C-38/88

Mr President, 'the German Law'). Paragraph 2 treats the Members of the Court, absorption of a company's losses by its parent company pursuant to a profit and loss transfer agreement as a contribution subject to capital duty. After bringing an 1. The Finanzgericht Münster has asked action against the Finanzamts decision this Court to give a preliminary ruling on before the Finanzgericht (Finance Court) two questions concerning the basis of Münster, Siegen asserted in the proceedings assessment of the indirect tax levied on the before that Court that Paragraph 2 of the raising of capital, as harmonized by Council German Law was contrary to Article 4(2)(b) Directive 69/335/EEC of 17 July 1969' of the directive. That article allows capital (hereinafter referred to as 'the directive'). duty to be levied on 'an increase in the assets of a capital company through the provision of services by a member which do not entail an increase in the company's 2. The facts may be summarized as follows. 3 capital, but which do result in variation in In 1971, Ingersoll Maschinen und Werk­ the rights in the company or which may zeuge GmbH (hereinafter 'Ingersoll') increase the value of the company's shares'. concluded an integration agreement entailing the transfer of profits and losses (Organschafts- und Ergebnisabführungs­ vertrag) with its subsidiary, Waldrich Siegen Werkzeugmaschinen GmbH (hereinafter 3. The Finanzgericht Münster therefore 'Siegen'), of which it is the sole shareholder. referred to this Court two questions which The agreement provides that Ingersoll seek in essence to establish, first, whether undertakes to take over the results — Article 4 of the directive has 'direct effect' whether profit or loss — shown in the and, secondly, whether or not the accounts of its subsidiary. In the financial absorption of a company's losses by its years 1975 to 1978, the subsidiary realized shareholder pursuant to a profit and loss profits which were transferred to the parent transfer agreement is subject to capital duty. company. However, from the financial year 2 1979/80 onwards, Siegen incurred losses which were absorbed by Ingersoll. The Finanzamt (Finance Office) Hagen 4. This is not the first occasion on which a (hereinafter 'the Finanzamt') levied capital national court has questioned this Court duty of 1% on the transfers of losses, about the 'direct effect' of Article 4 of the pursuant to Paragraph 2 of the German 4 directive, but for various reasons the Court Law on the taxation of capital transactions, has not yet had an opportunity of ruling on the Kapitalverkehrsteuergesetz (hereinafter this point. Nevertheless, in the Dansk s Original language: French. 3 — Provision is made in Article 4(2){a) of the directive for the 1 — Directive concerning indirect taxes on the raising of taxation of increases in the capital of a company capital (OJ, English Special Edition 1969 (II), p. 412). 4 — Judgment of 15 July 1982 in Case 270/81 Felicitas v 2 — According to the order of the Finanzgencht the financial Finanzamt fur Verkehrsteuern [1982] ECR 2771, see also year runs from 1 December to 30 November of the the judgment of 25 Mav 1989 in Case 15/88 SpA Maxi Di following year v Oficio del Registro di Bolzano [\W] F.CR 1391.

Accordingly, the list in Article 4 of the directive showing the transactions which 9. The peculiar feature of a profit and loss may be subject to capital duty is an transfer agreement is that it replaces the exhaustive one. Consequently, the obli­ risks inherent in economic life with a degree gation on Member States to refrain from of certainty, since the subsidiary introducing any indirect taxes on the raising company — and its creditors — may be sure of capital other than those for which the that, irrespective of the results of its business directive provides is an unconditional one. activities, the company will never show either profits or losses. As the Commission 8 notes in its written observations, the difficulty is not whether the profit and loss 5. Moreover, the provisions of Article 4 — transfer agreement has, in itself, the effect as is immediately clear from its of increasing the company's assets — what wording — are perfectly precise. indeed is the value of certainty in the func­ tioning of an undertaking? — but whether or not the absorption of losses pursuant to 6. Indeed, in his Opinion in Case 15/88, that agreement is to be regarded as a trans­ Mr Advocate General Lenz concluded that action subject to capital duty. the prohibition in Article 11 of the directive was unambiguous and sufficiently precise to enable economic agents to rely on it on the expiry of the period allowed for its 10. I think that a criterion which focuses on 6 implementation. whether the economic potential of the company is thereby enhanced should serve as a guideline and point to a distinction. A 7. Accordingly, I propose that the reply to company which, having suffered losses, the first question should be to the effect secures ex post facto an agreement for the that, since 1 January 1972, it has been transfer of profits and losses necessarily has possible for a taxable person to rely directly its losses absorbed by its shareholder, and on Article 4 of the directive in proceedings thus, even if subsequent profits accrue to the before a national court against a Member shareholder rather than the company itself, State. its economic potential at that stage is enhanced. Such a transaction may be subject 5 — Operative part of the judgment of 2 February 1988 in Case 36/86 Ministeriet for Skatter og Afgifter v Dansk 7 — Case 270/81, cited above, paragraph 16; see also Case Sparinvest [Kii] ECR 409. 36/86, cited above, paragraph 14. 6 — Opinion delivered on 15 February 1989, paragraph 7. 8 — Paragraph 5.3 on p. 7 of the French text.

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