Tax Connect Flash

COURT CASE 28 MAY 2020 (COURT OF APPEAL OF MONACO)
Panama papers and Monaco Sovereign Ordinance of 23 March 2010 on International Tax Cooperation

Case law on exchange of tax information gives the basis for interpretation of international standards and OECD comments on the tax cooperation between jurisdictions.

A recent case in Monaco confirms the rules that apply in the Principality, including the ones resulting from the Luxembourg Berlioz decision case law. The Monaco case at hand is of particular relevance as it results from the Monaco Court of Appeal, which gives significant authority.

In Monaco, the basis of procedure with respect to tax cooperation is the Sovereign Ordinance n°2.693 of 23 March 2010 (official Gazette 26 March 2010) as amended on the 16 May 2017 (Official Gazette 19 May 2017). This ordinance sets the procedure to allow a request of exchange between states, including the recourses the taxpayers are entitled to.

There are a number of recourses by taxpayers. However, in most cases, the latter forgets that an exchange of information is merely a right of communication from a requesting jurisdiction to a required jurisdiction and that States have to respect their bilateral Governments agreement, subject to the fact that the foreseeable relevant test is met.

The case law of 28 May 2020 refers to the TIEA between Monaco and Italy of 2 March 2015. This TIEA is comparable to the ones Monaco has signed with other jurisdictions with three main différences:

• A provision refers to the conflict of tax residence for individuals which is traditionally included in DTAs and not in TIEAs;
• A provision achieves for taxpayers to benefit from the Italian SCUDO in force at the time (amnesty for non-compliant taxpayers who had the opportunity to regularize their situation);
• The question of the responsibility of Financial Institutions is outlined in the TIEA regarding compliance for the past.
  In the Court case of 28 May 2020, which is the first held by a Court of Appeal, the main matters of attention are the following.

The case confirms the case of the first level Tribunal of 8 October 2018.

1. A group request is different from a grouped request

The taxpayer was arguing that because Italy asked information on several taxpayers at a time to the Monaco competent authorities, the procedure with respect to group requests had to be applied. The Court has indicated that it is not because several taxpayers were subject each to a request with other taxpayer that this implies it is a group request.    

2. Source of information: Panama Papers

The control of the Monaco Court does not relate to the request of the requiring jurisdiction which has to be appreciated by its Court. The taxpayer argued that the source of information was the Panama Papers and that the collection of such information was illegal as contrary to Monegasque law. The Court of Appel has indicated that:

• The domestic rules on tax cooperation do not provide any judiciary control on the request itself in Monaco;
• The request has simply to comply with the Monegasque rules of Ordinance n° 2.693;
• Panama Papers were public information and accordingly access free, involving no offence;
• The request of Italy was based on other investigations than the Panama Papers, as the taxpayer was under a tax audit.

In addition, it has not been supported by the taxpayer that such information had been stolen.

Accordingly, the transmission was possible, and the taxpayer Always has the opportunity to go before the Italian Court.

3. The foreseeable relevance

The control of the Court relates to the information on which is based the foreseeable relevance. The facts and documents provided to Monaco were sufficiently specific to support such a relevance (an offshore company was involved, and assets were not disclosed). As the taxpayer were shown a significant tax risk to hide assets, the foreseeable relevance was evidenced.

4. The fact that the information had been transmitted to the requesting jurisdiction prior to the recourse by the taxpayer does not render void the transmission as long as the notification had been realized according to the legislation

The taxpayer can have his rights respected in the requesting country. He accordingly cannot complain as the information transmitted were obviously known to him.

The Monaco Case Law shows that the International Standards and the OECD comments are of essence. It confirms the rules implemented since 2009 by the Monaco Government are a protection for the taxpayers and the Administration. The Monaco legislation respects the international standards.