionship  between  Member  States  compared  to  third  countries.  Especially  TIEAs  (see  2.2.) 
are focused on tax haven states and not on EU Member States to which the Directive would 
apply. 

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Policy Department A: Economic and Scientific Policy 

6.  TYPES OF INFORMATION EXCHANGE 

KEY FINDINGS 

Exchange of information on request, spontaneous transmitted information and automat-
ic exchange of information (AEOI) are different means of mutual assistance of sovereign 
states in tax matters and establish together an international tax risk  management.  No 
hierarchy between the three instruments exists. On request or spontaneously pursued, 
information exchanges deal with concrete-single cases after a first examination and tar-
get a concrete tax risk. In contrast, the AEOIs are focused on a multitude of predefined 
cases without a concrete suspicion of tax losses and are targeting abstract tax risks. 

6.1. 

Short Overview 

International tax cooperation has three different instruments for exchange  of information: 
(1)  the  exchange  of  information  on  request  (see  6.2.);  (2)  the  spontaneous  exchange  of 
information (see 6.3.); (3) the automatic exchange of information (see 6.4.). All three in-
struments  of  exchange  of  information  are  relevant  to  DAC1  (amended  by  DAC2,  see  3.1. 
and 3.4.) and other legal sources in relation to VAT24 and excise duties25. The same set of 
instruments is provided by Art. 5-7 of the Joint Convention of the Council of Europe/OECD 
(see 4.). 

In  contrast,  Art.  26  of  the  OECD  DTC  does  not  distinguish  between  the  three  kinds  of  in-
struments for exchange information, but Art. 26(9) of the Commentary notes that the rule 
set in Art. 26 (1) allows for the exchange information according to these three instruments. 
Art. 5 of the OECD TIEA-Model only explicitly mentions the exchange of information on re-
quest. However, according to the Commentary on Art. 5 of the OECD TIEA-Model, the con-
tracting parties may expand cooperation by way of automatic and spontaneous exchanges 
of information.26 

6.2. 

Exchange of Information on Request 

The  exchange  of  information  on  request  describes  a  situation  in  which  the  competent  au-
thority  of  one  state  asks  for  particular  information  to  the  competent  authority  of  another 
state with a special tax-case in mind. The requested information typically relates to an ex-
amination, inquiry or investigation of the liability of a taxpayer for specified tax years. The 
requested  authority  clarifies  the  relevant  facts  and  transmits  the  information  to  the  re-
questing  authority.  Art. 18(1)  DAC1  and  Art. 26(4)  OECD-DTC  state  that  the  requested 
authority  should  use  its  information  gathering  measures  to  obtain  the  requested  infor-
mation, even though that authority  may not  require such information  for its own tax pur-
poses. This can be classified as the passive exchange of information because the requesting 
state has no control or influence over the actions of the requested state. This method of the 
exchange of information is also passive form the point of view of the taxpayer, as the tax-
payer cannot require the state of residence to use the mutual assistance procedures. It is a 
general principle of tax cooperation that a contracting party should use all means in its own 

24   Council Regulation (EU) No. 904/2010 of 7.10.2010 on administrative cooperation and combating fraud in the 

field of value added tax, OJ EU of 12.10.2010, No. L 268/1. 

25   Council Regulation (EC) No. 2073/2004 of 16.11.2004 on administrative cooperation in the field of excise du-

ties, OJ EU of 4.12.2004, No. L 359/1. 

26  OECD TIEA Model, marginal No. 39. 

22 

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territory to obtain the information before sending a request, except where this would give 
rise to disproportionate difficulties. This principle is to be found in Art. 17(1) DAC1 and in 
the  OECD  "Manual  on  the  Implementation  of  Exchange  of  Information  Provisions  for  Tax 
Purposes" (the "OECD Manual").27  

In general, a precondition for the supply of information is that the requested information is 
foreseen  to  be  relevant  to  the  enforcement  of  the  domestic  laws  of  the  requesting  state. 
The fiscal authority checks incoming requests with respect to their relevance from the point 
of  view  of  an  ex-ante  observer.  This  means  the  requested  authority  does  not  investigate 
explicitly if  the  requesting authority  actually  possesses  no  tax  claim. In  doing  so,  it  is  as-
sumed that the requesting authority has used its investigation capabilities to the full extent 
before submitting an information request (subsidiarity principle). 

A  big  step  towards  effective  administrative  assistance  and  exchange  of  information  is  the 
standardization  of  the  requests  and  information.  Art.  20(1)(3)  DAC1  state  that  an  infor-
mation request  or a  spontaneous provision of information (see below  6.3) shall be formu-
lated  according  to  a  standard  form.  The  automatic  exchange  of  information  (see  below 
6.4.)  shall  also  be  sent  using  a  standard  computerized  format  (Art.  20(4)  DAC1).  The 
standard form  of the  request has to  contain specifics like the identity of the person under 
examination and the tax purpose for which the information is sought (the same information 
has to be provided if information is requested after a TIEA, see above 2.2.). In addition, the 
requesting authority may, to the extent that it is known, provide the name and address of 
any  person  believed  to  be  in  possession  of  the  requested  information,  as  well  as  any  ele-
ment that may facilitate the collection of information by the requested authority. The use of 
standard formats is accompanied by regulations concerning the use  of the Common Com-
munication Network (CCN) in Art. 21 of DAC1 to make the information exchange faster, as 
it is already the  case for VAT. As language may also be an issue for efficient exchange  of 
information between cooperating countries, the requests for cooperation, including requests 
for notification and attached documents can be in any language agreed by contracting par-
ties (Art. 21(4) DAC1).  

Pursuant to Art. 5 DAC1, the requested authority shall communicate to the requesting au-
thority  any  information  referred  to  in  Art.  1(1)DAC1  that  is  in  its  possession  or  has  been 
obtained as a result of administrative enquiries. The single central liaison office, liaison de-
partments and the competent officials may also be involved. (Art. 4(6)DAC1). The request-
ed authority takes care of the information request in the same way it provides information 
for  national  taxation  issues  (Art.  6(3)DAC1:  equivalence  principle).  Information  shall  be 
provided  as  quickly  as  possible,  and  no  later  than  6  months  from  the  day  the  request  is 
received (Art. 7(1)DAC1). 

6.3. 

Spontaneous Exchange of Information 

The spontaneous exchange of information is the provision of information in a singular case 
to  another  contracting  party  that  is  foreseeable  relevant  to  that  other  party  and  that  has 
not  been  previously  requested.  According  to  the  OECD,  the  spontaneous  exchange  of  in-
formation relies on the active participation and cooperation of local tax officials.28 Art. 9(1a-
e) DAC1 lists five circumstances in which the competent authority of a Member State must 
communicate  the  information  referred  to  in  Art.  1(1)DAC1  to  the  competent  authority  of 
another Member State without previous request: 

27   OECD Manual on Information Exchange, 2006, Module 1, p. 2 et seq. 
28   OECD Manual, Module 2, p. 3. 

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23 

 
 
 
                                           
Policy Department A: Economic and Scientific Policy 

(a)  the  competent  authority  of  one  Member  State  has  grounds  for  supposing  that 
there may be a loss of tax in the other Member State;  

(b)  a  person  liable  to  tax  obtains  a  reduction  in,  or  an  exemption  from,  tax  in  one 
Member State which would give rise to an increase in tax or to liability to tax in the 
other Member State;  

(c) business dealings between a person liable to tax in one Member State and a per-
son  liable  to  tax  in  the  other  Member  State  are  conducted  through  one  or  more 
countries in such a way that a saving in tax may result in one or the other Member 
State or in both;  

(d)  the  competent  authority  of  a  Member  State  has  grounds  for  supposing  that  a 
saving of tax may result from artificial transfers of profits within groups of enterpris-
es;  

(e)  information  forwarded  to  one  Member  State  by  the  competent  authority  of  the 
other Member State has enabled information to be obtained which may be relevant 
in assessing liability to tax in the latter Member State. 

DAC1  has  the  potential  to  enlarge  the  scope  of  spontaneous  information  exchange  in  Eu-
rope since Art. 9 (2) states that the competent authority of each Member State may com-
municate  spontaneously  to  the  competent  authority  of  the  other  Member  State  any  infor-
mation of which they are aware that may be useful to the competent authority of the other 
Member  States.  Identifying  the  existence  of  one  of  the  aforementioned  circumstances  re-
quires  remarkable  undertaking  by  tax  officials  who  are  acting  without  a  specific  request. 
However,  information  exchanged  spontaneously  represents  a  very  effective  manner    to 
counter tax evasion and tax fraud, as it reports facts and information that another Member 
State could hardly or  very seldom autonomously detect. The spontaneous exchange of in-
formation as an effective tool to fight tax fraud has increased rapidly in the EU. Relating to 
the former Mutual Assistance Directive 1977/799/EC the Court of Justice of the EU (CJEU) 
has ruled in favour of the obligation to the spontaneous exchange of information.29 Art. 10 
DAC1  sets  a  time  limit  for  the  transmission  of  spontaneous  information.  Information  shall 
be forwarded as quickly as possible and not later than one month after it becomes availa-
ble. 

6.4. 

Automatic Exchange of Information 

The automatic exchange of information involves the systematic and periodic transmission of 
"bulk" taxpayer information by the requested state to the requesting state regarding vari-
ous categories of income without a formal request being made. 30 In contrast to the sponta-
neous exchange of information, the automatic exchange of information does not refer to a 
specific case. Rather, information referring to defined case groups is transmitted automati-
cally. According to Art. 3 (9)DAC2: “’Automatic exchange’ means the systematic communi-
cation of predefined information of residents in other Member States to the relevant Mem-
ber State of residence, without prior request, at pre-established regular intervals.” The au-
tomatic exchange of information can be classified as a mean of cross-border risk manage-
ment, as it offers a Member State the possibility to match the information transmitted with 
the  information  contained  in  a  tax  declaration  or  return.  The  most  cost  effective  way  to 

29  Case C-420/98, W.N. (13 April 2000), Para. 13.  
30  OECD Manual, Module 3, p. 3. 

24 

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Legislation Practices Regarding Exchange of Information between National Tax Administrations in Tax Matters  

process the information is to receive the foreign-source information in digital form so that it 
can feed into the recipient's tax data base, automatically match the income data reported 
by taxpayers and, furthermore, be easily transmitted to local tax offices. As already men-
tioned  above  (see  3.3.  and  3.4.),  the  automatic  exchange  of  information  has gained  rele-
vance in the world of international cooperation on tax matters, with the common standard 
on Financial Account Information 31 being adopted by the EU 32. 

However,  the  recipient  state  is  faced  with  the  need  of  processing  a  huge  amount  of  data 
delivered  by  foreign  states  without  prior  concrete  risk  examinations.  The  Member  States 
have to secure that the transmitted information will be used in a proper tax risk manage-
ment  framework  and  not  be  simply  archived.  To  avoid  the  risk  of  accumulating  huge  da-
tasets  of  unprocessed  information,  the  competent  authority  of  a  Member  State  may  indi-
cate to the  competent  authority of another  Member State that it does not  wish to  receive 
information  regarding  specific  tax  categories  (see  Art. 8(3)  DAC2 33).  Member  States  can 
use this provision to ensure that the data received through the automatic exchange of in-
formation will be processed and evaluated by their national risk management systems. 

The implementation of Directive 2014/107/EU (see above 3.4.) makes the Saving Directive 
2003/48/EC  (see  above  3.2.)  outdated  and  redundant.  Consequently,  on  18.3.2015  the 
European  Commission  presented  a  proposal  to  the  EU  Council  to  repeal  the  Saving  Di-
rective34. On the same day, the European Commission has released a proposal regarding a 
further mandatory automatic exchange of information on “Advance Cross-Border Rulings - 
ACBR”  and  “Advance  pricing  Arrangements  -  APA”35.  This  proposal  is  following  a  2-step-
approach. As a first step, each Member States has to send automatically basic information 
about  ACBR  und  APA  to  all  other  Member  States  and  to  the  Commission  (Art.  8a(5)  Di-
rective Proposal). This gives all other Member States the opportunity to assess if the ACBR 
or the APA affects its financial interests and its national tax law. The  Commission can use 
the data for further examination in state aid law matters (Art. 107 ff. TFEU; see further 7.). 
After  this  evaluation  of  the  basic  data  transmitted,  in  a  second  step,  each  Member  State 
may have the possibility to request further information in single cases. This approach com-
bines  the  automatic  exchange  of  information  on  general  tax-risk-related  matters  with  the 
exchange of information on request in specific cases.  

6.5. 

Concurrences of the Information Types 

The exchange of information on request always starts at the initiative of a state that is in-
terested  in  securing  its  tax  revenues,  and  is  therefore  requesting  specific  information  be-
fore another state has examined the case. From this perspective, the spontaneous and au-
tomatic  exchanges  of  information  feature  additional  developments.  Both  instruments  re-
quire activity by the Member State that transmits the information by its own initiative. The 
requesting  states  decide  what  kind  of  information  may  be  relevant  to  another  Member 
State.  International  tax  cooperation  has  progressed  further,  whereby  states  are  proactive 
and transmit useful information. In general, TIEAs do not provide for the automatic sharing 
of tax information (see above 2.2). Thus, the new common standard of automatic exchange 
of financial account information embodies a remarkable step towards proactive tax cooper-
ation between countries, including former tax havens. 

31   See  OECD,  Standard  for  Information  Exchange  of  Financial  Information  in  Tax  Matters  –  New  single  global 

standard for the automatic exchange of information between key authorities worldwide, 2014. 

32   See Directive 2014/107/EU(DAC 2). 
33   Amended version Directive 2014/107/EU. 
34   http://ec.europa.eu/taxation_customs/taxation/personal_tax/savings_tax/revised_directive/index_en.htm 
35   European Commission, proposal for a Council Directive amending Directive 2011/16/EU as regards mandatory 

automatic exchange of information in the field of taxation, 18.3.2015, COM (2015), 135 final. 

PE 563.452 

25 

 
 
                                           
Policy Department A: Economic and Scientific Policy 

As  regards  the  usefulness  of  the  instruments  (information  types)  to  fight  tax  fraud  and 
evasion,  there  is  no  hierarchy  between  the  various  forms  as  each  information  type  is  ap-
propriate  to  pursue  a  specific  goal.  The  interaction  of  the  different  information-types  is 
widely  recognized  as  an  adequate  system  for  the  purpose  of  sharing/exchanging  infor-
mation on tax-related matters. Information on request and spontaneous information gath-
ering are considered to be case-specific as they contribute to reduce concrete risks. By con-
trast, the automatic exchange of information contributes to reducing abstract risks.  

Table 2: 

Mutual Assistance Principles 

Principles 

Meaning 

Reciprocity 

Equivalence 

Subsidiarity 

Standardisation  of  instruments,  procedures, 
data or secret protection 

Scope  of  examinations  does  not  differ  from 
domestic cases 

Each tax authority shall firstly exhaust its own 
instruments to examine or verify abroad facts 

Table 3: 

Mutual Assistance Instruments 

Instrument 

Cause 

Request for mutual assistance 

After examination of a single case for the ben-
efit of the requesting state 

Spontaneous transmittance of information 

After examination of a single case for the ben-
efit of the recipient state 

Automatic transmittance of information 

In  a  systematic  predefined  field  of  cases  for 
the benefit of the recipient state 

26 

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Legislation Practices Regarding Exchange of Information between National Tax Administrations in Tax Matters  

7.  USE  OF  INFORMATION  EXCHANGE  FOR  STATE  AID 

CONTROL 

KEY FINDINGS 

The automatic exchange of tax information may also be used for state aid control pur-
poses by extending the scope of recipients. In this case, the automatic exchange of in-
formation  gets  a  double  function.  The  proposal  of  a  second  amendment  of  the  DAC  is 
following this approach in the field of cross-border tax rulings. Via the automatic trans-
mission of basic data, the European Commission will get a systematic overview over the 
types of ACBR and APA which are used in each Member States and its tax policies (first 
step).  On  this  basis  the  EU-Commission  could  open  state  aid  investigation  procedures 
should a suspicion of a hidden state aid policy of a Member State occur (second step). 
However, this investigation may conflict in single cases with the confidentiality principle 
and with enterprise secrets (Art. 16, 17 ECFR). In view of the proposed 10-years period 
for  retrospective  automatic  exchange  of  information  (Art. 8a  ( 2)  of  the  proposed  new 
DAC),  the  risk  of  undermining  confidentiality  and  proportionality  principles  warrants  a 
reflection on the limits for the mandatory exchange of basic data. 

The different types of information exchange are aligned to secure the fiscal interests of na-
tional states by transmitting information which are  relevant for tax assessment or tax en-
forcement in the recipient states (see above 6.). The information exchange on tax matters 
between EU Member States does not aim to safeguard state aid rules on the basis of Artt. 
107 ff. TFEU. However, a Member State may decide to disclose information about harmful 
tax behaviour or tax policy of another Member State a or report this information to the EU 
Commission and ask to initiate state aid control procedures.  

Therefore, a more systematic approach to enlarge the information exchange by a state aid 
control function is needed. According to the European Commission, the automatic exchange 
of  information  can  be  an  additional  mean  of  state  aid  supervision.  In  the  proposal  of  an 
amendment of the DAC of 18.3.2015 36, the recipients of the automatic exchange of infor-
mation  on  ACBR  and  APA  are  not  only  all  other  Member  States,  but  also  the  European 
Commission.  According  to  Art.  8a  DAC,  the  Commission  will  get  the  following  mandatory 
information from each Member State about its ACBR and APA which are issued in favour of 
legal persons:37 

- 

- 

- 

the  identification  of  the  taxpayer  and  where  appropriate  the  group  of  companies  to 
which it belongs, 

the content of the ACBR or APA, including a description of the relevant business activ-
ities or transactions or series of transactions, 

the description of the set of criteria used for the determination of the transfer pricing 
or transfer price itself in the case of an APA. 

36   See footnote 35. 
37   After the proposed new Art. 8a(3) DAC the automatic exchange will not apply in a case where an ACBR exclu-

sively concerns and involves the tax affairs of one or more natural persons. 

PE 563.452 

27 

 
 
 
 
 
 
 
 
 
                                           
 
 
 
Policy Department A: Economic and Scientific Policy 

These basic data will give an overview of which kind of ACBR and APA concerning legal per-
sons are taking place in individual Member States. This will make the tax ruling policy of EU 
Member  States,  more  transparent.  However,  the  Commission  will  not  know  the  complete 
content of the ACBR and APA (see above 6.4.: «2-step approach»). The obligation to auto-
matically  submit  information  has  to  be  balanced  with  the  need  to  protect  fundamental 
rights  of  the  ECFR  of  affected  taxpayers.  In  particular,  Art.  17(4)  DAC  gives  the  Member 
States the right to refuse the provision of information when this leads to the disclosure of a 
commercial, industrial or professional secret or of a commercial process. Enterprise secrets 
are part of the freedom to conduct a business (Art. 16 ECFR) and property right, including 
intellectual  property  (Art. 17  ECFR).  Thus,  the  information  to  be  shared  has  to  strike  the 
balance  between  being  on  the  one  hand  as  concise  as  possible  and  on  the  other  hand 
providing  sufficient  information  to  the  EU  Commission  to  judge  whether  it  should  request 
for more information in a state aid control procedure against a Member State. This will be 
balanced  if  the  automatic  exchange  is  limited  by  reporting  only  the  «type  of  matters  ad-
dressed  with  by  the  ruling» 38.  Furthermore,  in  an  electronic  standard  form  contents  of 
ACBR and APA can only be described by keywords which give a typecasting idea what has 
been  ruled.  But  the  complete  number  of  typecasting  information  offers  an  overall  picture 
about the tax ruling policy in each single Member State. It gives the EU Commission a bet-
ter insight about existing state aid internal the EU. On the second step, the Commission will 
have to decide to go into a preliminary investigation by making requests for further detailed 
information about the content of the ACBR and APA of a specific Member State. Therefore, 
the  proposal  of  a  further  amendment  of  the  DAC  is  not  only  a  «2-step  approach»  of  the 
mutual assistance between the national tax authorities, but also of the state aid control by 
the EU Commission. 

Art. 21(5)  of the proposed new  DAC  enhances tax transparency by setting a new secured 
centralised database managed by the  EU Commission. Both  Member  States and the Com-
mission  shall  have  access  to  the  information  recorded  in  this  database.  It  will  serve  two 
main purposes: to give each Member State easy access to information about tax ruling pol-
icies in other Member States with the aim of assessing the relevance of ACBR and APA for 
national  tax  interests;  to  provide  the  Commission  an  overview  tax  policies  in  EU  Member 
States over time. Thanks to this database, information on ACBR and APA will be collected in 
a systematic way rather than ad hoc or randomly. 

This  will  take  time,  however.  To  speed  up  the  gathering  of  relevant  information,  the  pro-
posed  new  Art.  8(2)  DAC  enacts  a  retrospecitve  automatic  exchange  of  information,  ac-
cording to which the competent authorities of the Member States shall inform the compe-
tent  authorities  of  all  other  Member  States  as  well  as  the  European  Commission  on  any 
ACBR and APA issued within a period beginning ten years before the entry into force of the 
new DAC. The 10 years time-span is related to the time limit set by Art. 15(1) of the Coun-
cil Regulation (EC) No. 659/199939 for the recovery of unlawful state aid. This is a key pro-
vision  of  the  new  double  function  in  the  amended  DAC  proposal  of  18.3.2015.  This  far-
going obligation about ACBR and APA may, however, conflict with the confidential principle 
set by EU law. Taxpayers who have applied for ACBR and APA at national tax authorities in 
the past may have done so under tax confidentiality granted by the national laws. Further-
more, they may have paid considerable fees to get administrative binding answers by the 
national tax authorities. Hence, they may be disappointed if the content of individual ACBR 
and APA is transmitted the EU-Commission.  

38   Commission Staff Working Group, Technical analysis of focus and scope of the legal proposal COM (2015) 135 

final, of 18.3.2015, SWD (2015) 60 final, Annex 5, under 5.1. 

39   Council Regulation (EC) No. 659/1999 of 22.3.1999 laying down detailed rules for the application of Art. 93 of 

the EC treaty, OJ of 27.3.1999, L 83/1. 

28 

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Legislation Practices Regarding Exchange of Information between National Tax Administrations in Tax Matters  

However, the protection of confidentiality is not absolute. The CJEU has ruled that the prin-
ciple  of  legitimate  expectations  cannot  be  extended  to  the  point  of  generally  preventing a 
new  rule  from  applying  to  the  future  effects  of  situations  which  arose  under  the  earlier 
rule40.  Regarding  the  recovery  of  state  aid  granted,  a  central  element  of  EU  law  does  not 
legitimate  the  expectation  that  the  aid  is  lawful  if  it  has  not  been  granted  in  compliance 
with this procedure41. A Member State that has issued ACBR or has concluded APA has to 
take  into  account  both  tax  legislative  acts  and  administrative  acts  as  state  aid  granting 
sources.  EU  Member  States  need  to  be  aware  that  the  EU  Commission  is  obliged  by 
Art. 108 (1) TFEU to supervise systems of state aid in the EU. To this end, the EU Commis-
sion  is  entitled  to  make  requests  even  for  specific  tax  cases  whereby  the  taxpayers  have 
provided information to the national tax authorities under the protection of tax confidential-
ity.  The  taxpayer’s  expectation  of  this  information secrecy  may  not  be  fulfilled.  These  ex-
pectations  are  subordinated  to  primary  EU  law  and,  therefore,  the  submission  of  the  re-
quested information has to be considered as an efficient instrument for state aid control. 

The specific innovation of the proposed new Art. 8a(2) of the DAC is to take the automatic 
exchange  of  tax  relevant  information  for  the  purpose  of  state  aid  control  and  use  this  in-
strument of international tax risk management for a double-function. In contrast to regular 
state aid investigations, no concrete suspicion of unlawfully granted aid exists which justi-
fies a single request. A general abstract state aid risk management takes the place of sin-
gle,  case  examinations.  In  the  past,  no  legal  person  could  expect  that  the  information 
which has been disclosed in an ACBR or APA proceeding to the national authorities will later 
be part of a systematic information exchanges with the EU Commission and other Member 
States. Member states will have to report a large number of ACBR and APA where no evi-
dence of state aid can be found. This is the consequence of the nature of a general-abstract 
reporting system with a broad range of information. Thus, the confidential principle has to 
be  balanced  with  the  state  aid-control  mission  of  the  EU-Commission  in  a  proportional 
manner. In the light of the proportionality principle which is even a principle of the EU law 
the following restrictions have been made:  

-  The earlier agreed ACBR and APA remain valid (relevant for the individual taxation 

also after bringing the new DAC into force).  

-  The maximal time period of reporting has been linked with the maximal time period 

of recovering unlawfully granted state aid. 

-  The automatic reporting of information has been reduced on basic data which do not 
cover  commercial,  business,  professional  secrets  or  commercial  processes  (enter-
prise secrets). 

Given  these  limitations,  even  a  retrospective  automatic  exchange  of  information  respects 
the proportionality principle and does not infringe taxpayer’s confidentiality. However, if in 
a further process of state aid-investigation the EU Commission would require in single cases 
additional details which are part  of an  enterprise  secret protected by  Art. 17 (4) DAC, the 
confidentiality  principle  could  be  an  impediment  for  submitting  the  requested  information. 
This  confidence  has  to  be  protected  at  least  in  the  retrospective  cases  where  no  double-
function of tax information exchange has been originally on the table. 

40   CJEU of 11.12.2008 – C-334/07 P, Commission/Freistaat Sachsen, para. 43 ; CJEU of 22.4.2008 – C-408/04 P, 

Commission/Salzgitter, para. 104 ; CJEU of 26.3.2015 – C-596/13, Globula/Commission, para. 45. 

41   CJEU  of  20.3.1997  –  C-24/95,  Alcan  Deutschland,  para. 25;  CJEU  of  22.4.2008  –  C-408/04  P,  Commissi-

on/Salzgitter, para. 104; CJEU of 11.12.2008 – C-334/07 P, Commission/Freistaat Sachsen, para. 45. 

PE 563.452 

29 

 
 
 
 
 
 
 
 
 
                                           
Policy Department A: Economic and Scientific Policy 

8.  LEGAL PROTECTION OF TAXPAYERS 

KEY FINDINGS 

European law provides for a legal protection of personal data of natural persons at the 
level of the primary law (Art. 8  ECFR) and secondary law (Directive  95/46/EC).  In the 
light of the jurisdiction of the Court of Justice of the European Union (CJEU), the infor-
mation exchange of personal data has to be based on Parliamentarian law and has to be 
justified by a clear defined public interest (e.g. tax supervision, prevention of tax fraud 
and tax avoidance) and has to be proportional in relation to its purpose. Furthermore, 
there  are  limitations  in  the  collection  and  processing  of  the  personal  data  for  tax  pur-
poses.  Therefore,  an  EU  standard  of  tax  secrecy  has  to  be  designed.  Its  observation 
shall be a binding precondition also for the transmission of data to third countries. 

A  framework  for  data  protection  of  legal  entities  is  lacking.  Business  data  shall  be 
granted the same legal protection as personal data of natural persons. Business secrecy 
is protected by Art. 16 ECFR (freedom to conduct a business) and Art. 17 ECFR (right to 
property including intellectual property). Art. 17 (4) DAC has to be read as an obligation 
to refuse the disclosure of those secrets. However, the legal protection of data is still a 
matter of national law. The national procedures of data protection for personal data and 
business  secrets  shall  be  effective.  At  least,  a  notification  standard  should  be  set  as  a 
strict  minimum.  Hearings  and  objections  before  national  courts  have  to  be  weighed 
against the public interest of mutual assistance in tax matters. Therefore, the automatic 
exchange of information (AEOI and AEFI) cannot depend on a sole suspicion and data-
protection issues related to single cases. 

8.1. 

Legal Enterprise Secrets 

Art. 17  (4)  DAC  gives  the  Member  States  the  right  to  refuse  the  provision  of  information 
where it would lead to the disclosure of a commercial, industrial or professional secret or of 
a commercial process. Accordingly, Art. 26(3c) OECD-MTC prohibits imposing a contracting 
state the obligation to supply information which would disclose any trade, business, indus-
trial, commercial or professional secret or trade process. A trade or business secret is gen-
erally  understood  to  imply  facts  and  circumstances  that  are  of  considerable  economic  im-
portance and that can be exploited practically and the authorised use of which may lead to 
serious  economic    and/or  financial  damage 42 .  However,  Art.  18(2)  DAC  and  Art. 26(5) 
OECD-MTC  state  that  the  provision  of  information  shall  not  be  refused  solely  because  the 
information is held by a bank or other financial institutions. This distinction makes sense, as 
the  different  secrets  shall  protect  different  issues.  The  aforementioned  enterprise  secrets 
protect  a  country’s  companies,  their  inventions  and  investments  and  herewith  strengthen 
economic competition. These secrets are part of the freedom to conduct a business (Art. 16 
ECFR), are often the result of business and are protected as (intellectual) property (Art. 17 
ECFR).  In  contrast to this, bank secrets are not  results of business.  By hindering relevant 
income  information,  bank  secrets  prevent  the  competent  authority  of  a  Member  State  to 
determine  the  exact  taxpayer’s  base,  favouring  tax  fraud  and  tax  evasion.  Furthermore, 
investors tend to invest in countries where no such information has to be provided to their 
state  of  residence.  In  contrast  to  protecting  enterprise  secrets  (as  in  Art. 17(4)DAC  men-
tioned), bank secrets hamper competition and the internal market. 

42   OECD, Commentary on Art. 26 OECD-MTC, No. 19.2. 

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8.2. 

Personal Data Protection by EU law 

Art. 25  and  recital  No.  27  DAC1  clarify  that  all  exchange  of  information  is  subject  to  the 
provisions  implementing  Directive  95/46/EC 43 and  to  the  Regulation  (EC)  No.  45/2001 44. 
Recital  28  adds  that  DAC1  respects  the  fundamental  rights  and  observes  the  principles 
which  are  recognised  in  particular  by  the  ECFR.  As  part  of  the  primary  EU  law 45 Art.  7 
ECFR 46 demands respect for private and family life. Art. 8 ECFR refers to the protection of 
personal data. Art. 8(2) ECFR specifies that “such data must be processed fairly for speci-
fied purposes and on the basis of the consent of the person concerned or some other legit-
imate basis laid down by law. Everyone has the right of access to data which has been col-
lected concerning him or her, and the right to have it rectified.” Limitations on the exercise 
of the granted rights and freedoms by the Charter have to be provided by law and have to 
respect the essence of those rights and freedoms. Subject to the principle of proportionali-
ty,  limitations  may  be  made  only  if  they  are  necessary  and  genuinely  meet  objectives  of 
general  interest  recognised  by  the  EU  or  the  need  to  protect  the  rights  and  freedoms  of 
others (Art. 52(1) ECFR). 

This  matches  with  the  European  Convention  for  the  Protection  of  Human  Rights  and  Fun-
damental Freedoms of 4.11.1950 (ECHR)47. Under the heading “Right to respect for private 
and family life” Art. 8 of the Convention provides: “Everyone has the right to respect for his 
private and family life, his home and his correspondence. There shall be no interference by 
a  public  authority  with  the  exercise  of  this  right  except  such  as  is  in  accordance  with  the 
law and is necessary in democratic society in the interests of national security, public safety 
or  the  economic  well-being  of  the  country  for  the  prevention  of  disorder  or  crime,  for  the 
protection of health or morals, or for the protection of the rights and freedoms of others”. 
At  the  level  of  the  EU  fundamental  rights,  the  ECHR  sets  a  kind  of  a  minimum  standard, 
which can be enhanced by EU law (see Art. 52 (3) ECFR). 

As part of the secondary EU-law, the data protection Directive 1995/46/EC of 24.10.199548 
aims to protect the right to privacy with respect to the processing of personal data of natu-
ral persons. But the free flow of data shall neither be restricted nor prohibited (Art. 1). Pur-
suant to Art. 3(1) of Directive 1995/46/EC the directive is applicable for the processing of 
personal  data  defined  in  Art. 2(a)  of  the  directive  by  automatic  means.  Personal  data  is 
defined as the information regarding identified or identifiable persons (identification by an 
identification number, or other factors relating to his identity). In order to collect and pro-
cess personal data, a specified, explicit and legitimate purpose is needed and the data has 
to be adequate, relevant and not excessive regarding those purposes (Art. 6 (1b-c) of Di-
rective  1995/46/EC).  Processing  of  the  personal  data  is  only  allowed  under  the  circum-
stances  listed  in  Art.  7  of  Directive  1995/46/EC.  The  relevant  case  here  is  stated  in  Art. 
6(1e) and refers to the processing of data in order to fulfil a task carried out in the public 
interest or in the exercise of official authority. 

43   Directive 95/46/EC of the European Parliament and of the Council of 24.10.1995 on the protection of individu-
als  with  regard  to  the  procession  of  personal  data  and  on  the  free  movement  of  such  data,  OJ  EU  of 
23.11.1995, L 281/31. 

44   Regulation  No. 45/2001  of  the  European  Parliament  and  of  the  Council  of  18.12.2000  on  the  protection  of 
individuals with regard to the processing of personal data by the Community institutions and bodies and on the 
free movement of such data, OJ EU of 12.1.2001, L 8/1. 

45   Art. 6(1) of the Treaty on European Union of 13 Dec. 2007 (TEU), consolidated Version, OJ EU of 26.10.2012, 

C 326/13. 

46   Charter of Fundamental Rights of the European Union, OJ EU of 26.10.2012, C 326/391. 
47   CETS No. 5. 
48   Directive 95/46/EG of the European Parliament and of the Council on the protection of individuals with regard 
to the processing of personal data and on the free movement of such data, OJ EU of 23.11.1995, L 281/31. 

PE 563.452 

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8.3. 

Jurisdiction of the CJEU regard personal data protection 

On these legal bases, the CJEU has made in recent years paramount decisions in the area 
of  data  protection.  In  the  cases  of  Schecke  GbR/Eifert  the  Grand  Chamber  of  the  CJEU 49 
has  examined  if  the  publication  of  information  on  beneficiaries  of  agricultural  aid  on  the 
website of agricultural state agencies violates (primary) EU law even though the publication 
has been foreseen by EU regulations50 to respect the principle of transparency and the con-
cept of “open government”. At first, the CJEU secured that even EU regulations have to be 
assessed  in  the  light  of  the  provisions  of  the  EU  Charter,  which,  following  Art. 6  (1)  TFEU 
has  the  same  legal  value  as  the  “Treaties”.  However,  the  fundamental  right  of  personal 
data protection is not an absolute right, but must be considered in relation to its functions 
in society51. Art. 52 (1)  ECFR accepts limitations  of fundamental rights, but any limitation 
on the exercise of the rights and freedoms recognized by the EU Charter must be provided 
for by law and respect the essence of those rights and freedoms. Subject to the principle of 
proportionality,  limitations  may  be  made  only  if  they  are  necessary  and  genuinely  meet 
objectives  of  general  interest  recognized  by  the  EU  or  the  need  to  protect  the  rights  and 
freedoms of others. In the specific context of personal data protection rights, the data pro-
cession is only permitted for specified purposes and on the basis of the consent of the per-
son concerned or some other legitimate basis laid down by law (Art. 8(2) ECFR). Regarding 
the  personal  scope  of  the  data  protection  the  CJEU  differs  between  natural  and  legal  per-
sons. Legal persons deserve data protection only as far as the official title of the legal per-
son  identifies  one  or  more  natural  persons.52 On  the  other  hand,  it  is  not  relevant  in  this 
respect that the data published concerns activities of a professional nature.53 The publish-
ing of the concrete amount of aid deriving from the Common Agricultural EU policy violates 
the  fundamental  right  of  data  protection  of  the  beneficiaries  because  this  amount  repre-
sents part of their personal income.  

As regards the justification of interference into fundamental right of personal data protec-
tion, the CJEU investigated the following issues in a three-stage check:54 

1.  Does a law exist that provides the interference of the fundamental right? 

2.  Does a general interest exist that is accepted by EU law and may justify the limitation 

of the fundamental right? 

3  As  one  of  the  general  principles  of  the  EU  law:  Is  the  limitation  of  the  fundamental 

right proportional in relation to the legitimate aim pursued? 

In the concrete cases the CJEU saw a disproportional public transparency. The principle of 
proportionality requires that measures implemented by EU acts are appropriate for attain-
ing the objective pursued and do not go beyond what is necessary to achieve it. The CJEU 
has pointed out that it is necessary to determine whether the EU Council and Commission 

49   CJEU (Grand Chamber) of 9.11.2010, Joint Cases C-92/09 and C-93/09, Volker und Markus Schecke GbR und 

Eifert v. Land Hessen, (2010) ECR I-11063. 

50   Council Regulation (EC) No 1290/2005 of 21 June 2005 on the financing of the common agricultural policy, OJ 
EU  of  11.8.2005,  L 209/1;  No. 1437/2007 of 26.11.2007 amending Regulation  (EC)  No 1290/2005  on  the  fi-
nancing  of  the  common  agricultural  policy,  OJ  EU  7.12.2007,  L  322/1;  Commission  Regulation  (EC) 
No 259/2008  of  18.3.2008  laying  down  detailed  rules  for  the  application  of  Council  Regulation  (EC) 
No 1290/2005 as regards the publication of information on the beneficiaries of funds deriving from the Europe-
an Agricultural Guarantee Fund (EAGF) and the European Agricultural Fund for Rural Development (EAFRD), OJ 
EU of 19.3.2008, L 76/28. 
51   CJEU (footnote 49), para. 48. 
52   CJEU (footnote 49), para. 53. 
53   CJEU (footnote 49), para. 59. 
54   CJEU (footnote 49), para. 66 ff. 

32 

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balanced  the  EU’s  interest  in  guaranteeing  the  transparency  of  its  acts  and  ensuring  the 
best  use  of  public  funds  against  the  interference  with  the  right  of  the  beneficiaries  con-
cerned to respect for their private life in general and to the protection of their personal data 
in particular. The Court has held in this respect that derogations and limitations in relation 
to the protection of personal data must apply only in so far as it is strictly necessary.55 The 
CJEU  misses  the  consideration  of  the  EU  legislator  to  reduce  the  intrusion  of  the  personal 
data rights of natural persons by limiting the publication of data by name relating to those 
beneficiaries according to the periods for which they received aid, or the frequency or na-
ture and amount of aid received.56 However, finally the  CJEU  reduces the requirements of 
proportionality for the limitation of fundamental rights even of such legal persons who are 
titled by a name of a natural person. The CJEU argues that legal persons are already sub-
ject to a more onerous obligation in respect of the publication of data relating to them. Fur-
thermore, the obligation on the competent national authorities to examine, before the data 
in question are published and for each legal person, which is a beneficiary of aid, whether 
the name of that identifies natural persons would impose on those authorities an unreason-
able administrative burden.57  

In  two  further  cases,  the  Grand  Chamber  of  the  CJEU58 has  taken  the  opportunity  to  set 
limits on the retention of personal data generated or processed in connection with the pro-
visions  of  the  Directive  2006/24/EC 59.  The  aim  of  the  Directive  2006/24/EC  has  been  to 
ensure that the data are available for the purpose of the investigation, detection and prose-
cution  of  serious  crime,  as  defined  by  each  Member  States  in  its  national  law.  The  fight 
against  serious  crime  and  terrorism  is  an  objective  of  a  general  public  interest. 60 These 
public interests has to be weighed with the offence of the fundamental right to privacy and 
the other rights laid down in Article 7 and 8 ECFR measured on the proportional principle. 
Due to Art. 7 of Directive 2006/24/EC certain principles of data protection and data security 
must be respected by providers of publicly available electronic communications services or 
of  public  communications  networks  so  that  the  retention  of  data  does  not  affect  the  es-
sence of the fundamental right to the protection of personal data enshrined in Art. 8 ECFR. 
According to Art. 5(4) TEU the content and form of EU action shall not exceed what is nec-
essary to achieve the objectives of the Treaties under the principle of proportionality. Under 
EU law, limitations to rights and freedom granted by the EU Charter have to genuinely sat-
isfy an objective of general interest. According to settled case law of the CJEU, the principle 
of  proportionality  requires  that  actions  of  EU  institutions shall  be  appropriate  for  attaining 
the legitimate objectives pursued by the legislation at issue and do not exceed the limits of 
what is appropriate and necessary in order to achieve those objectives. The decision of the 
CJEU of 8.4.2014 states that clear and precise rules governing the scope and application of 
the measure in question must be laid down and minimum safeguards must be imposed so 
that  the  persons  whose  data  have  been  retained  have  sufficient  guarantees  to  effectively 
protect  their  personal  data  against  the  risk  of  abuse  and  against  any  unlawful  access  and 
use  of  that  data.61 It  furthermore  stresses  that  this  requirement  is  more  important  if  the 
personal  data  is  processed  automatically  and  significant  risk  of  unlawful  access  to  those 

55   CJEU (footnote 49), para. 77. 
56   CJEU (footnote 49), para. 81 and 84. 
57   CJEU (footnote 49), para. 87, citing the European Court of Human Rights of 2 March 2009, 2872/02 – K.U. ./. 

Finland (HUDUC data base). 

58   CJEU of 8.4.2014, Joint Cases C-293/12 and C-594/12, Digital Rights Ireland ltd. v. Kärntner Landesregierung 

a.o. 

59   Directive  2006/24/EC  of  the  European  Parliament  and  of  the  Council  of  15.3.2006  on  the  retention  of  data 
generated  or  processed  in  connection  with  the  provision  of  publicly  available  electronic  communications  ser-
vices or of public communications networks, OJ EU of 13.4.2006, L105/54. 

60   CJEU (footnote 58), para. 42. 
61   CJEU (footnote 58), para. 54. 

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data  exists.62 The CJEU misses clear and precise rules governing the extent of the interfer-
ence  with  the  fundamental  rights  enshrined  in  Art. 7  and  8  ECFR.  The  main  reasons  that 
lead the CJEU to the invalidity of Directive 2006/24/EC are that no differentiation, limitation 
or exception are being made in the light of the objective of the directive (the fight against 
serious crime):63 

The Directive does not restrict the retention of data “in relation (i) to data pertaining to a 
particular time period and/or a particular geographical zone and/or to a circle of particular 
persons likely to be involved, in one way or another, in a serious crime, or (ii) to persons 
who could, for other reasons, contribute, by the retention of their data, to the prevention, 
detection or prosecution of serious offences.” The Directive “fails to lay down any objective 
criterion by which to determine the limits of the access of the competent national authori-
ties to the data and their subsequent use for the purpose of prevention, detection or crimi-
nal prosecutions concerning offenses that, in view of the extent and seriousness of the in-
terference  with  the  fundamental  rights  enshrined  in  Art.  7  and  8  of  the  Charter,  may  be 
considered to be sufficiently serious to justify such an interference.” The directive “does not 
contain substantive and procedural conditions relating the access of the competent national 
authorities to the data and to their subsequent use. …. In particular, the Directive does not 
lay down any objective criterion by which the number of persons authorized to access und 
subsequently  use  the  data  retained  is  limited  what  is  strictly  necessary  in  the  light  of  the 
objective pursued.” Above all, the CJEU criticizes that the access by the competent national 
authorities to the data  retained is not made dependent on a prior review carried  out by a 
court  or  by  an  independent  administrative  body  who  has  to  examine  if  the  access  to  the 
data and their use is strictly necessary for the purpose of attaining the objective pursued. 

8.4. 

Specific  data  protection  needs  regarding  automatic  exchange  of  infor-
mation 

The AEOI as a tool of international tax risk management in an abstractly defined scope of 
cases  (see  above 6.4.)  will  grant  the  recipient  states  access  to  a  large  amount  of  data  of 
individuals. As Art. 25 and recitals 27 and 28 of DAC1 emphasize, each Member State has 
to observe the provisions of the implemented Directive 95/46/EC as well as the fundamen-
tal  rights  of  the  individual  taxpayer  (see  above  8.2.).  Art. 6(1)  of  the  Directive  95/46/EC 
sets especially the following limitations for collecting and processing personal data: 

-  collection and processing of personal data are limited by specified, explicit and legiti-

mate purposes and its further procession is bound to those purposes (lit. b]); 

-  collection and processing of personal data have to be adequate, relevant and not ex-
cessive  in  relation  to  the  purposes  for  which  they  are  collected  and/or  further  pro-
cessed (lit. c]); 

-  personal data shall be  kept no longer than necessary for the purposes for which the 

data were collected or for which they are further processed (lit. d]). 

Art.  12  of  the  Directive  95/46/EC  provides  the  individuals  a  right  of  access  at  information 
about  the  collection  and  procession  of  his/her  personal  data.  However,  Art. 13(1e)  of  Di-
rective 95/46/EC gives the Member States the discretion to restrict the scope of obligations 

62   CJEU (footnote 58), para. 55. 
63   CJEU (footnote 58), para. 59-63. 

34 

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Legislation Practices Regarding Exchange of Information between National Tax Administrations in Tax Matters  

and rights provided in favour of individuals when such a restriction constitutes a necessary 
measure to safeguard an important financial interest of a Member State or of the EU includ-
ing  taxation  matters.  This  exception  shows  that  the  EU-legislator  considers  national  tax 
matters as a legitimate public interest to restrict the personal data rights of individuals. In 
the light of the aforementioned jurisdiction of the CJEU (see above 8.3.) the restriction has 
to be set by parliamentarian law and shall not go beyond that level which is necessary to 
pursue the public goal of tax supervision and enforcement. Art. 25 sent. 2 DAC1 demands 
such restrictions to the extent required in order to safeguard the national tax interests, yet. 

The bulk of cross-border exchanged personal data will rapidly increase after implementing 
DAC2  (see  above  3.4.)  in  the  national  laws.  The  scope  of  automatic  transmitted  financial 
account  information  will  be  by  far  broader  than  it  has  been  before  according  to  Art. 8(1) 
DAC1. The EU Commission’s Expert Group on Automatic Exchange of Financial Account In-
formation (AEFI) is concerned that the DAC2 may violate preconditions set by recent CJEU 
rulings  about  data  protection  (see  above  8.3) 64.  The  EU-Commission  AEFI  Expert  Group 
argues that one of the fundamental principles governing the legitimacy of the collection of 
data is that indicia for an incorrect behaviour of persons must exist. As these requirements 
are unalterable, data collections without cause, at random, may simply be unconstitutional.  

However,  the  automatic  exchange  of  information  is  an  instrument  which  is  based  only  on 
general-abstract risk management criteria. Therefore, it must be sufficient if the transmit-
ted facts (like name of the account holder, account balance or value, total gross amount of 
interests or dividends) are potentially relevant for the residence state of the account hold-
er.  Furthermore,  the  Member  States  have  to  guarantee  that  the  information  transmitted 
are not just stored, but are used in matching systems to verify the incoming tax returns as 
a part of the international tax risk management. An important notification obligation is pro-
vided  by  the  new  Art. 25(3)DAC2.  Each  Member  State  shall  ensure  that  each  Reporting 
Financial  Institution  (RFI)  under  its  jurisdiction  informs  each  individual  Reportable  Person 
concerned that the AEFI relating to him/her will be collected and transferred in accordance 
with DAC2. Additionally, each Member State shall ensure that the RFI provides to that indi-
vidual  all information  he/she  is  entitled  to  under  its  domestic  legislation  implementing  Di-
rective  95/46/EC  in  sufficient  time  for  the  individual  to  exercise  his/her  data  protection 
rights.  And  in  any  case,  before  the  concerned  RFI  reports  the  AEFI  to  the  competent  au-
thority of its Member State of residence. The new Art. 25(4)DAC2 gives a hint for the max-
imum  of  safekeeping  period.  The  data  shall  be  retained  for  no  longer  than  necessary  to 
achieve the purpose of the DAC2, and in any case in accordance with the domestic rules on 
statute of limitations.  

The  EU-Commission  AEFI  Expert  Group  also  points  out  the  need  of  appropriate  protection 
of the personal data transferred under AEOI. Yet, DAC2 does not have any effective mech-
anism to protect the data of account holders transferred outside of the EU 65. An example of 
a good practice is offered by Art. 22 of the multinational Convention on Mutual Administra-
tive Assistance in Tax Matters of 29.10.2014 (MCAA)66. This provisions of secrecy demands 
the following: 

“(1) Any information obtained by a Party under the Convention shall be treated as se-
cret in the same manner as information obtained under the domestic laws of that Par-
ty,  or  under  the  conditions  of  secrecy  applying  in  the  supplying  Party  if  such  condi-
tions are more restrictive. 

64   First Report of the  Commission AEFI Expert Group on the implementation of Directive 2014/107/EU for auto-

matic exchange of financial account information, March 2015, pp. 7 f., 24-26. 

65   Commission AEFI Expert Group. 
66   See above 3.4. and 4. 

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(2) Such information shall in any case be disclosed only to persons or authorities (in-
cluding courts and administrative or supervisory bodies) involved in the assessment, 
collecting or recovery of, the enforcement or prosecution in respect  of, or the deter-
mination of appeals in relation to, taxes of that party. Only the persons or authorities 
mentioned  above  may  use  the  information  and  then  only  for  such  purposes.  They 
may,  notwithstanding  the  provisions  of  paragraph  1,  disclose  it  in  public  court  pro-
ceedings  or in judicial  decisions relating to such taxes, subject to prior authorisation 
by the competent authority of the supplying Party. However, any two or more Parties 
may mutually agree to waive the condition of prior authorisation. 

(3) …. 

(4) Notwithstanding the provisions of paragraphs 1, 2 and 3, information received by 
Party  may  be  used  for  other  purposes  when  such  information  may  be  used  for  such 
other purposes under the laws of the supplying Party and the competent authority of 
that Party authorises such use. Information provided by a Party to another Party may 
be  transmitted  by  the  latter  to  a  third  Party,  subject  to  prior  authorisation  by  the 
competent authority of the first-mentioned Party.” 

Art. 22  MCAA  provides  the  international  tax  secret  by  enlarging  the  national  tax  secret-
standard  of  the  submitting  state  on  the  information  receiving  states.  Concurrently,  it  ex-
presses  the  principles  of  equivalence  and  reciprocity  as  general  principles  of  the  interna-
tional information exchange (see above 6.5.). These preconditions may be pattern to safe-
guard personal data protection between the Member States as well as in the relationship to 
third  countries.  The  EU  standard  of  data  protection  has  to  be  observed  not  only  by  each 
Member  State,  but  also  by  third  countries  which  are  been  provided  with  personal  data  of 
any  Member  State  of  the  EU.  Every  EU  citizen  need  the  confidentiality  to  be  assured  that 
his/her  personal  data  will  be  transmitted  to  other  fiscal  authorities  only  for  tax  purposes 
and under the precondition of EU data protection. 

8.5. 

Additional effective procedural instruments needed to protect the freedom 
rights of taxpayers 

The fundamental right of data protection is mainly reserved for natural person (see above 
8.2. and 8.3.). Legal persons deserve data protection only as far as the official title of the 
legal person identifies one or more natural persons (see above 8.3.). This remains a severe 
lack of legal protection of legal entities whose business or commercial secrets are jeopard-
ized by the exchange of information. Thus, Art. 17(4) DAC is key (see above 8.1.). Enter-
prise secrets are less jeopardized by AEOI, but more by spontaneous information or by in-
formation which is transmitted on request. The last-mentioned cross-border transmittances 
of information are  always based  on  examinations in single, concrete  cases.  The legal pro-
tection of the taxpayer still depends on the national laws in the Member States. In respect 
of  incoming  requests,  we  find  a  clear  relationship  between  notification,  consultation  and 
intervention rights. National legislations of the Member States differ greatly in this respect. 
Member States with no notification rights, such as Belgium, Finland, Spain and the United 
Kingdom, do not have consultation rights67. Consequently, if taxpayers are not aware of a 
request,  they  cannot  intervene.  In  Member  States  without  notification  rights,  taxpayers 
may only intervene when they "exceptionally" become aware  of the  request, for example, 
when the tax authorities are not in the possession of the necessary information and have to 
request  it.  The  right  to  intervene  more  or  less  depends  on  random  events.  Overall, it  can 

67   See the General Report of Seer and Gabert, Mutual Assistance and Information Exchange, EATLP International 

Tax Series, Vol. 8, Amsterdam 2010, pp. 23-54. 

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be said that the level of taxpayer rights at this stage of the process of the exchange of in-
formation  depends  on  notification  rights.  However,  taxpayer  rights  are  just  effective  with 
regard  to  the  legal  protection  of  taxpayers  if  they  are  informed  of  the  request  before  the 
information  is  transmitted  to  the  other  State.  In  other  circumstances,  taxpayers  have  no 
possibility of appeal. 

In  the  OECD's  opinion,  national  law  can  help  to  prevent  mistakes  and  facilitate  the  ex-
change of information.68 Clearly, however, notification rights should not give rise to delays 
in the exchange of information or make it ineffective. It is the task of the law, on the one 
hand,  to  protect  the  taxpayer  and,  on  the  other,  to  create  rules  that  permit  the  effective 
and swift exchange of information between states. With regard to consultation rights, there 
are  opinions  of  tax  administrators  who  state  that  hearings  may  not  have  a  positive  effect 
on the result of the investigation in all cases because, if taxpayers are warned in advance, 
they  may  be  able  to  defeat  the  objective  of  the  request  by  adopting  counteractive 
measures. This may be the case for tax fraud investigations. Consequently, it is advocated 
that, in emergencies, a hearing should not take place, as this could endanger the exchange 
of  information.  Generally,  extensive  legal  protection  may  block  the  exchange  of  infor-
mation. As a result, the public interest for the executable exchange of information must be 
balanced  against  the  individual's  rights  to  legal  protection.  Accordingly,  taxpayers  must 
provide convincing evidence to verify the risk of violating their individual rights, for exam-
ple, with regard to enterprise secrets (see 8.1.). If there is no relevant likelihood that the 
tax  authorities  could  use  enterprise  secrets  for  purposes  other  than  lawful  taxation,  the 
information should be exchanged without delay. 

A highly developed instrument regarding legal protection is the preliminary injunction used 
by a court before a final judgement that prohibits the delivery of cross-border information. 
However,  in  most  states,  there  are  only  less  effective  legal  protections,  which,  at  least, 
provide for claims in respect of the damage that a taxpayer has suffered as a result of vio-
lations of enterprise secrets. Compared to the legal protection with regard to incoming re-
quests, the legal protection against the making of requests is less strong. In these circum-
stances, most states do not have any notification rights. 

Where the taxpayer's Member State of residence intends to request another State regard-
ing the taxpayer's tax situation in that State, the EU-wide position of the taxpayer is weak-
er  compared  regarding  incoming  requests.  Only  a  few  Member  States  have  notification 
rights compared to the situation for incoming requests so that there are virtually no Mem-
ber  States  that  have  to  inform  the  taxpayer  regarding  incoming  requests.  Consequently, 
taxpayers  have  very  few  rights  with  which  to  prevent  a  Member  State  of  residence  from 
requesting information from another State. It is, however, a positive sign that some Mem-
ber States first cooperate with the taxpayer and try to obtain the required information be-
fore sending a request to another Member State. In many cases, this can result in an effec-
tive and satisfying resolution of an issue. 

68.  Para. 14.1 of the Commentary on Art. 26 of the OECD MC. 

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37 

 
 
                                           
Policy Department A: Economic and Scientific Policy 

Table 4: 

Legal Protection of Taxpayers 

Instruments 

Content 

Notification right 

Hearing right 

Right of filing an objection 

Tax Authority or Financial Intermediaries have 
to  inform  the  taxpayer  before  transmitting 
his/her data to the foreign tax authority 

Right  of  the  taxpayer  to  be  heard  before 
transmitting  his/her  data  to  the  foreign  tax 
authority 

Right  of  the  taxpayer  to  intervene  against  the 
transmittance  of  his/her  data  in  front  of  a 
court of his/her home state. 

Preliminary injunction right 

Right to get preliminary legal protection by an 
interim suspension 

Right of damage compensation 

as  a  last  resort:  at  least  financial  compensa-
tion 

38 

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Legislation Practices Regarding Exchange of Information between National Tax Administrations in Tax Matters  

REFERENCES 

•  Dourado,  Ana  Paula,  in  Reimer/Rust,  Klaus  Vogel  on  Double  Taxation  Conventions, 

4. Edition, Vol. II, Alphen/Netherlands 2015, commentary on Art. 26. 

• 

• 

• 

Seer, Roman and Gabert, Isabel, Mutual Assistance and  Information Exchange,  EATLP 
International Tax Series, Vol. 8, Amsterdam 2010. 

Seer,  Roman  and  Gabert,  Isabel,  European  and  International  Tax  Cooperation:  Legal 
Basis, Practice, Burden of Proof, Legal Protection and Requirements, Bulletin for Inter-
national Taxation, 2011, pp. 88-98. 

Seer,  Roman,  Recent  Development  in  Exchange  of  Information  within  the  EU  for  Tax 
Matters, EC Tax Review, Vol. 22, 2013, pp. 66-77. 

PE 563.452 

39 

 
 
Policy Department A: Economic and Scientific Policy 

NOTES 

40 

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