C-426/98

COMMISSION v GREECE

O P I N I O N O F ADVOCATE GENERAL STIX-HACKL delivered on 7 June 2 0 0 1 1

I — Object of the proceedings I I — Legal framework

A — Community law

2. Article 7 of Directive 69/335/EEC, as amended by Directive 85/303/EEC, pro­ vides:

1. In the present action, the Commission applies for a declaration that, by imposing ' 1 . Member States shall exempt from for the benefit of the Ταμείο Νομικών capital duty transactions, other than those (hereinafter 'Lawyers' Fund') and the referred to in Article 9, which were, as at Ταμείο Προνοίας Δικηγόρων (hereinafter 1 July 1984, exempted or taxed at a rate of 'Lawyers' Welfare Fund') additional 0.50% or less. charges on the formation of public limited liability companies and private limited liability companies, on the publication and alteration of their statutes and on the increase of their capital, the Hellenic Republic has failed to fulfil its obligations The exemption shall be subject to the under the EC Treaty and in particular conditions which were applicable, on that under Articles 7 and 10 of Council Direc­ date, for the grant of the exemption or, as tive 69/335/EEC of 17 July 1969 2 concern­ the case may be, for imposition at a rate of ing indirect taxes on the raising of capital, 0.50% or less. as a m e n d e d by Council Directive 85/303/EEC of 10 June 1985 3 (hereinafter 'the Directive').

B — National law 'Apart from capital duty, Member States shall not charge, with regard to companies, firms, associations or legal persons oper- ating for profit, any taxes whatsoever: 5. Under Article 10(1)(p)(aa) of Legislative Decree No 4114/1960, the Lawyers' Fund is financed in particular 'by the payment of an amount of one per cent. (1%) of the (a) in respect of the transactions referred value of any agreement drawn up by to in Article 4; notarial act'.

(b) in respect of contributions, loans or the provision of services, occurring as part 6. The percentage rate referred to above of the transactions referred to in was set at 1.30% by Article 14(1) of Law Article 4; No 1512/1985.

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(3) acts by which the period of existence of companies is extended. In this case, the abovementioned sum shall be paid in (c) branches of foreign companies.'

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9. Under Article 21 of this Law, the per- replied by letter dated 6 May 1993. As this centage rate for this duty is set at 'one per letter did not, in the opinion of the Com- cent. (1%) of the taxable value'. mission, dispel the suspicion of a failure to fulfil obligations, it delivered a reasoned opinion to the Hellenic Republic on 23 February 1996, in which it requested the latter to take the necessary measures within two months. The Greek Govern- 10. Moreover, it appears from Royal ment responded by letter dated 19 June Decree No 22/1956 that an amount of 1996. 1% of the capital of partnerships and of private limited liability companies is levied for the benefit of the Lawyers' Welfare Fund, which is payable at the time when the statutes of such partnerships and com- panies are published at the Court of First 12. Since the Commission arrived at the Instance, Athens (Protodikio Athéni), as view that the Hellenic Republic had failed well as a further amount equal to two to fulfil its obligations, it brought an action thirds of the stamp duty (0.5% of the against the Hellenic Republic at the Court capital) at the time of publication of the by application dated 20 November 1998, acts extending the period of existence of registered at the Registry of the Court on such partnerships and companies. 26 November 1998.

13. The Commission applies III— Pre-litigation procedure and pro- cedure before the Court

IV — Analysis of the plea in law submitted by the Commission 16. The Commission takes as its starting point Article 7(2) of the Directive, accord- ing to which the rate of capital duty is not to exceed one per cent., and submits first of all that the total burden under Greek law of 14. The Commission founds the incom- indirect taxes on the formation of a com- patibility of the disputed provisions of pany, 4 the publication and the alteration of Greek law with the provisions of Directive its statutes and the increase of its capital 69/335/EEC in substance on the basis that reaches 3.8%. From that it infers an the duties concerned are indirect taxes infringement of the Directive, as Article 10 w i t h i n the m e a n i n g of D i r e c t i v e thereof specifically prohibits Member 69/335/EEC, the amount of which exceeds States from levying, apart from capital the authorised amount. In contrast, the duty, any other similar taxes whatsoever. Hellenic Republic claims in substance that the disputed duties are not indirect taxes w i t h i n the m e a n i n g of D i r e c t i v e 69/335/EEC, but are instead the employer's share of social security contributions. As an alternative argument, the Hellenic Republic submits that the duties concerned are in 17. In response to the arguments of the any case compatible with the Directive, in Hellenic Republic in the pre-litigation pro- that they are paid by way of fees or dues cedure, the Commission emphasises that within the meaning of the Directive. there is no link of an insurance nature between the persons liable to pay the duty and the funds that are benefited, as the persons liable to pay the duty cannot be regarded as either beneficiaries or employers. The classification of the dis- puted duties as indirect taxes derives from the absence of a legal relationship between 15. In accordance with the submissions of the persons liable to pay the tax and the the parties, what must be examined first is funds. the legal nature of the disputed duties. If they fall under the prohibition in Article 10 of the Directive, then whether they are 4 — According to the application of the Commission, the excepted under Article 12 thereof would relevant transactions relate to public limited liability com- panies and private limited liability companies under Greek require to be considered. law.

20. First of all, it must be recalled that the 24. As regards the objective characteristics Court has consistently held that 'the nature of the duty under Article 10(1)(p)(aa) of of a tax, duty or charge must be determined Greek Legislative Decree No 4114/1960 in by the Court, under Community law, conjunction with Article 14(1) of Greek according to the objective characteristics Law No 1512/1985 for the benefit of the by which it is levied, irrespective of its Lawyers' Fund in the amount of 1.30% of classification under national law'. 5 the value of the subject of the contract, it is to be observed that this duty is linked to the value of the subject of the contract which is 5 — See the judgments in Joined Cases C-197/94 and C-256/94 notarially attested. It is not disputed that in Bautiaa and Société Française Maritime [1996] ECR I-505, paragraph 39, and in Case C-4/97 Nonwoven [1998] ECR Greece at least some of the transactions the I-6469, paragraph 19. taxation of which is intended to be har- I - 2800

COMMISSION v GREECE

monised by Directive 69/335/EEC 6must levied on the publication of the statutes of be notarially attested: for example, the the company or on their alteration, as the formation of a public limited liability case may be. In this connection, the levying company or of a private limited liability of this duty on documents by which the company, and an increase of capital if it period of companies' existence is extended accompanies an alteration of the statutes. may be disregarded.

26. As regards the objective characteristics of the duty under Article 10(1)(p)(bb) of Greek Legislative Decree No 4114/1960, it is to be observed that the relevant rate of 28. As an interim finding, it may therefore duty is to be applied inter alia to the initial be stated that the additional duties in capital and to increases of capital. This dispute appear at first sight to fall under duty thus falls under the prohibition in the prohibition in Article 10 of Directive Article 10 of the Directive inasmuch as it is 69/335/EEC inasmuch as they are levied in addition to the duty under Articles 17 and 21 of Greek Law No 1676/1986. 6 — See in this respect the judgment in Nonwoven (cited in footnote 5), paragraph 20: '... the various transactions which, in accordance with Article 4(1) of the Directive, must be subjected to capital duty are all transactions 7 — In this connection it is to be observed that the levying of the involving the transfer of capital or assets to a capital company in the taxing Member State. Similarly, the disputed duty on partnerships may be ignored here, in that it categories of transactions which, under Article 4(2), may is not included within the prohibition in Article 10 of the be subject to capital duty all result in an effective increase in Directive. the company's capital or assets'. 8 — Article 10(c) of Directive 69/335/EEC.

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29. What must therefore be analysed, how- example, in the application of Regulation ever, is the arguments of the Greek Govern- (EEC) No 1408/71 9 in regard to the pro- ment according to which the duties con- hibition on the payment of double con- cerned cannot be indirect taxes within the tributions. A recent judgment of the scope of the Directive because they are not Court 10 shows that, for that reason, the paid as income into the State budget in the classification is in each case to be made in narrow sense but into the budget of public the light of the objectives of the provision legal persons, the purpose for which they that is to be applied. are levied is fixed by law and they are imposed irrespective of the tax-paying capacity of the persons liable to pay them.

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34. For that reason, the submissions of the Greece itself. Furthermore, it is to be Greek Government concerning the classifi- emphasised that both the Lawyers' Fund cation of the duties in question as employer and the Lawyers' Welfare Fund clearly — contributions need be considered only on contrary to the submissions of the Hellenic an alternative basis. For the following Republic in its response — have further reasons, these submissions are not persua- financial resources at their disposal. sive. In the first place, there is no contract of service between the company liable to pay the duty — as employer — and the notary or the lawyer — as a provider of services, so that such a classification could 36. From all the foregoing considerations, be considered only by way of analogy, if at it appears that the Commission rightly all. 12 The Greek Government ultimately classified the duties concerned as indirect admits this in its rejoinder, in that it speaks taxes. From that it follows that the total of a 'bundle of relationships' in the context burden of indirect taxes on the formation of which the duties would roughly cor- of capital companies, the publication and respond to employer contributions. the alteration of their statutes and the increase of their capital far exceeds the maximum rate provided for in Article 7 of Directive 69/335/EEC, as amended by Directive 85/303/EEC.

B — The nature of the duties in dispute as 35. It is equally difficult to show the exist- being paid by way of fees or dues ence of a three-party relationship, such as is characteristic in the context of social secur- ity, between the social security provider concerned, an employer and a supplier of 37. However, the disputed duties could be services. Specifically, the disputed duties in paid by way of fees or dues under the present case are paid initially to the Article 12(1)(e) of Directive 69/335/EEC. notary or the lawyer, as the case may be, such that the companies concerned are not linked to the funds in question in any way. This would also appear to be the reason for the fact that the task of the notary or lawyer which is connected to that, of collecting taxes for the State and paying them, appears to be not undisputed in Submissions of the parties

41. As regards the case-law cited by the Hellenic Republic, the Commission 39. In particular, it submits that the duties observes that the characteristics of the concerned are to be regarded as part of the duties in the judgment in Ponente Carni consideration for the activity of the indi- and Cispadana Costruzioni were signifi- vidual persons insured under the social cantly different from the characteristics of security scheme. 13 In this connection, it the duties at issue here, whereas the judg- refers to the judgments in Ponente Carni ment in Denkavit does not concern duties and Cispadana Costruzioni 14 and in Den- falling within the scope of application of kavit Internationaal and Others, 15 which, Article 10 of Directive 69/335/EEC. according to it, mean that an annual duty levied in respect of the registration of capital companies could be paid by way of fees or dues. Also, the levying of a fee required by law in the public interest is permissible. Accordingly, the disputed duties are permissible in that they are levied for the benefit of social security providers Assessment as consideration for the activities per- formed by insured persons.

Modelo [1999] ECR I-6427], paragraph 45. In this respect, the Hellenic Republic 29)'. 16 emphasised that the Court accepted that the duties at issue in that case were paid by way of fees or dues. It in fact held that duties paid by way of fees or dues 'may be payment collected by way of consideration for transactions required by law in the public interest such as, for example, the registration of capital companies'. The Court added that 'the amount of such 43. However, whether the duties levied on duties, which may vary according to the the companies concerned in the present legal form taken by the company, must be case have this characteristic appears to be calculated on the basis of the cost of the questionable. Specifically, in so far as these transaction, which may be assessed on a duties are paid to social security providers flat-rate basis'. However, as the duties at in the form of the two funds referred to, issue in the present case are certainly not to they appear at first sight to be less a fee for be taken as such consideration for the the activity carried out by the notaries or activity of notaries and lawyers which is the lawyers as a fee for the services supplied required by law in the public interest, the by those two funds, which, however, are judgment cited seems to be irrelevant. themselves not supplied to the companies liable to pay the duty. Thus, the disputed duties and the activities of the notaries and the lawyers do not stand in any relationship of mutuality.

47. As an interim finding, it may therefore be stated that the disputed duties cannot be regarded as part of the remuneration paid to the notary or the lawyer, as the case may be. 50. If the Court should none the less be of the view that the disputed duties are linked to the individual activity of notaries and lawyers, then at least the calculation of them — the amount of which increases in direct proportion to the capital of the company and in respect of which there is no upper limit — appears, in the light of existing case-law, to merit discussion. 48. A different conclusion would be poss- ible only if notaries and lawyers were, as Organs of legal services', deemed to be part of the State, so that the financing of their old-age and sickness benefits by companies employing their services might be regarded as part of their remuneration.

52. In doing so, the Court relied on the 54. From all the foregoing considerations, principle, already referred to above, 21 it appears that the disputed duties are not according to which a duty must display a paid by way of fees or dues within the link to the actual costs incurred in provid- meaning of Article 12(1)(e) of Directive ing the service and must be calculated on 69/335/EEC. the basis of those costs, for which it constitutes the consideration. In this con- nection, the Court stated that, 'charges with no upper limit which increase directly in proportion to the nominal value of the capital raised cannot, by their very nature, amount to duties paid by way of fees or dues within the meaning of the Directive. Even if there may be a link in some cases C — The application of the Hellenic between the complexity of a registration Republic for the restriction of the temporal and the amount of capital raised, the effect of the decision to be made by the amount of such charges will generally bear Court no relation to the costs actually incurred by the authority on the registration formalities (Fantask and Others, paragraph 31)'. 22 55. At the end of the oral hearing, the representative of the Hellenic Republic requested that, if the Court were not to give judgment in its favour, 'a decision be made which... did not in any case have retrospective effect'. By way of justifi- cation, the representative of the Hellenic Republic pointed to a danger, of which no more detailed evidence was offered, of a financial crisis for the Lawyers' Fund and also to the requirements of the protection 53. In the present case, it was not disputed of legitimate expectations. that all the disputed duties are calculated with no upper limit and increase directly in proportion to the capital of the company. For this reason alone, they are not paid by way of fees or dues, and there is no need to consider the further principles relating to the lawfulness of the means of calculating 56. This application appears to merit dis- fees with regard to Article 12(1)(e) of cussion in a number of respects. Directive 69/335/EEC. 23

60. In this connection, reference must be made to the judgment in Joined Cases 314/81, 315/81, 316/81 and 83/82, 28 which holds that 'if the Court finds in 58. However, as the application was made proceedings under Articles 169 to 171 of only at the end of the oral hearing, and the EEC Treaty that a Member State's without any substantive justification for legislation is incompatible with the obli- which any detailed evidence was offered 2 5 gations which it has under the Treaty the as well as without justification of the courts of that State are bound by virtue of lateness in time, it is submitted to the Article 171 to draw the necessary infer- Court that the application should be ences from the judgment of the Court. rejected in accordance with Article 42(2) However, it should be understood that the of the Rules of Procedure as inadmissible, rights accruing to individuals derive, not and in any case as unfounded. from that judgment, but from the actual provisions of Community law having direct effect in the internal legal order'. 29

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Community law is a consequence of, and thus interpreted with a view to calling in an adjunct to, the rights conferred on question legal relationships established in individuals by the Community provisions good faith'. 33 prohibiting such charges'. 30 31

63. Against this background, the appli- cation of the representative of the Hellenic Republic is to that extent also devoid of practical effect.

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VI — Conclusion

66. On the basis of the foregoing considerations, it is proposed that the Court should:

(1) declare that, by imposing for the benefit of the Lawyers' Fund and the Lawyers' Welfare Fund, in addition to the duty on the raising of capital under Articles 17 and 21 of Greek Law No 1676/1986, additional charges on the formation of public limited liability companies and private limited liability companies, on the publication and alteration of their statutes and on the increase of their capital, the Hellenic Republic has failed to fulfil its obligations under Articles 7 and 10 of Council Directive 69/335/EEC concerning indirect taxes on the raising of capital, as amended by Council Directive 85/303/EEC of 10 June 1985;

(2) reject the application of the Hellenic Republic for a restriction of the temporal effect of the judgment;