C-19/99

OPINION OF MR COSMAS — CASE C-19/99

OPINION OF ADVOCATE GENERAL COSMAS delivered on 30 March 2000 *

I — Introduction less be regarded as permitted by virtue of the derogation in Article 12(1)(e) of the Directive allowing the Member States to charge 'duties paid by way of fees or dues'.

1. In the present case, the Tax Division of the Supremo Tribunal Administrativo (Supreme Administrative Court of Portu- gal) is asking the Court to interpret provi- 3. Additionally, in the present case the sions of Council Directive 69/335/EEC of national court asks more specific questions 17 July 1969 concerning indirect taxes on concerned with determining the level of the the raising of capital 1 (hereinafter 'the notarial charges should they be regarded as Directive'). amounting to fees or dues within the meaning of Article 12(1)(e) of the Direc- tive.

2. The questions submitted by the national court are to a large extent identical to those asked by the same court in Case C-56/98, 2 II — Community context in which judgment was given on 29 Sep- tember 1999. First, as in Case C-56/98, the national court asks whether charges pay- able to a notary for recording in a public instrument as required by law, resolutions to amend a company's statutes or increase 4. The Directive has the aim of promoting its capital are covered by the Directive and, the free movement of capital, in order to if so, whether those charges may none the 'create an economic union whose charac- teristics are similar to those of a domestic market'. 3 * Original language: Greek. 1 — OJ, English Special Edition 1969 (II), p. 412. 2 — Case C-56/98 Modelo v Director-Geral dos Registos e Notariado [1999] ECR I-6427. 3 — See the first recital in the preamble to the Directive.

6. Article 4, Article 8 as amended by Council Directive 85/303/EEC, 4and Arti- cle 9 set out, subject to Article 7, the 9. Article 10 of the Directive provides that, transactions subject to capital duty and apart from capital duty, the Member States certain transactions for which the Member are not to charge, with regard to compa- States may lay down exceptions. 5 nies, firms, associations or legal persons operating for profit, any taxes whatsoever: (a) in respect of the transactions referred to in Article 4; (b) in respect of contributions, loans or the provision of services, occurring as part of the transactions referred to in Article 4; or (c) in respect of registration or any other formality required before the commencement of business to which a 7. In accordance with Article 4(1) of the company, firm, association or legal person Directive, capital duty is payable on, inter operating for profit may be subject by alia, (a) the formation of a capital com- reason of its legal form. pany 6 and (c) an increase in the capital of a capital company by contribution of assets of any kind.

OPINION OF MR COSMAS — CASE C-19/99

than capital duty which, in derogation from attested act relating to the amendment of a Articles 10 and 11, may be levied on company's statutes is equal to the entire capital companies on account of the trans- share capital of the company. Under Arti- actions referred to in those two articles. 8 It cle 1(2)(f), where the notarially attested act states, inter alia, that, notwithstanding concerns an increase in capital, its statutory Articles 10 and 11, Member States may value is the amount of that increase. charge duties paid by way of fees or dues Finally, Article 1(2)(g) provides that the (Article 12(1)(e)). value of an act relating to an increase in capital accompanied by various other amendments to the statutes is the amount of that increase or the amount of the amended share capital resulting from the alteration, whichever yields the higher charge.

I I I— National law

11. The code governing the Portuguese 13. Under Article 4 of the Table, notarial notarial profession, adopted by Decree- charges are determined on the basis of the Law No 47619 of 31 March 1967, pro- type of the notarially attested act while, vides that certain acts must be recorded in under Article 5 of the Table, they are public instruments drawn up by a notary. calculated by reference to a percentage of Under Article 89(e) of the code, the acts the statutory value of the act. Articles 4 covered include those which 'incorporate and 5 apply cumulatively. commercial companies, change their form, dissolve them or put them into ordinary liquidation... and those which amend any company statutes'.

16. Modelo contested the document deter- '(1) Is it open to an individual to rely on mining the amount of those notarial Articles 10 and 12 of Council Directive charges before the Tribunal Tributário de 69/335/EEC in his relations with the Primeira Instância (Tax Court of First State even though the latter has not Instance), Oporto, but its action was dis- transposed that directive into its missed as unfounded. It then appealed to national legal system? the Supremo Tribunal Administrativo, ask- ing it to set aside the judgment and, consequently, the determination of the charges, and to order reimbursement of the sum paid together with interest. It submitted that the charge was really a (2) Must the transactions referred to in tax, the level of which should have been set Article 4(3) of Directive 69/335/EEC not by the Government but by Parliament, be regarded as covered by the prohibi- tion laid down in Article 10 of the same Community measure, in such a 9 — In accordance with Article 27, the charges set out in way as to preclude the collection, with Article 5 are halved, inter alia, where the period for which respect to those transactions, not only the company was constituted is extended or continued or the company's statutes are partially amended (Arti- of capital duty but also of any other cle 27(1)(c)). 10 — Modelo states that it increased its share capital and made levy, of whatever kind, in particular other amendments to its statutes. one that is a charge rather than a tax?

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(3) Must Articles 10 and 12(1)(e) of the VI — Answers to the questions submitted same directive be interpreted as mean- ing that notarial charges for recording in a public instrument as required by law resolutions to increase the capital or to amend the statutes of a company may not vary according to the amount of the increase and the amount of the A — Questions 1, 2 and 3 capital respectively?

22. The Court then ruled that 'fees or dues' within the meaning of Article 12(1)(e) of Directive 69/335, as amended by Directive 85/303, did not cover a charge collected for drawing up a notarially attested act record- B — Questions 4, 5 and 6 ing an increase in the share capital or a change in the name or registered office of a capital company, such as the charge at issue in the main proceedings in that case, the amount of which increased in direct pro- portion to the share capital raised and in respect of which there was no upper 25. It is appropriate to consider the final limit. 12 three questions together and to give them a joint answer. By those questions, the national court essentially enquires about the nature of the charges if they are paid by way of fees or dues. Specifically, it asks whether the amount of the notarial charges 23. Finally, the Court recalled its settled- may be determined by reference to the cost case law according to which Article 10 of of the service provided and what that cost Directive 69/335, as amended by Directive may include. That is to say, it asks whether 85/303, creates rights on which individuals the charges must be calculated solely on the may rely in proceedings before the national basis of the cost of the services provided or courts. may be set so as to cover the whole or part of the outgoings of the department entrusted with their provision.

24. In other words, it was held in Case C-56/98 that the notarial charges set in that instance, in accordance with national law,

12 — See also Case C-188/95 Fantask and Others v Industrimi- 26. The necessary criteria for answering the nisteriet [1997] ECR I-6783, paragraph 31. national court's final three questions can be

found in both Ponente Carni 13 and Fan- panies and on their capital being increased task. 14 cannot be by way of fees or dues within the meaning of Article 12(1)(e) of the Directive if their amount is calculated so as to cover costs. . . [which are] unrelated to the regis- trations in respect of which the contested charges are paid'. 27. The Court has already held 15 that 'the distinction between taxes prohibited by Article 10 of the Directive and duties paid by way of fees or dues implies that the latter cover only payments collected on registration whose amount is calculated on the basis of the cost of the service rendered. A payment the amount of which had no link with the cost of the particular service or was calculated not on the basis of the cost of the transaction for which it is consideration but on the basis of all the 29. The Court has also held 17 that a running and capital costs of the department Member State may impose charges for responsible for that transaction would have major transactions only and pass on in to be regarded as a tax falling solely under those charges the costs of minor services the prohibition of Article 10 of the Direc- performed without charge.

. . . a registration authority is 13 —Joined Cases C-71/91 and C-178/91 Ponente Carni and responsible for ensuring compliance with Cispadana Costruzioni [1993] ECR I-1915, in particular paragraphs 41 and 42. That case was concerned with the numerous other registration and disclosure issue of whether certain provisions of Italian law imposing requirements. . . . it is in my view open to a administrative charges for the registration of company details in the appropriate register of capital companies Member State to confine its charges solely were compatible with the Ditective. It was also concerned, inter alia; with the issue of whether the charges could be to more substantial transactions and to considered to constitute duties paid by way of fees or dues, take account of the costs of minor tasks and with the question of the relationship between the amount of duties paid by way of fees or dues and the cost performed in connection with maintenance of the service provided. of the register in the fees or dues charged 14 — Cited above in footnote 12. The issues in that case included whether charges levied on registration of new public and for such transactions.' In paragraph 45, the private limited companies and on registration of increases Advocate General proposed that in the in their capital could be considered to be paid by way of fees or dues within the meaning of Article 12(1)(a) of the interests of administrative simplicity the Directive, and how the amount of those charges was to be calculated. 15 — See Ponente Carni, paragraphs 41 and 42, and Fantask, paragraph 27. 16 — Fantask, paragraph 28. 17 — Fantask, paragraph 28.

30. In the present case, given the particular nature of the arrangements governing the notarial profession under Portuguese law, 32. In paragraph 43 of his Opinion in the consequence of having regard to the Fantask, Advocate General Jacobs provi- abovementioned redistributive element in ded more detailed guidance on the manner connection with the notarial charges levied in which the costs of a registration author- would be that Portugal may impose higher ity are to be calculated. He explained that it notarial charges for major transactions and would be appropriate 'to base the calcula- pass on in those charges the costs of any tion of the relevant costs on the normal minor services performed without charge. principles of cost or management account- In that way it is possible for individuals to ing. In other words, the fees may reflect the have wide access to notarial services, with- direct costs and overheads of the authority out distinction on the basis of their income. attributable to the services in question. Thus, such costs might include, in addition to direct material costs and the salary and social security costs of the staff carrying out the services, a proportion of the overheads of the authority such as lighting and heating, staff management costs, computer 31. In addition, the Court held 1 8that 'in operation and development costs, office calculating the amount of duties paid by rents or depreciation, depreciation of other way of fees or dues, the Member States are fixed assets such as furniture and equip- entitled to take account not only of the ment etc. The proportion of such costs material and salary costs which are directly referable to registration services should, related to the effecting of the registrations where possible, be determined by direct in respect of which they are incurred, but attribution, for example by identifying the rent payable for the offices used specifically for the services in question. Where costs 18 — Fantask, paragraph 30. relate both to registration services and to

33. In the present case, I would say that those costs include the remuneration of 35. In view of the foregoing considerations, notaries and of the staff in their office and I consider that it is for the national court to regard may be had to the time which they review the extent to which the notarial devote to carrying out each operation (for charges at issue are paid by way of fees or example, registration of an increase in dues and, where appropriate, to order a company capital), the expenditure on their refund on that basis. 21 The sums levied professional training and the cost of run- may cover the costs of any minor services ning their offices. Account may also be performed without charge. Furthermore, as taken, when determining the authority's has been made clear by the Court, 22 the costs, of the insurance cover in respect of Member State may impose flat-rate charges the notaries' personal liability for the and fix their amount for an indefinite documents which they draw up and, more period, provided that it checks at regular generally, of the costs of setting up and intervals that they continue not to exceed maintaining the authority in question. 19 the average cost of the registrations at issue. 19 — In Case C-56/98, the Portuguese Government, in reply to a written question asked by the Court, analysed the arrange- ments governing the notarial profession under Portuguese law and pointed out, inter alia, that while Portuguese notaries assume their duties under a public service relationship, are employed by the State and nave the rights and obligations of other civil servants, they are personally liable for their actions and may be required to compensate persons harmed thereby. It also stated that the difference between the charge levied and the amounts payable to the notary and the members of his staff is paid to an 36. Thus, the answer to Questions 4, 5 and organisation called the Cofre dos Conservadores, Notários e Funcionários de Justiça (Fund for Registrars, Notaries and Officers of the Ministry of Justice). By means of the 6 should be that Article 12(1 )(e) of the sums levied, that organisation meets the following expen- Directive must be interpreted as meaning diture: (a) the salaries of the notaries and other civil servants; (b) all the costs relating to the professional that, in order for notarial charges levied in training of notaries; (c) the costs of acquiring movable property; and (d) the costs of acquiring real property in order to set up a notary's office, the cost of the works and the rent payments, in other words, the charges levied are in principle intended to pay the salaries of the notaries and 20 — Ponente Carni, paragraph 43, and Fantask, paragraph 32. their staff and to cover their setting up and maintenance 21 — Fantask, paragraph 33. costs. 22 — Fantask, paragraphs 32 and 34.

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(2) A charge payable for drawing up a notarially attested act recording an increase in the share capital or a change in the name or registered office of a capital company is, where it amounts to a tax for the purposes of Directive 69/335, as amended by Directive 85/303, in principle prohibited under Article 10(c) thereof.

(3) 'Fees or dues' within the meaning of Article 12(1 )(e) of Directive 69/335, as amended by Directive 85/303, do not cover a charge collected for drawing up a notarially attested act recording an increase in the share capital or a change in the name or registered office of a capital company, such as the charge at issue in the main proceedings, the amount of which increases in direct proportion to the share capital raised and in respect of which there is no upper limit.

(4) Article 10 of Directive 69/335, as amended by Directive 85/303, creates rights on which individuals may rely in proceedings before the national courts.

(5) Article 12(l)(e) of the directive must be interpreted as meaning that, in order for notarial charges levied in respect of increases in the capital of capital companies or amendments of their statutes to be paid by way of fees or dues, their amount must be calculated solely on the basis of the cost of the formalities in question. It may, however, also cover the costs of any minor services performed without charge. In calculating their amount, a Member State is entitled to take account of all the costs related to the effecting of registration, including the proportion of the overheads which may be attributed thereto. A Member State may impose flat-rate notarial charges and fix their amount for an indefinite period, provided that it checks at regular intervals that they continue not to exceed the average cost of the registrations at issue.