C-347/96

I-939

O P I N I O N OF MR TESAURO — CASE C-347/96

any kind contributed or to be contributed (c) in respect of registration or any other by the members, after deduction of liabilities formality required before the com- assumed and expenses borne by the com- mencement of business to which a com- pany as a result of each contribution. The pany, firm, association or legal person last sentence of this provision permits Mem- operating for profit may be subject by ber States to postpone the charging of capital reason of its legal form.' duty until the contributions have been effected. 3

In derogation from these provisions, how- ever, Member States may charge 'duties paid by way of fees or dues' (Article 12(1)(e)).

4. Article 10 provides: 'Apart from capital duty, Member States shall not charge, with regard to companies, firms, associations or legal persons operating for profit, any taxes whatsoever: Lastly, it should be remembered that the eighth and last recital in the preamble to the Directive states that 'the retention of other indirect taxes with the same characteristics as the capital duty or the stamp duty on securi- ties might frustrate the purpose of the mea- (a) in respect of the transactions referred to sures provided for in this Directive and those in Article 4; taxes should therefore be abolished'.

National legislation (b) in respect of contributions, loans or the provision of services, occurring as part of the transactions referred to in Article 4;

Article 1(1) of that law provides that duty on transfers of assets and on documented legal transactions is an indirect tax imposed, sub- ject to the conditions set out in the subse- quent clauses, on transfers of assets for con- The facts and the questions referred sideration, on company transactions and on documented legal transactions. Article 1(2) provides however, that a single transaction shall in no case be taxed both as a transfer of assets for consideration and simultaneously as a company transaction. I would add that the duties relevant to the present proceedings 7. By notarial deed executed on 21 Novem- are the duty on company transactions and ber 1990, Solred was formed as a limited that on documented legal transactions. liability company with a registered share capital of PTA 300 million. Only 60% of the registered share capital (PTA 180 million) was paid up on this date. O n the following 28 November, Solred paid the sum of PTA 3 million, being 1% of the registered share capital, to the tax authorities by way of duty on transfers of assets and documented legal 6. Lasdy, pursuant to Article 31 of the Law, transactions — as a 'company transaction'. under Section III concerning documented By notarial deed of 17 January 1991, the legal transactions, 'minutes and copies of 40% balance (PTA 120 million) of the regis- notarial deeds and documents as well as affi- tered share capital which had not previously davits shall in all cases be drawn up on paper been issued and paid up was formally con- stamped at either PTA 50 per double page or tributed to the company. PTA 25 per single page, as the public official may choose. Simple copies are not subject to duty' (paragraph (1)). It is further stipulated that 'where notarial deeds and documents concern a quantity or object that can be val- ued, contain deeds or contracts which may be registered in property, trade or property rights registers without being liable to inher- O n 7 February 1991, the appellant company itance or donation tax or to the taxes pro- in the main proceedings filed the self- assessment form relative to the duty on the second transaction with the tax authorities, 4 — The version currently in force is published in the Boletín indicating that it was not subject to tax since Oficial del Estado of 20 October 1993. the 1% duty had been paid on the full

'(1) Properly construed, does Council Directive 69/335 of 17 July 1969 (as amended by Directives 73/79 and 73/80 (3) Does the aforesaid Directive 69/335 (as of 9 April 1973, 74/553 of 7 November amended) have direct effect and does it 1974 and 85/303 of 10 June 1985), in affect, and possibly prevail over, the particular Articles 4(1)(a), 5(1)(a), 7 and provisions of national law in the event 10(a), mean that, if the legislation of a that those provisions cannot be inter- Member State provides for a duty to be preted in a manner compatible with the charged on the formation of a public Directive?'

I - 942

SOLRED v ADMINISTRACIÓN GENERAL DEL ESTADO

The first and second questions within the common market and at a single rate in all the Member States.

11. The Court has already had occasion to define the purpose and content of the Direc- tive. In particular, in Ponente Carni 5 the Court pointed out that, as indicated in the recitals in the preamble, the Directive seeks to promote the free movement of capital, which is deemed essential to the creation of an economic union whose characteristics are 13. As I said, Article 10 of the Directive is of similar to those of a domestic market. In the decisive importance. This article prohibits view of the Court, the pursuit of such an Member States from charging on contribu- objective presupposes, in so far as taxes on tions any additional tax whatsoever apart the raising of capital are concerned, the abo- from capital duty. This applies to three cat- lition of indirect taxes in force up to then in egories of transaction: first, the transactions the Member States and the application in referred to in Article 4 (including company their stead of a duty charged only once formations); secondly, contributions, loans or the provision of services occurring 'as part' of the transactions referred to in Article 4; lastly, 'registration' or any other formality 5 — Joined Cases C-71/91 and C-178/91 [1993] ECR I-1915; also required before the commencement of busi- Case 161/78 Conradsen [1979] ECR 2221 and Case C-2/94 Denkavit Internationaal and Others [1996] ECR I-2827. ness to which a company, firm, association

I - 943

OPINION OF MR TESAURO — CASE C-347/96

or legal person operating for profit may be 16. There can be no doubt that, although the subject by reason of its legal form. duty at issue is formally charged on the legal instrument recording the contribution of a part of the share capital, de facto it is charged in occasione and by reason of the contribu- tion required to complete the paid-up share capital. It is therefore an indirect tax which has the same characteristics as capital duty. 6 For that reason, the duty falls in principle within the scope of Article 10 of the Direc- tive.

I-944

SOLRED v ADMINISTRACIÓN GENERAL DEL ESTADO

unlawful when charged at company forma- by Solred and by the Spanish Government, tion but lawful when charged subsequently. 7 while the Commission simply indicated that the duty was generally incompatible with Article 10. I shall say straightaway that the answer is far from self-evident; however, a useful guide is to apply the interpretation of the Directive which guarantees it full effect.

19. Finally, the duty at issue is imposed on capital contributions to capital companies. Any other conclusion would make it too easy for Member States to evade the obliga- tions imposed on them by the Directive. Moreover, it is settled case-law of the Court 21. The appellant company in the main that the nature of a tax must be determined action argues primarily that charging the not on the basis of its classification under duty on registered legal documents is in national law but according to the objective principle incompatible with Article 10(c). In characteristics ascertained from the reference its view, the criteria for application of the for a preliminary ruling and from the case- provision are met. Firstly, the duty at issue is file. 8 charged in respect of a formality required before the commencement of business: fail- ing execution of the deed recording the con- tribution of the unpaid balance of share capi- tal, the company could not, under Spanish law, undertake certain normal company activities, such as a further increase in capital. Secondly, it is imposed on the company by reason of its legal form, in so far as it is man- 20. It must therefore be determined whether datory under Spanish law for capital contri- the duty at issue in the main proceedings butions effected after registration of share falls into one of the categories listed in capital to be recorded by notarial deed. Article 10. That issue was examined in depth

business because under Spanish legislation, 9 subsequently. What matters is that it is in implementation of Article 9 of Council charged in respect of a formality indispens- Directive 77/91/EEC of 13 December able to the full exercise of the company's 1976, 10 limited liability companies may be business. formed, provided that their share capital is subscribed in full, even when only one quar- ter thereof is issued and paid up. However, the Spanish Government itself concedes that although a company is duly formed upon fulfilment of the minimum requirements laid down by the law, including precisely the paying-up and issue of one quarter of its share capital, the company is none the less 24. While it must be repeated that, although required to pay up the unissued balance of the duty on documented legal transactions is its share capital subsequently. The Spanish formally charged on the notarial deed, it in Government also denies that these are for- effect taxes the contribution of the unpaid malities to which the company is subject 'by balance of Solred's share capital, I do not reason of its legal form'. believe that in this case the paying-up and issue in full of the share capital, which is the result of the subsequent contribution, can be deemed to be a formality required before commencement of the company's business. The term 'commencement of business' as used in Article 10(c) of the Directive clearly refers to the exercise of the company's activi- ties, understood in the sense of the pursuit of the company's objects. Consequently, the fact that the failure to fully issue and pay up its share capital prevents the company from 23. The rule laid down in Article 10(c) is undertaking certain normal company trans- clearly formulated, in fact, in more general actions, such as capital increases, is some- and comprehensive terms than the Spanish thing which falls outside the scope of Article Government concedes. The provision refers 10(c). to the formalities required not before com- pany formation but before 'the commence- ment of business'. Article 10 therefore pro- hibits the charging of any tax, apart from harmonised capital duty, in respect of for- malities required for the full exercise of the normal activities of capital companies. In that context it is of no consequence whether the duty coincides in time with the forma- 25. The duty at issue is, on the other hand, tion of the company or whether it is charged certainly incompatible with Article 10 in another respect. It may be recalled that para- graphs (a) and (b) of that article prohibit 9 — Ley de Sociedades Anónimas (Law on public limited liability Member States from charging any taxes companies), as amended. Article 12 (BOE 310 of 27 Decem- other than the harmonised capital duty, both ber 1989). 10 — OJ 1976 L 26, p. 1. in respect of the 'transactions referred to in

26. The contribution of the balance of share capital not paid up at company formation is not in this case a requirement for completing formation because, as stated above, a capital company is effectively duly formed when one quarter (at least) of its share capital is issued and paid up. In my view therefore, the duty at issue cannot be regarded as a tax pro- hibited by Article 10(a). However, I consider it possible to reach a different conclusion with respect to paragraph (b) of the same article. Although the contribution of sub- scribed but previously unissued share capital is not strictly speaking essential to the 'for- mation of a capital company', such a contri- 28. The wording of Article 5 of the Direc- bution may be assumed to occur as part of tive supports that interpretation. It will be such a transaction. recalled that Article 5 concerns the condi- tions for charging the duty. Paragraph 1(a), which applies to contributions made, inter alia, for the formation of a company, pro- vides that Member States may postpone the charging of the duty until contributions are effected (the Spanish Government did not elect to do so). It is clear that that provision was intended to cover possible subsequent contributions occurring 'as part', precisely, 27. The last assumption clearly covers a of the company formation. I need hardly larger group of transactions than those repeat that it is of no consequence that the purely required for the purposes of company duty at issue is charged on the instrument formation. It can consequently also cover recording the contribution and not on the transactions, such as the subsequent contri- contribution as such. I have already said that bution of part of the initially subscribed the general terms of the introductory sen- share capital, which certainly occur 'as part' tence of Article 10, prohibiting Member of the 'formation of a capital company' in so States from charging any taxes 'whatsoever', far as, by finalising the latter, they reflect the eliminate all doubt in that respect.

32. Those arguments rely on the wording of 30. Furthermore, even though the order of Article 31 of the Law on transfers of assets the referring judge does not raise the issue, I and documented legal transactions. Pursuant would add that the disputed duty can in no to that provision, the duty on documented case be justified on the basis of the exemp- legal transactions is to be charged only in tions listed in Article 12 of the Directive. respect of deeds or contracts which have not Only the Commission submitted argument already been subject to the taxes, including in that regard; it ruled out the application of company transactions, listed in paragraphs 1 Article 12 in the present case. Suffice it to say and 2 of Article 1 of the Law. Under the that the duty charged as a percentage of sub- Spanish Law, deeds and documents which sequent partial capital contributions is a tax have been taxed as company transactions of a general nature and that it has no coun- cannot be subjected to the duty on docu- terpart in any services rendered by the mented legal transactions. Therefore, it authorities. 11 The stamp duty charged in would appear that national legislation itself respect of the same transaction, however, prohibits the cumulation of the duty on clearly does. capital contributions (as a company transac- tion) and the duty chargeable pursuant to Article 31(2) on the registration of the notarial deed recording the contribution of 1 1— See Ponente Carni (cited in footnote 5), paragraph 33 et the unpaid balance of share capital. The seq. In Case 36/88 Sparinvest[1988] ECR 409, the Court ruled that the exemptions to the rule prohibiting any taxes Commission, albeit more cautiously, envis- other than capital duty listed in Article 12 of the Directive must be deemed exhaustive. ages the same conclusion when it observes

that it may be deduced from a simple reading be and whether it takes precedence over pro- of the two texts that contributions of share visions of national legislation conflicting capital effected to a company under forma- therewith. That question can be answered tion cannot be subject to a further fiscal very briefly. The provisions of the Directive charge over and above that levied in respect which impose obligations on the Member of the company transaction, even if subse- States have direct effect in relations between quent contributions are recorded by notarial individuals and the public authorities. 13 In deed. that respect, it is my view that Article 10 ful- fils the conditions (clarity, precision, uncon- ditionality) required by the Court for a pro- vision of Community law to be relied on by individuals directly before a national court. The obligation not to impose any taxes apart from capital duty has its counterpart in the citizen's right to rely on the relevant provi- sion before a national court in order to chal- lenge fiscal charges in conflict therewith. 33. It is not for the Court to decide on the interpretation of national law. It is settled case-law that the national court is bound to interpret provisions of domestic law in the light of the wording and purpose of the rel- evant provisions of Community law. 12 Once the meaning of Article 10(c) of the Directive has been clarified and what the provision prohibits has been been determined, it is for the national court to ascertain whether the provisions of national law may be inter- preted in a manner consistent therewith or whether in order to give full effect to the 35. With regard to the precedence of Com- provisions of community law it is necessary munity law over conflicting national legisla- to aside conflicting national provisions in the tion, I would simply quote the 'classical' pas- specific case. sage of the Simmenthal judgment in which the Court ruled: 'A national court which is called upon, within the limits of its jurisdic- tion, to apply provisions of Community law is under a duty to give full effect to those provisions, if necessary refusing of its own motion to apply any conflicting provision of national legislation, even if adopted subse- quently, and it is not necessary for the court to request or await the prior setting aside of 34. Finally, the referring court asked the such provisions by legislative or other con- Court to clarify whether the Directive has stitutional means. 14 direct effect, what the effects of that might

(2) Article 10 of Directive 69/335/EEC is sufficiently clear, precise and uncondi- tional to be relied upon by individuals against the national authorities and to be applied by the court in place of national provisions which conflict there- with.

I-950