C-164/90

MUWI BOUWGROEP

OPINION OF ADVOCATE GENERAL MR JACOBS delivered on 24 October 1991 *

2. Article 4(1) of the directive specifies the transactions which shall be subject to capital duty, which include the formation of a capital company (Article 4(l)(a)), and an increase in capital by contribution of assets 4. The mandatory reduction provided for in of any kind (Article 4(1 )(c)). The expression point (b) of Article 7(1) applies where

* Original language: English.

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6. Article 5 of the directive deals with the 8. Thus, the Netherlands was under an basis upon which duty is charged. By Article obligation to implement the mandatory 5(1)(a), in the case of the formation of a reduction in duty provided for in Article capital company or of an increase in its 7(l)(b). As regards the optional reduction of capital or assets, the duty is charged on the Article 7(l)(bb), it appears that the option actual value of assets contributed or to be has been exercised in the Netherlands in contributed by the members, after deduction respect of some but not all kinds of trans­ of liabilities assumed and expenses borne by action. The Dutch legislation draws a

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11. In order to bring those businesses, once they were acquired, into a single operating unit, on 2 October 1979 Van der Vorm also 10. Van der Vorm contracted to acquire the set up a company which was initially named target companies by an agreement dated 11 'Van der Vorm's Muwi Beheer BV', but September 1979. The agreement allowed which was subsequently renamed 'Muwi Van de Vorm to make the acquisitions Bouwgroep BV' (hereafter 'Muwi'). Muwi either by itself purchasing the assets and is the appellant taxpayer in the main assuming the liabilities of the target proceedings. Van der Vorm undertook to companies, or by causing companies set up pay up the entire issued share capital of by itself to do so. In the event, Van der Muwi, amounting to HFL 10 000 000, by Vorm opted for the latter alternative, and transferring all its shares in the instrument accordingly on 2 October 1979 set up four new companies to be used as instruments companies and paying up the remaining for that purpose ('the instrument Muwi shares in cash; and the shares in the companies'): instrument companies were duly transferred on 30 October 1979. It should be noted that it was not until the next day, 31 October 1979, that the assets and liabilities of the target companies were taken over by the (A) Nedu, (B) Multi ontwerp, (C) Muwi instrument companies, which had mean­ Geleen and (D) Muwi Rotterdam. while become subsidiaries of Muwi.

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OPINION OF MR JACOBS —CASE C-164/90

15. The Hoge Raad has referred the following two questions to the Court:

14. It is to be noted that, where the Dutch legislation makes provision for a reduced amount of duty, the reduction is effected by 1. Where the assets and liabilities of a means of a diminution in the assessment capital company include a parcel of basis rather than by means of a lower rate shares which constitutes a 100% share in of taxation. Thus, at the relevant time, the another capital company, may that parcel rate of capital duty in the Netherlands was a of shares be regarded as a 'part of the uniform 1%. The reduction in the business' of the company which holds assessment basis was provided by Article . them within the meaning of Article 35(4) of the Law on the Taxation of Legal 7(1)(b) of Directive 69/335/EEC of 17 Transactions, of 24 December 1970. From July 1969, even if the assets of the that provision, read in the light of the calcu­ subsidiary consist at the time solely of lation given on page 5 of the Order for liquid assets? Reference, it appears that, where a trans­ action falls within Article 7(1)(b) of the directive, the duty is levied on the difference between (A) the nominal value of the shares allocated by the acquiring company, and (B) the ratio of the assets contributed to the 2. If so, does it follow from the directive total assets of the company making the that in this case capital duty may not contribution, expressed as a proportion of exceed 0.5% of HFL 10 000 000 — that

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17. It seems to me that the Commission and 16. The reduced rate of Article 7(1)(b) the Netherlands Government are correct in applies to two kinds of acquisition: (1) suggesting that the same concept of 'part of where the acquiring company obtains all the a business' or 'branch of activity' is implicit assets and liabilities of the acquired in Directive 69/335. A transfer of a part of company, and (2) where the acquiring a business, for the purposes of Article company obtains one or more parts of the 7(1)(b) of the directive, is the transfer of a business of the acquired company. In the part of the transferor company's organi­ former case, the entire business of the zation, and one which in my view must acquired company is transferred; in the itself be capable of carrying on a business of latter, part only is transferred. It is I think its own. clear from the wording of the provision that a 'part of a business' cannot mean simply one or more of the assets of the business; for otherwise the provision could have simply referred to 'all or some of the assets' of the companies in question. What is trans­ 18. It seems to me, therefore, that a ferred must make up a relatively company with assets consisting only in cash autonomous branch of the acquired cannot amount to part of the business of its company's business activity, and the French parent company. Thus, when Van der Vorm version of the provision accordingly uses the agreed to contribute capital to Muwi by

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OPINION OF MR JACOBS —CASE C-164/90

19. It is true that the problem would have taken on a slightly different aspect if the same events had occurred in a different sequence. Thus, if Van der Vorm had first used the assets of the instrument companies to purchase the businesses of the target companies, and had only then transferred the shares in the instrument companies to Muwi, the question would arise whether 20. In order to answer the question which those companies could be regarded as rela­ has been referred, it is unnecessary to tively autonomous parts of the Van der decide the more general question of Vorm organization, and hence as parts of whether or not a company can be said to its business. According to both the carry on a part of its business through the Commission and the Netherlands medium of a subsidiary it controls; in either Government, as well as the Danish case, the Hoge Raad's first question is in Government, such a transaction should still my view to be answered in the negative. It be regarded as a share exchange, falling seems to me, none the less, that the answer within point (bb), rather than as the transfer need not be restricted to situations where of a part of a business, falling within point the assets of the subsidiary consist solely of (b). Thus, the Commission and the liquid assets. Thus, even if the subsidiary is Netherlands and Danish Governments all capable of carrying on a business of its own, take the view that a company cannot be said the transfer of its shares to another to carry on a part of its business, for the company is not to be regarded as the purposes of Article 7(1)(b) of the directive, transfer of a part of the business of the when the business is carried on through the parent company for the purposes of Article medium of a subsidiary it controls. Again, it 7(1)(b) of the directive.

21. Given the answer I have proposed to the first question, it is unnecessary to answer the second of the two questions referred. I shall nevertheless consider how the second question should be answered if the first question were answered differently. 24. It should be noted that each of those The second question can be understood as provisions allows the Member States a asking what the maximum amount of capital certain degree of freedom in implementing duty is in a case where the contribution of the directive. Thus, although Article 5(1)(a) capital falls within point (b) of Article 7(1) specifies that the basis for assessment shall of the directive, and in particular where that be the actual value of assets contributed, less contribution consists in the transfer of liabilities and expenses, Article 5(2) permits shares with a nominal value of Member States to take the actual value of HFL 9 800 000 representing assets of the shares allocated as the basis, or the nominal same value, together with cash amounting value where that is higher. Similarly, in the to HFL 200 000, in exchange for shares case of transactions falling within Article with a nominal and actual value of 7(1)(b), Member States are permitted to fix HFL 10 000 000. the rate of duty charged at any amount between 0% and 0.5%. The question therefore is whether those limited areas of discretion are sufficient to prevent the provisions being unconditional for the purposes of direct effect. 22. I shall first consider whether the relevant provisions of the directive have direct effect, that is to say whether they are sufficiently precise and unconditional for individuals to rely upon them before the national courts in order to prevent the application of any inconsistent national provisions: see Case C-188/89 Foster v 25. Although, as the Court has recently British Gas [1990] ECR I-3313, paragraph emphasized, a provision is unconditional 16 of the judgment. I note that a different when it does not leave to the Member States provision of the directive, namely Article any margin of appraisal (see Joined Cases 4(2)(b), was held to have direct effect in C-100/89 and C-101/89 Kaefer and Procacci Case C-38/88 Siegen v Finanzamt Hagen [1990] ECR I-4647, paragraph 26 of the [1990] ECR I-1447 (see paragraph 8 of the judgment), a certain margin of discretion judgment). left to the Member States as to the result to be achieved does not necessarily prevent a directive from having direct effect. Thus, in Case 88/79 Ministère Public v Grunert [1980] ECR 1827, the Court held that certain provisions of directives relating to 23. The provisions of the directive relevant the use and marketing of additives in food­ to the calculation of the amount of duty in stuffs had direct effect, even though the the present instance are Article 5(1)(a) and directives in question left to the Member

'The prohibition against the introduction or 27. In the present case, it appears that the maintenance of legislative or regulatory applicable national legislation would charge provisions to that effect by the Member duty on an assessment basis which is States is unconditional and sufficiently actually smaller than any permitted by the precise to enable an individual to rely on it directive. As we have already seen, that before a national court ... ' circumstance arises from the fact that the Netherlands chose to implement Article 7(1)(b) by means of a reduction in the assessment basis, rather than by means of a reduction in the rate of duty. The question therefore arises whether a taxpayer can rely Similarly, in Case 51/76 Nederlandse Onder- upon the national provisions to obtain a nemingen v Inspecteur der Invoerrechten reduced assessment basis, and rely at the [1977] ECR 113, the Court stated that it same time upon Article 7(1)(b) in order to was the duty of the national court to obtain a reduced rate of duty. (I note that it determine whether national measures fell does not in fact appear from the Order for outside the margin of discretion permitted Reference that the taxpayer is attempting to by a directive, and to take the provisions of rely upon the reduced assessment basis as the directive into account in so far as the well as upon the reduced rate of duty.) measures fell outside those limits: see para­ graphs 29-30 of the judgment.

order to claim a reduced rate of duty, it separate from the assets of the instrument might be thought that the provisions of the companies. The cash contribution must same directive determining the assessment therefore be charged at the full rate of 1%, basis for the duty should also be applied. resulting in an amount of HFL 2 000. The For in such a case, it seems to me that the contribution of capital consisting in shares, two sets of provisions cannot properly be on the other hand, is to be taxed at a separated: each specifies one of the two maximum of 0 . 5 % of their value, namely parameters which must necessarily be taken HFL 49 000. The maximum amount of duty into account before the amount of duty can chargeable is therefore HFL 51 000 if the be calculated. That view also has the assessment basis of Article 5(1)(a) of the advantage that it leads to a result consistent directive is applied. with the directive; the other view would not. Thus, if Muwi is able to rely upon the directive before the national court, it should in my view be subject to both of the provisions which, taken together, determine the amount of capital duty which can be 30. It is to be noted that the same maximum charged. It follows that, if Muwi is to figure would result if the alternative basis of benefit from the maximum rate of duty assessment in Article 5(2) of the directive specified in Article 7(1)(b) of the directive, were to be chosen. Thus, a part of the allo­ the maximum assessment basis to be applied cation of shares, to a value of must be the one which follows from Article HFL 200 000, must be taken to be the 5(1)(a) and (2) of the directive, rather than consideration for the contribution in cash, the reduced basis made available by the and therefore taxed at 1%, and the national legislation. remaining allocation of shares, to a value of HFL 9 800 000, represents the consideration for the transfer of part of a business, and is therefore taxed at a maximum of 0.5%.

extent that the assets contributed are repre­ that the national court must ignore any sented by reserves of the contributing provisions of Dutch law which would result company. Thus, it appears that the Dutch in a charge to capital duty of an amount legislation would treat the contribution of greater than the amount permitted by the capital by Van de Vorm to Muwi, in directive. To the extent therefore that an exchange for shares in the latter company, application of the relevant national legis­ in part as a capitalization of reserves within lation would lead to a charge greater than the meaning of Article 4(2)(a). In my view, HFL 51 000, that legislation should not be however, Article 4(2)(a) of the directive applied by the national court. The second does not apply to such a transaction. That question referred would then have to be provision is concerned with the capital­ answered as follows: ization of a company's profits or reserves by means of the issue of the company's own shares, rather than with the exchange of Article 7(1)(a) and (b) of Council Directive assets represented by reserves for shares in a 69/335/EEC may be relied upon by a different company. Thus, it does not seem taxpayer before a national court. to me to be relevant that assets contributed Accordingly, the capital duty payable on a by Van de Vorm can be regarded as repre­ transaction falling within those provisions sented by that company's reserves. In the may not exceed the maximum amount present case, therefore, no charge to capital resulting from the application of the rates duty arises under Article 5(1)(c) of the specified therein to the maximum assessment directive. basis permitted by Article 5(1)(a) and (2) of the directive.