BFH - IX R 6/23
| BFH - IX R 6/23 | |
|---|---|
 | |
| Court: | BFH (Germany) |
| Jurisdiction: | Germany |
| Relevant Law: | Article 4(1) GDPR Article 4(2) GDPR Article 6(1)(c) GDPR Article 6(1)(e) GDPR § 29b AO § 97(1) AO |
| Decided: | 13.08.2024 |
| Published: | |
| Parties: | |
| National Case Number/Name: | IX R 6/23 |
| European Case Law Identifier: | ECLI:DE:BFH:2024:U.130824.IXR6.23.0 |
| Appeal from: | Financial Court Nuremberg 3 K 596/22 |
| Appeal to: | Not appealed |
| Original Language(s): | German |
| Original Source: | Bundesfinanzhof (in German) |
| Initial Contributor: | Lacrosse |
The German Federal Financial Court held that the tax office request of rental agreements is proportionate and the subsequent processing of the tenants personal data is lawful.
English Summary
Facts
The parties involved are in dispute about the fact that the German tax office requires a copy of the rental agreements from the landlady (taxpayer) as part of an income tax return. The landlady is the data controller, the tenants are the data subjects and the tax office would be the recipient of the data.
In the income tax returns for 2018 and 2019, the data controller submitted her statements of the total rental income, depreciation, administrative and maintenance expenses for the respective property for its income from letting and leasing various properties. The tax office requested a copy of the rental agreements, service charge settlements and on claimed maintenance expenses from the data controller. The controller submitted the gross and net rental income with the names of the tenants blacked out as well as the operating costs for the various apartments and documents on the maintenance expenses, but not the requested copies of the rental agreements and maintenance expenses. The data controller argued that the disclosure of the requested documents was not possible without the consent of the data subjects. Furthermore the tax office was not entitled to request the documents, as the rental agreements were not required to check the actual income.
The tax office responded with a request for the rental agreements in question, referring to the duty of cooperation of the data controller under the German Fiscal Code. The documents are necessary for the verification of the income data submitted by the controller.
The tax office rejected an objection on its decision by the data controller as unfounded and repeated the obligation to cooperate according to German fiscal code. (Abgabenordnung or AO). The duty to cooperate includes in particular the complete and truthful disclosure of the facts relevant to taxation and the provision of evidence. The tax office may, at its own discretion, determine which evidence it deems necessary within the meaning of the relevant section of the Fiscal Code. The tax office requires the names of the tenants and the respective rental agreements to verify the tax-relevant circumstances. The GDPR does not prevent the fulfillment of the obligations to cooperate, as the controller is entitled to transfer the personal data contained in the contracts for the purpose of fulfilling these tax obligations in accordance with Article 6(1)(c) GDPR.
The Financial Court Nuremberg dismissed a legal action brought by the data controller.
The data controller appealed against the decision of the Nuremberg Financial Court and argued in his appeal that the tax office request to disclose the tenants personal data violated his and his tenants fundamental right to informational self-determination. The tax office violated the protection principles of the GDPR and required the data controller to act in a manner sanctioned by criminal law, thereby exceeding its discretionary powers. Furthermore, the tenants were not informed about the unlawful storage of their personal data protected by this fundamental right.
The Financial court had been grossly negligent and in breach of duty in failing to review the tax office exercise of discretion.
The tax office argued that it acted lawfully within the scope of its investigative duties and powers to examine and clarify the facts. The personal data and information contained in the rental agreements were relevant for tax purposes, as they related to the deduction of income-related expenses and the amount of income.
The tax office requested that the appeal be rejected as unfounded.
Holding
The Federal Financial Court dismissed the appeal as unfounded. The Financial Court Nuremberg correctly assumed that the tax office was entitled to request the rental agreements from the data controller. The rental agreements are documents that can be requested for inspection by the tax office in accordance with § 97(1) AO. The request to submit the document is an administrative action within the meaning of § 118 AO. The court considered the tax offices request for the documents to be a discretionary decision by the administration.
This disclosure of documents is subject to the principle of proportionality, i.e. it must be suitable and necessary to clarify the facts, the fulfillment of the obligation must be possible for the person concerned and the use must be necessary, proportionate and reasonable
The court held that the tax office needed the rental agreements to check the tax-relevant circumstances and that these represented a suitable means. The rental agreements would contain tax-relevant information e.g. amount of the agreed rent, rent increases, the composition of the rent, the scope of the right of use and the actual implementation of the rental. The tax office had no other equally effective means of clarification. The income tax returns and income documents of the data controller were insufficient as a means of control, as they are prepared without the involvement of the tenants. Personal data of the tenants are required in order to be able to allocate the payment flows to the respective tenancy.
The tenants data in the rental agreements are personal data pursuant to Article 4(1) GDPR and the disclosure by the data controller constitutes a data processing operation pursuant to Article 4(2) GDPR.
It was also possible for the data controller to disclose the tenants data because she is entitled to do so under Article 6(1)(c) GDPR in conjunction with § 97 AO. Accordingly, the court held that data processing by disclosing the rental agreements to the tax office is considered lawful if it is necessary for the fulfillment of a legal obligation to which the controller is subject. In this case, the court considered this legal obligation to be based on § 97 AO.
The subsequent data processing by the tax office is also lawful, as § 29(b) AO allows the processing of personal data by the tax authority if it is necessary for the exercise of public authority. The court found that Section 29(b) Fiscal Code is the national legal basis for data processing in conjunction with Article 6(1)(e) GDPR.
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English Machine Translation of the Decision
The decision below is a machine translation of the German original. Please refer to the German original for more details.
The appeal is unfounded and is dismissed pursuant to Section 126 Paragraph 2 of the Fiscal Court Code (FGO).The Fiscal Court correctly assumed that the tax office was entitled to demand that the plaintiff submit the rental agreements. As the controller within the meaning of Article 4 No. 7 of the GDPR, the plaintiff was not entitled to refuse to release the tenant data.1. The tax office was entitled to demand that the plaintiff submit the rental agreements, even taking into account the provisions of the General Data Protection Regulation.a) Pursuant to Section 97 Paragraph 1 Sentence 1 of the Fiscal Code (as amended by the Administrative Assistance Directives Implementation Act of June 26, 2013, Federal Law Gazette I 2013, 1809, 1834), those involved and other persons must, upon request, submit books, records, business papers and other documents to the tax authorities for inspection and examination. The request to submit the document is an administrative act within the meaning of Section 118 AO (Roser in Gosch, AO Section 97 Rz 11; Seer in Tipke/Kruse, Section 97 AO Rz 14; Baum in AO - eKommentar [June 21, 2023], Section 97 AO Rz 13) and is to be seen in connection with the requests for information pursuant to Section 93 AO (BRDrucks 139/13, p. 195: equivalent investigative instruments). It is a discretionary decision of the administration. As such, according to Section 102 FGO, it must be examined in court proceedings to determine whether the administrative act is unlawful because the statutory limits of discretion have been exceeded or because the discretion has been used in a manner that does not correspond to the purpose of the authorization (Section 5 AO). In order to be able to carry out this review, which leaves the court no room for its own discretionary considerations, the discretionary decision of the administration must be justified in the administrative act, but at the latest in the objection decision (cf. BFH judgment of 15.09.1992 - VII R 66/91, BFH/NV 1993, 76, under 2.b; BFH decision of 05.04.2022 - VIII B 42/21, para. 7; Baum in AO - eCommentar [21.06.2023], § 97 AO para. 16).aa) The application of § 97 AO is not excluded in the case in dispute under § 200 para. 1 sentence 2 AO.(1) In the context of an external audit, § 97 AO is superseded by § 200 para. 1 sentence 2 AO (Klein/Rätke, AO, 17th ed., Section 97 Rz 1; Roser in Gosch, AO Section 97 Rz 3; Niewerth in Lippross/Seibel, Basic Commentary on Tax Law, Stand 119, cited April 2020 Section 97 AO Rz 2). If there is no audit order pursuant to Section 196 AO, there is a prohibition on exploitation under certain circumstances.(2) The decisive factor in distinguishing between investigations within the framework of an external audit and individual investigations is how the tax authority’s actions appear from the perspective of the person concerned (cf. BFH judgment of November 25, 1997 – VIII R 4/94, BFHE 184, 255, BStBl II 1998, 461, under II.2.b). What is decisive is how the taxpayer could understand the content of the investigative measures in accordance with the legal principles developed under Section 133 of the Civil Code and the circumstances known to him, taking into account good faith (BFH judgment of February 2, 1994 - I R 57/93, BFHE 173, 487, BStBl II 1994, 377, under II.B.1). In general, it must be assumed that measures taken by an auditor to investigate a tax case are audit activities.(3) The Fiscal Court did not assess the tax office’s request for submission as an audit activity. The Senate is bound by this assessment in accordance with Section 118, Paragraph 2 of the Fiscal Court Act. It can only be reviewed under the law of appeal to determine whether it violates the laws of logic and principles of experience. This is not the case. The Fiscal Court correctly pointed out that neither an audit order had been issued nor an audit scheduled at the plaintiff's premises. Rather, the disputed requirements of the tax office were all issued in temporal connection with the filing of the 2018 and 2019 income tax returns. This makes it clear that this is an action by the tax office as part of an assessment activity.bb) The submission of documents is subject to the principle of proportionality, i.e. it must be suitable and necessary for clarifying the facts, the obligation must be possible for the person concerned to fulfil and the use of documents must be necessary, proportionate and reasonable (cf. BFH judgment of 23.10.1990 - VIII R 1/86, BFHE 162, 539, BStBl II 1991, 277, under 2.d on the right to information under Section 93 AO; Schuster in Hübschmann/Hepp/Spitaler ‑‑HHSp‑‑, Section 97 AO Rz 32 ff.; Klein/Rätke, AO, 17th ed., Section 97 Rz 12; Roser in Gosch, AO Section 97 Rz 13).(1) The submission of a document must be suitable for clarifying the facts. This is not the case if the documents are not relevant for tax purposes. Facts relevant for tax purposes include everything that can influence the decisions of the tax authorities in an administrative tax procedure (cf. Schuster in HHSp, § 93 AO Rz 10). The "facts" to be communicated that are relevant in this sense only have to be possible within the framework of a forecast decision (BFH judgment of October 29, 1986 - VII R 82/85, BFHE 148, 108, BStBl II 1988, 359, established case law). The tax authorities must decide on this by way of an advance assessment of the evidence. In the interests of legal and uniform taxation and in order to implement the verification principle required by the constitution, the requirements for this forecast decision should not be set too high (cf. BFH judgment of 29 July 2015 - X R 4/14, BFHE 251, 112, BStBl II 2016, 135, para. 40 et seq.).(2) The requested documents must be needed. This is not the case if the tax-relevant facts are obvious or have been conclusively established.(3) The taxpayer or other person must be able to present the requested documents. A private or contractually agreed prohibition on the release of a document does not render the public law obligation to produce the document unfulfillable (BFH judgment of 16 May 2013 - II R 15/12, BFHE 241, 211, BStBl II 2014, 225, para. 43; Schuster in HHSp, § 97 AO para. 36, with further references).(4) Finally, the request for production must be proportionate in the narrow sense. The time, personnel and material (financial) expenditure for the person required to submit the evidence must not be clearly disproportionate to the "more" in truthful clarification of the facts that can be expected from this evidence (Schuster in HHSp, Section 97 AO Rz 39).b) Applying these principles, the tax office's requests for submission in question were lawful.aa) In its objection decision, the tax office stated that it needed the rental agreements to check the tax-relevant circumstances and that these represented a suitable means. The rental agreements - possibly in conjunction with other documents - would reveal, among other things, the amount of the agreed rent, rent increases, deviations from payments actually made, the composition of the rent, the apportionability of additional costs, the extent of the right of use and the actual implementation of the rental. No other, equally effective means of clarification is apparent. In particular, these could not be the plaintiff's private statements because they were prepared solely by the plaintiff - without the involvement of the tenants. The names of the tenants are necessary in order to be able to assign the payment flows to the respective tenancy. These considerations do not reveal any errors of discretion. In particular, the questions about the specific premises made available to a tenant (including parking spaces, garages, basements, gardens, etc.) and the amount of the agreed remuneration relevant within the framework of Section 21 Paragraph 2 of the Income Tax Act (cf. Senate judgment of February 22, 2021 - IX R 7/20, BFHE 272, 200, BStBl II 2021, 479, paragraph 11, with further references) can only be reliably clarified on the basis of the rental agreements. The utility bills are relevant to the question of the amount of income and to the question of the actual implementation of the tenancy. Finally, the names of the tenants are required in order to clarify whether a tenancy agreement is in place between relatives (Section 15 of the Fiscal Code). In the event of any ambiguities, the tax authorities must be able to question the tenants as "other persons". The tax authorities did not have the milder means of immediately questioning the tenants at their disposal. Regardless of the fact that not all tenants were known to the tax office, third parties should only be called in if the clarification of the person involved has not achieved the desired result (Section 97, Paragraph 1, Sentence 3 in conjunction with Section 93, Paragraph 1, Sentence 3 of the Fiscal Code). Finally, the effort required by the plaintiff to transmit the rental agreements is not disproportionate to the information the tax authorities are intended to gain.bb) It was also not impossible for the plaintiff to disclose the tenant data because this would constitute unlawful processing within the meaning of Article 6, Paragraph 1 of the GDPR. Irrespective of the question of whether the General Data Protection Regulation applies to the processing operations for which the plaintiff is responsible (Article 2(1) GDPR), the consent of the tenants was not required in any case. This is because the plaintiff was entitled to do so under Article 6(1) subparagraph 1 letter c, paragraph 2 GDPR in conjunction with Section 29b paragraph 1, Section 97 AO entitles the plaintiff to disclose the personal data of its tenants.(1) The Fiscal Court did not examine whether the General Data Protection Regulation is objectively applicable to the processing operations for which the plaintiff as landlord is responsible, in particular with regard to disclosure to the tax office.Obviously, the tenants’ data is personal data within the meaning of Art. 4 no. 1 GDPR and the disclosure by the plaintiff constitutes a processing operation within the meaning of Art. 4 no. 2 GDPR (for the broad interpretation of this term, see judgment of the Court of Justice of the European Union ‑‑ECJ ‑‑ Endemol Shine Finland of 7 March 2024 - C-740/22, EU:C:2024:216, paragraph 29). The Fiscal Court has not determined whether this constitutes fully or partially automated processing or non-automated processing of data stored in a filing system pursuant to Article 2(1) GDPR.In any case, processing would be justified under Article 6(1)(1)(c) GDPR. According to this, processing is lawful if it is necessary to fulfill a legal obligation to which the controller is subject. In this case, the plaintiff’s legal obligation arises from Section 97 of the Fiscal Code.(2) There is a permissible change of purpose under Article 6(4) GDPR. The disclosure of personal data by the plaintiff constitutes processing (Article 4 No. 2 GDPR) for a purpose other than that for which the tenants’ personal data were collected, namely for the purpose of implementing the rental agreements (Article 6(1)(1)(b) GDPR). The obligation to disclose to the tax office is based on Sections 29b, 93 and 97 of the Fiscal Code as national provisions within the meaning of Article 6(4) GDPR. In addition, it also represents a necessary and proportionate measure in a democratic society within the meaning of Article 6(4) GDPR and ensures one of the objectives set out in Article 23(1) GDPR. According to Article 23(1)(e) GDPR, these objectives also include the protection of an important economic or financial interest of the Union or of a Member State, for example in the monetary, budgetary and tax areas, i.e. both the collection of taxes and the fight against tax fraud (cf. ECJ judgment "SS" SIA v Valsts ieņēmumu dienests of February 24, 2022 - C-175/20, EU:C:2022:124, para. 70, with further references). The Senate has already affirmed in the case in dispute that the submission of the documents is necessary and proportionate (under II.1.b aa). Finally, the plaintiff’s obligation as the controller to inform tenants of further processing for another purpose pursuant to Article 13(3) GDPR does not affect its obligation to submit the data.(3) Finally, the plaintiff cannot prevail with its objection, which is not further specified, that the submission is unreasonable because it is being asked to engage in criminally sanctioned conduct. This allegation can at best relate to Section 42 of the Federal Data Protection Act (BDSG). The regulations are intended to cover particularly serious violations of the protection of personal data (cf. Becker in Plath, DSGVO/BDSG/TTDSG, 4th ed. 2023, Section 42 BDSG Rz 2; Taeger/Gabel/Wybitul/Zhou, 4th ed. 2022, BDSG Section 42 Rz 1). Section 42(1) BDSG concerns the unlawful transmission or making available of data on a large number of people to third parties for commercial purposes. Section 42(2) BDSG concerns cases in which personal data is processed without authorization or someone obtains the data by providing incorrect information and in doing so in individual cases for a fee or with the intention of enriching themselves or causing harm. These constituent elements are obviously not met, which is not seriously claimed by the plaintiff.cc) The tax office was also permitted to process the data from the rental agreements.(1) The processing of personal data – which according to Art. 4 No. 2 GDPR also includes the collection and recording of the data – is only lawful if at least one of the conditions set out in Art. 6 Para. 1 GDPR is met (prohibition subject to permission, cf. among others Wackerbeck in HHSp, Section 29b AO Rz 9, with further references). This is the case, among other things, according to Art. 6 Paragraph 1 Subparagraph 1 Letter e of GDPR if the processing is necessary for the performance of a task carried out in the public interest or in the exercise of official authority vested in the controller. According to Art. 6 Paragraph 3 Sentence 1 Letter b of GDPR, this requires a legal basis, which the German legislature created through the Act Amending the Federal Social Security Act and Other Provisions of July 17, 2017 (BGBl I 2017, 2541) with Section 29b AO (cf. Senate judgment of September 5, 2023 - IX R 32/21, BFHE 281, 6, BStBl II 2024, 159, Rz 21). The provision of Section 29b AO authorises the tax authorities, under the conditions specified therein, to take all measures relating to the processing of personal data relating to tax procedural law. In its decision of September 5, 2023 - IX R 32/21 (BFHE 281, 6, BStBl II 2024, 159), the Senate stated that this standard meets the requirements of Article 6, Paragraph 3, Sentence 2, Alternative 1 of the GDPR and, in particular, does not contradict the prohibition of repetition of norms under Union law.(2) As the Senate has also already decided, the power of the tax authorities to collect and process personal data by means of requests for submission either from the parties involved (Section 97, Paragraph 1, Sentence 1 of the Fiscal Code) or from third parties (Senate judgment of September 5, 2023 - IX R 32/21, BFHE 281, 6, BStBl II 2024, 159, para. 55). In view of the above comments on Section 97 AO, the Senate has no doubt as to the necessity of the processing.2. The Fiscal Court did not make a procedural error in its decision either.a) A surprise decision (Article 103 paragraph 1 GG in conjunction with Section 96 paragraph 2, Section 119 no. 3 FGO) is ruled out because the question of whether an external audit has taken place was raised both by the plaintiff in her written submissions of June 2, 2022 and July 31, 2022 and by the Tax Office in its written submission of June 24, 2022 (cf. BFH decision of July 22, 2014 - XI B 103/13, para. 15). Ultimately, the plaintiff complains that the Fiscal Court did not follow her legal opinion. This does not, however, constitute a violation of the right to be heard.b) The procedural defect complained of by the plaintiff, namely a violation of the right to be heard by not granting access to the “permanent documents” file, does not apply either.aa) The right to be heard merely establishes the right of those involved to inspect the court files available to the court, including the files consulted. Pursuant to Section 71, Paragraph 2 of the Tax Code (FGO), the defendant tax authorities are obliged to transmit the tax files to the court ex officio upon receipt of the statement of claim. The right to be heard does not require the Fiscal Court to expressly point out that it is a matter of course that the Tax Office has complied with its legal obligation to transmit the files. According to consistent case law of the highest courts, the inclusion of files should only be referred to if their use without such a reference would surprise the parties involved, as may be necessary, for example, in the case of files from another procedure (cf. BFH decision of January 19, 2011 - X B 204/10, paragraph 10, with further references).bb) Accordingly, there is no violation of the right to be heard. In a written submission dated June 24, 2022, the Tax Office sent the following files to the Finance Court: income tax file, permanent documents file, legal remedy file. The Finance Court sent this written submission to the plaintiff's legal representative on July 1, 2022 for information. However, the legal representative did not request inspection of the files. To the extent that the plaintiff claims that the Finance Court read out excerpts from the permanent documents file during the oral hearing, this does not emerge from the minutes of the hearing. In addition, the plaintiff would have been free to inspect this file in good time or, if necessary, to request an adjournment.c) The plaintiff cannot successfully assert a violation of the statutory judge pursuant to Article 101 Paragraph 1, Sentence 2 of the Basic Law by complaining for the first time in the appeal proceedings about the concern that the judges of the first instance were biased.aa) A motion to recusal lacks legal interest if it is filed in concluded proceedings after the end of the instance, provided that the recusal - even if it were justified - could no longer affect the court’s decision on the matter (BFH decisions of December 10, 2014 - V B 145/14, paragraph 14 and of October 21, 2015 - V B 36/15, paragraph 18).bb) According to the Fiscal Court file, the plaintiff did not file a motion for bias in the first instance proceedings. It merely asked the judges in its written submission of July 31, 2022, "with a view to examining the need for a motion for disqualification and to examining individual involvement," to explain their individual level of knowledge of the course of the proceedings to date.d) To the extent that the plaintiff argues that the Fiscal Court should have submitted the norm of Section 97 AO to the ECJ pursuant to Article 267 of the Treaty on the Functioning of the European Union (TFEU) or to the Federal Constitutional Court (BVerfG) pursuant to Article 100, Paragraph 1 of the Basic Law, this does not constitute a procedural defect either. As a court of first instance, the Fiscal Court is only entitled, but not obliged, to obtain a preliminary ruling from the ECJ pursuant to Article 267, Paragraph 2 TFEU (BFH decision of August 11, 1999 - VII B 162/99, juris, with further references). If the Fiscal Court refrains from referring the matter to the Federal Constitutional Court pursuant to Article 100 Paragraph 1 of the Basic Law, this does not constitute a procedural defect, because the constitutionality of laws is a question of substantive law and not of procedural law (BFH decision of October 15, 2019 - VIII B 70/19, paragraph 21).e) Finally, to the extent that the plaintiff complains about the withdrawal of the statutory judge due to "pseudo-jurisprudence" and raises the issue of "possible manipulation of the lay judges", her statements are unsubstantiated.3. A request for a preliminary ruling from the deciding Senate to the ECJ pursuant to Article 267 Paragraph 3 TFEU is not necessary.a) Contrary to the opinion of the lower court, the case does contain questions on the interpretation of Union law that are relevant to the decision. However, this circumstance does not oblige the Senate to obtain a preliminary ruling from the ECJ. There is no obligation to refer the matter under Article 267(3) TFEU if there is already established case-law of the ECJ on the relevant question concerning the interpretation or validity of Union law ("acte éclairé") or if the correct application of Union law is so obvious that there is no scope for any reasonable doubt as to the decision on the question raised, so-called "acte clair" (ECJ judgment in Srl CILFIT and Lanificio di Gavardo SpA v Ministero della Sanità of 6 October 1982 - C-283/81, EU:C:1982:335, paragraph 13 et seq.; cf.also BVerfG decision of 4 March 2021 - 2 BvR 1161/19, para. 55; Wegener in Calliess/Ruffert, EUV/AEUV, 6th ed., Art. 267 TFEU para. 33; Schönfeld, Internationales Steuerrecht 2022, 617, 623).b) According to these standards, no request for a preliminary ruling is required in the case in dispute. The case law of the ECJ has already clarified that tax collection - in addition to combating tax fraud - is a task in the public interest within the meaning of Art. 6 Para. 1 subpara. 1 letter e GDPR (ECJ judgment "SS" SIA v Valsts ieņēmumu dienests of 24 February 2022 - C-175/20, EU:C:2022:124, paragraph 70). Finally, in its decision Norra Stockholm Bygg of 2 March 2023 - C-268/21, EU:C:2023:145, the ECJ dealt in detail with the requirements for a change of purpose under Art. 6 Para. 4 GDPR. The Senate applied these case law principles.4. The plaintiff's statements and legal arguments in her pleadings submitted after the announcement of the judgment are not relevant because the Senate is bound by its decision.According to Section 104 Para. 1 FGO, a judgment is effectively issued upon its announcement. Instead of announcement, according to Section 104, Paragraph 2 of the FGO, service of the judgment is permissible, as happened here; it must then be sent to the registry within two weeks of the oral hearing. According to established case law, this provision is also satisfied if (only) the signed judgment (operative part) is sent to the registry within the time limit. When the judgment is informally communicated to one of the parties, the decision is deemed to have been announced. The court is then bound by its decision (e.g. Senate decision of September 18, 2014 - IX B 9, 19/14, paragraph 9); reopening the oral hearing is no longer an option.5. The decision on costs is based on Section 135, Paragraph 2 of the FGO.
