Until now, there was no unanimity on the necessity for the taxpayer’s consent when the tax authorities want to execute an unannounced dawn raid at the taxpayer’s premises. In a landmark judgment dated 16 June 2023, the Court of Cassation has now made it clear that such consent is crucial if the tax authorities want to gain access to private premises. Moreover – and perhaps more importantly – the Court explicitly stated that such consent must be permanently present. This court ruling is of paramount importance for the protection of the taxpayer’s fundamental rights during dawn raids.
The facts and decision of the Court of Appeal of Ghent
The taxpayer in question was a company engaged in car sales. The office of the company was located at the same address as its director’s home. The tax authorities obtained authorisation from the police judge for a dawn raid of private dwellings for VAT purposes (dawn raids at private premises are only allowed with such authorisation). An unannounced visit then took place at the company’s office, where the director’s home was also located.
The taxpayer argued, with reference to Constitutional Court case law (12 October 2017, no. 116/2017), that the dawn raid was not validly conducted. This case law states that tax officials may not force the audit of books and records or documents on their own if the taxpayer opposes this. The taxpayer also stressed that the director did not consent to the conducting of the dawn raid. As proof of this assertion, it submitted audio recordings in which the director says he does not consent to the tour of the house. To this, the tax official replies that the director did give permission earlier, so the dawn raid continued.
The Court of Appeal of Ghent concluded that it can only be inferred from the cited Constitutional Court judgment that tax officials may not use coercion when conducting a dawn raid. Nevertheless, according to the Court of Appeal, the taxpayer does not have to give his consent, as an authorisation was granted by the police judge.
The Court of Appeal therefore held that there were no grounds to find that the information obtained during the dawn raid was of unlawful origin.
The Court of Cassation did not adhere to this opinion
The Court of Cassation started by paraphrasing the legal provision governing the tax authorities’ right to conduct a dawn raid (in this case, article 63 of the VAT Code, but a similar rule applies to income taxes, i.e. article 319 ITC92). This legal provision requires authorisation from the police judge for a dawn raid at private dwellings. The Court of Cassation then stated unequivocally that the authorised tax officials may not enter these private premises without the prior consent of the taxpayer.
In doing so, the Court of Cassation clarified that there is indeed a stratification of conditions for valid access to private premises. The first level is the police judge’s authorisation, which is necessary for the competent officials to be able to obtain access to private premises in the first place. The second level is the permission of the taxpayer himself, which is thus indispensable so that the tax officials would actually be allowed to enter the private premises. Although, in principle (and if the tax authorities respect all applicable legal rules), such consent should derive from the taxpayer’s duty to cooperate, the tax authorities cannot obtain access themselves if the taxpayer opposes this and refuses to give his consent. The same applies for business premises.
Moreover, the Court of Cassation expressly held that the consent of the taxpayer must be permanently present. The opinion of the Advocate General, concurring with the judgment, shows that this requirement stems from the right to respect for private life – with which such a dawn raid obviously constitutes an interference. According to the Court of Cassation, the same fundamental rights are also at stake in the case of dawn raids at business premises.
In this case, the director granted his consent at the start of the dawn raid but apparently withdrew it afterwards. The Court of Cassation therefore concluded that the Court of Appeal, in ruling that the taxpayer’s withdrawal of permission to enter the premises did not prevent the dawn raid from continuing, violated the law. With this finding, the Court of Cassation followed the conclusion of its Advocate General. The judgment of the Court of Appeal was thus annulled.
For the sake of completeness, the judgment of the Court of Appeal of Ghent can also be criticised for drawing an erroneous conclusion from the judgment of the Constitutional Court. The Advocate General rightfully pointed out that the Constitutional Court did in fact distinguish between, on the one hand, the active search right of the tax authorities and, on the other hand, the first question of whether and to what extent the tax officials can gain access to business premises without the taxpayer’s consent. The Constitutional Court ruled on the latter issue as follows: “Should the legislator have intended such enforceability of access to business premises, without the taxpayer’s consent, it should have expressly provided for it and defined the conditions for it, which is not the case.” (Constitutional Court 12 October 2017, no. 116/2017, consideration B.10.2). The Constitutional Court stressed that this judgment only concerned the dawn raid of business premises (since the preliminary question on which it ruled only concerned that situation). However, according to the Advocate General – and the Court of Cassation – the above applies equally to access to private premises.
Conclusion: a landmark judgment!
The Court of Cassation has ruled that the prior consent of the taxpayer is necessary in order for the tax authorities to gain access to private premises. Moreover, the Court has acknowledged the right to respect for private life in ruling that if the taxpayer withdraws his consent, the dawn raid must be stopped.
The question now arises as to how this judgment will be dealt with in practice. As the same fundamental rights are at stake during dawn raids at business premises and at private dwellings, we are of the opinion that there is no reason not to apply this case law to dawn raids at business premises. In principle, therefore, tax officials will have to stop their dawn raid immediately if the taxpayer indicates that he no longer consents to it. Should the officials still continue with the dawn raid of the premises, we recommend that the withdrawal of consent should be explicitly recorded in the official report or otherwise established or registered (e.g. by means of a video or audio recording). If the taxpayer opposes a dawn raid at the beginning, the tax officials may not even start. This is also the reason why, in the Act of 22 November 2022, the legislator has introduced the court-imposed penalty payments system to force a taxpayer who wrongfully refuses access to grant it under monetary pressure (see also our earlier contribution about that Act).
If you have any questions about dawn raids, please do not hesitate to contact us.