C-31/97

FECSA AND ACESA

OPINION OF ADVOCATE GENERAL FENNELLY delivered on 11 June 1998 *

1. Two Spanish taxpayers have invoked Documentados (Law concerning duty on Council Directive 69/335/EEC of 17 July transfers of assets and documented legal trans­ 1969 concerning indirect taxes on the raising actions, hereinafter 'the Law') provides as fol­ of capital (hereinafter 'the Directive') 1to chal­ lows: lenge the imposition of an ad valorem duty on the issue of the document recording the repayment of a loan. The issue is a simple one of interpretation. Does the prohibition of taxes on loan documentation cover those con­ cerning repayment? As it happens, the same Spanish law was considered by the Court ear­ '(1) Duty on transfers of assets and docu­ lier this year. 2 mented legal transactions is an indirect tax imposed, subject to the conditions set out in the provisions below, on:

I — Factual and legal background

1. transfers of assets for consideration;

(a) Relevant national provisions

5. In June 1990, the applicants in the first case (hereinafter TECSA') partially redeemed an issue of debentures in an amount of 3. Article 28 of the Law applies the duty to PTA 378 650 000 by an officially attested notarial acts. Article 31(1) fixes a charge for record of redemption. The defendant tax minutes and copies of official documents and administration applied the duty on docu­ notarial deeds, while Article 31(2) provides in mented legal transactions at a rate of 0.5%, material part that: and concluded that the applicants owed PTA 1 893 250 in respect of this operation. FECSA's challenge to this assessment before the Tribunal Económico-Administrativo de Catalunya was rejected, and an appeal lodged at the Tribunal Superior de Justicia de Cata­ lunya (High Court of Justice, Catalonia).

'Where original documents and notarial deeds have for their subject-matter a quantity or a thing of value, or contain acts or contracts required to be entered in the Commercial, Mercantile or Industrial Property Register and are not subject to inheritance tax or tax (c) Case C-32/97 on gifts or the taxes referred to in Article 1(1) and (2) of this Law, they shall give rise in addition to the payment of duty of 0.5% for such acts or contracts.'

6. The dispute in the main proceedings in Case C-32/97 between the applicants (here­ inafter 'ACESA') and the Spanish tax authori­ ties concerns the imposition of the duty on documented legal transactions in an amount of PTA 367 000 in respect of the reimburse­ 4. Article 20 of the implementing provisions ment of a loan in June 1989; ACESA chal­ provides that where the reimbursement of lenged the assessment before the Tribunal bonds is not subject to the duty on the transfer Econòmico-Administrativo de Catalunya and of assets, it is subject to payment of the duty on appeal to the High Court of Justice, Cata­ on documented legal transactions. lonia.

'Loans raised by the issue of debentures or similar securities consist of two distinct phases: 9. Written and oral observations have been first, payment of the loan capital by the issue submitted by FECSA, ACESA, the Gener­ of debentures or other similar securities; alitat of Catalonia (hereinafter 'the Generali­ second, return of the loan capital, which is tat'), the Kingdom of Spain and the Commis­ formalised in a record of redemption. sion. According to the Spanish authorities, the offi­ cially attested deed of issue is exempt from the duty on transfers of assets and from any other charge. The record of redemption is exempt from the duty on transfers of assets but is liable to the duty on documented legal II — The capital duty directive transactions ... the Duty on transfers of assets and documented legal transactions is in no way similar to the duties on registration in the Commercial Register, which are not the subject-matter of the present case.' 10. As the Court stated in Solred, 'the Direc­ tive is aimed in particular at achieving har­ monisation of the factors involved in the fixing and levying of capital duty in the Com­ munity, by means of the elimination of tax obstacles which interfere with the free move­ 3 ment of capital'. With a view to ensuring the effectiveness of the harmonisation secured in 8. The Fourth Chamber of the Division for Contentious-Administrative Proceedings of the High Court of Justice, Catalonia, has C-347//96 3 — Case C-347 96,, cited in footnote 2 above above,, paragraph 3.

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C-31//97 AND C-32 OPINION OF MR FENNELLY — JOINED CASES C-31 C-32//97

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FECSA AND ACESA

14. While it is true that the orders for refer­ 16. In the first place, I do not agree with the ence do not provide either a full description approach suggested by the Generalitat on the of the applicable national provisions or any basis of the second recital in the preamble, information on the factual background, I am that, in seeking to avoid double or discrimi­ of the view, set out at paragraph 10 of my natory taxation in respect of the raising of Opinion in Lemmens, that 'the sufficiency of capital, the Directive only applies to the issue the information supplied by the national court but not the reimbursement of loans. The pre­ must be judged in the light of the questions vention of the double taxation of concentra­ 5 of Community law posed'. In the present tions of capital to which the Directive aspires proceedings, the referring court has set out is not an aim in itself, but is merely the means the position in national law regarding the to a wider objective, identified by the Court taxation of the transactions in question suc­ in Ponente Carni thus: cinctly but clearly, and has provided refer­ ences to the principal legislative provisions, while the factual background does not, in the relatively technical context of the Directive, impinge on the tenor of the response the Court is here invited to provide. In my opinion, the Court should therefore admit 6 the present request. '[t]he Directive aims at encouraging the free movement of capital which is regarded as essential for the creation of an economic union whose characteristics are similar to those of a domestic market ... the pursuit of such an objective presupposes the abolition of indi­ rect taxes in force in the Member States until then and imposing in place of them a duty (b) The interpretation of Articles 11 and 12 of charged only once in the common market the Directive and at the same level in all the Member 7 States.'

the Directive. The taxation of an operation entirety, and in particular any formality which is required for the extinction of a loan relating to the creation or extinction of loans, may 'frustrate the purpose of the measures such as the emission of a memorandum of provided for in [this] Directive' like other redemption. In any case, Article 11 prohibits indirect taxes, despite the deferral in time of 'any form of taxation whatsoever'; while for­ its imposition. Furthermore, an interpretation mally a tax on the official attestation of a of the Directive which allowed a Member document recording the redemption of a loan, State to tax loans, albeit indirectly by means the national tax is, in effect, a tax on the loan operation itself and as such falls foul of of a duty on the memorandum of redemp­ Article 11. tion, would have the effect of discouraging capital companies from raising loan capital in that Member State, contrary to the stated aims of the Directive noted above.

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FECSA AND ACESA

national duty can be levied where the loan- Nor has it been suggested that the contested sare secured by mortgages, the Generalitat duty falls within the exemption for fees or appears to be confusing two distinct opera­ dues allowed by Article 12(1)(e). Further­ tions, to wit, the discharge of mortgages or more, as noted by the applicants, in Dansk other charges on real property, and the finan­ Sparinvest the Court interpreted Article 12 of cial transaction consisting in the repayment the Directive as establishing 'an exhaustive of the loan itself. Even if a loan has, for Ust of taxes and duties other than capital duty example, been registered as a charge on real which affect capital companies in connection property, the discharge of such a charge must with the transactions referred to in Articles 10 9 be distinguished from the redemption; a duty and 11' . Clearly no duty such as that at may be levied on the former transaction, by issue in the main proceedings features on that virtue of Article 12(1)(d), but not on the latter. list.

IV — Conclusion

21 . In the light of the foregoing , I recommend to the Court that the questions referred by the Fourth Chamber of the Division for Contentious-Administrative Proceedings of the Tribunal Superior de Justicia de Catalunya be answered as fol­ lows :

Articles 11 and 12 of Council Directive 69 / 335 / EEC of 17 July 1969 concerning indi­ rect taxes on the raising of capital should be interpreted as precluding the levying of 0 . 5 % duty on the notarial deed recording the redemption of a loan in circumstances such as those of the main proceedings .