C-287/94
ECLI:EU:C:1996:196
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FREDERIKSEN ν SKATTEMINISTERIET
OPINION OF ADVOCATE GENERAL LA PERGOLA delivered on 7 May 1996 *
I — Introduction In 1984 the applicant granted the subsidiary an interest-free loan. The competent Danish tax authorities considered for the purposes of determining the taxable income that the loan in question yielded a return equal to 1 1 % of its average value and consequently proceeded to alter the plaintiff's tax returns 1. The questions referred for a preliminary for the financial years 1986/87, 1987/88 and ruling in this case relate to the interpretation 1988/89. The tax authorities did so on the of Directive 69/335/EEC 1 concerning indi ground that the interest-free loan did not rect taxes on the raising of capital. They seek constitute a normal business transaction but in particular to ascertain whether an interest- had been granted solely on the basis of the free loan granted by a parent company to its two companies' community of interests. subsidiary falls within the cases covered by Consequently the plaintiff was charged the aforesaid directive and whether the pay income tax on the return it was deemed to ment of capital duty on the saving by the have received from the interest-free loan subsidiary of interest on such a loan pre granted to the subsidiary by taxing the capi cludes the amount of capital so contributed tal transferred to the subsidiary in the form from being subject to the tax on income pay of the interest saved. Furthermore, the tax able by the parent company. authorities considered that the revenue the oretically yielded by the interest-free loan was a subsidy on which the subsidiary was liable to tax, but that the subsidiary was in any event entitled to deduct that sum for tax pur II — Facts poses. Therefore the amendment made by the tax authorities in relation to the subsid iary was 'neutral' from the tax point of view.
2. A/S Richard Frederiksen & Co. (hereinaf ter 'Frederiksen'), the plaintiff in the main proceedings, holds all the shares in Sydjysk Sten og Grus A/S (hereinafter 'the subsid iary'). 3. The plaintiff brought an action before the Landskatteret (Regional Tax Tribunal), Copenhagen, against the decision of the tax * Original language: Italian. authorities. The national court upheld the 1 — Council Directive 69/335/EEC of 17 July 1969 concerning decision. The plaintiff then appealed against indirect taxes on the raising of capital (OJ, English Special Edition, 1969 (II), p. 412). that judgment to the Østre Landsret (Eastern
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Regional Court), which considered it nec- a member which do not entail an increase essary to refer the following questions to the in the company's capital, but which do Court of Justice for a preliminary ruling: result in variation in the rights in the company or which may increase the value of the company's shares;
'1. Should Article 4(2)(b) of Council Direc- tive 69/335/EEC of 17 July 1969 con- cerning indirect taxes on the raising of capital be interpreted as covering the current value of an interest-free loan? (...)'.
2. Should Article 10 of the directive be interpreted as precluding income tax from being levied on a parent company 5. Article 10 of Directive 69/335 provides as in respect of interest fixed after the follows: event on an interest-free loan to a sub- sidiary, where the amount of the saving on interest is regarded as a contribution of capital to the subsidiary within the meaning of the directive?' 'Apart from capital duty, Member States shall not charge, with regard to companies, firms, associations or legal persons operating III — The provisions applicable to the for profit, any taxes whatsoever: dispute
4. Article 4(2) of Directive 69/335 provides (a) in respect of the transactions referred to as follows: in Article 4;
'The following transactions may be subject to capital duty: (b)in respect of contributions, loans or the provision of services, occurring as part of the transactions referred to in Article 4; (...)
(b) an increase in the assets of a capital com- pany through the provision of services by (...)'.
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IV — The dispute of assessment for the application of income tax to the contributing company.
The first question
8. The plaintiff in the main proceedings argues that the answer to the second ques tion referred by the national court must be affirmative. The breadth of the wording used in Article 10 of Directive 69/335 ('not charge 6. O n the basis of the Court's case-law, 2 I ... any taxes whatsoever') militates in support consider that the answer to the first question of the view that a contribution of capital referred by the national court must be affir made by means of an interest-free loan may mative. However, the concept of 'the accru not be taxed in a different way from that laid ing value of an interest-free loan', referred to down by the directive itself. The plaintiff by the national court in that question, calls goes on to claim that the Danish version of for explanation here. For the purposes of the directive in question does not specify in Article 4(2)(b) of Directive 69/335/EEC, the the title that the taxes on the raising of cap expression must be understood to mean the ital are indirect, as the other language ver amount of interest that the subsidiary should sions do. Finally the plaintiff relies on Arti have paid at market rates to the parent com cle 12 of the directive concerned which pany. That sum constitutes the enrichment of establishes a list, held by the Court 3 to be the subsidiary demandi causa, which is exhaustive, of the taxes and other duties equated by the directive with a contribution which may be imposed on transactions sub of capital. ject to capital duty, thereby excluding other possible forms of taxation. According to the plaintiff, that interpretation is in keeping with the O E C D model of a double taxation agreement and in particular with Articles The second question 2 and 24 of that text.
7. The second matter raised by the national 9. The defendant in the main proceedings, court is essentially whether Article 10 of the Member States which have submitted Directive 69/335 precludes Member States observations and the Commission consider from considering the contribution of capital that the answer to the second question must resulting from an interest-free loan as a basis be in the negative. Various arguments have
2 — Case C-249/89 Trave Schiffahrts-Gesellschaft [1991] ECR 3 — Case 36/86 Ministeriet for Skatter og Afgifter ν Dansk Spar- I-257. invest [1988] ECR 409.
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been put forward to that effect. In their view, other indirect taxes with the same character- the directive is intended to harmonize indi- istics as the capital duty or the stamp duty rect taxes, whilst making no provision at all on securities might frustrate the purpose concerning direct taxes. The defendant, of the measures provided for in this direc- together with the Member States and the tive and those taxes should therefore be Commission, have pointed to the difference abolished'. between a taxpayer required to pay tax where it is levied on the contribution of cap- ital (the accipiens or recipient company) and a taxpayer required to pay income tax (the donans or contributing company). Finally, in accordance with Community law, the rules governing direct taxes are a matter for the Member States, the directive being confined 11. Furthermore, it should be noted in that to harmonizing the duty on contributions of regard that the prohibition laid down in capital in order to facilitate the free move- Article 10 of the directive on charging 'any ment of capital intended as such. taxes whatsoever , apart from capital duty, in respect of the transactions referred to relates to transactions of a financial nature which result in a transfer of economic resources from one person to another. The tax deducted in this case, which under Danish law is levied on the return received by the parent company from the interest on the loan, relates to another, quite different event 10. To my mind, the answer to the second in the taxpayer's existence, namely the cre- question referred by the national court ation of income. That chargeable event is depends on the intention to be ascribed to necessarily distinct from a transfer of assets, the Community legislature in adopting even from the temporal point of view. The Directive 69/335/EEC and on the scope of return in question must therefore be subject, that legislation. in accordance with the rules and conditions laid down in the applicable tax legislation, to income tax. The directive in question, more- over, is not concerned with taxing the cre- ation of income — which is a matter for the Member States themselves — but regulates the possible methods of bringing about an increase in company capital through the I shall start with the last point, which seems transfer of assets by harmonizing the forms to me to be decisive. What kind of taxes, of taxation. duties and charges is the directive intended to harmonize? The intentions of the Com- munity legislature may be deduced not only from the actual title of the directive (which, in all the language versions in which it was originally adopted refers to 'indirect taxes', unlike the Danish version), but also quite plainly from the last recital in the preamble 12. To construe Article 10 of the directive as thereto, which states that 'the retention of exempting the transactions referred to
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therein even from direct taxes amounts to turn give rise to distortions on the capital encouraging potential tax evasion. Conse markets of those Member States which tax quently, the result of such an interpretation more heavily the profits made by companies of the legislation would be to encourage established on their territory, resulting in transactions involving a contribution of cap serious consequences precisely for the ital or financial transactions treated as equiv sources from which those companies supply alent thereto, especially where effected capital. That state of affairs would lead to between States, which would thus escape results contrary to the objective pursued by direct taxation. Such practices would in their the Community legislature.
V — Conclusion
13. F o r the reasons set o u t above, I p r o p o s e that the C o u r t s h o u l d reply as follows t o t h e questions referred b y t h e Ø s t r e Landsret, C o p e n h a g e n :
— Article 4(2)(b) of C o u n c i l Directive 6 9 / 3 3 5 / E E C of 17 J u l y 1969 also relates t o the a m o u n t c o r r e s p o n d i n g t o the interest w h i c h w o u l d u n d e r n o r m a l m a r k e t c o n d i t i o n s have been p r o d u c e d b y a loan granted b y a p a r e n t c o m p a n y t o a subsidiary, w h e r e that loan w a s contracted w i t h o u t any c o n d i t i o n as t o p a y m e n t of interest;
— Article 10 of Directive 6 9 / 3 3 5 / E E C does n o t c o n c e r n direct taxes o n i n c o m e w h i c h m a y be i m p o s e d o n s u m s transferred b y a p a r e n t c o m p a n y t o a subsid- iary b y means of an interest-free loan.
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