C-113/99

P.P. HANDELSGESELLSCHAFT

OPINION OF ADVOCATE GENERAL FENNELLY delivered on 21 September 2000 1

1. Does Council Directive 69/335/EEC of 3. Article 4(1) provides as follows: 17 July 1969 concerning indirect taxes on the raising of capital, as amended (herein- after 'the Directive'), 2preclude the levying on capital companies of a minimum cor- poration tax, payable in advance and regardless of their actual income?

'The following transactions shall be subject to capital duty:

I — Facts and procedural background (a) the formation of a capital company;

2. The Directive, as the Court has noted, 'is (b) the conversion into a capital company aimed in particular at achieving harmoni- of a company, firm, association or legal sation of the factors involved in the fixing person which is not a capital company; and levying of capital duty in the Commu- nity, by means of the elimination of tax obstacles which interfere with the free movement of capital'. 3

6. Since the retention of 'other indirect '(a) an increase in the capital of a capital taxes having the same characteristics as company by capitalisation of profits or capital duty might frustrate the purpose of of permanent or temporary reserves; the measures provided for in this Directive',

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P.P. HANDELSGESELLSCHAFT

the last recital in its preamble proposes that 7. Article 12 provides an exhaustive list of those taxes be abolished. To this end, charges which can be made notwithstand- Article 10 provides as follows: ing the prohibition of Article 10.

'[apart] from capital duty, Member States 8. In accordance with the Körperschaft- shall not charge, with regard to companies, steuergesetz 1988 (Corporation Tax Law), firms, associations or legal persons operat- as amended by the Abgabenänderungsge- ing for profit, any taxes whatsoever: setz (Tax Amendments Law) 1994 in Bundesgesetzblatt (Federal Law Gazette) No 680/1994 (hereinafter 'the KSG 1988'), corporations whose management or regis- tered office is in Austria have unlimited liability to corporation tax. This is charged at a rate of 34% of income received in one calendar year (Paragraph 7 of the KSG (a) in respect of the transactions referred 1988). In the version in force at the to in Article 4; material time, Paragraph 24(4) of that Law provided as follows:

10. Minimum corporation tax applies to capital companies in liquidation until they cease to exist. In accordance with a notice issued by the defendant in the main pro- ceedings, limited liability trading company P. P. Handels GmbH was required to pay ATS 15 000 corporation tax for 1996 II — Opinion (hereinafter 'the national tax'), though the company did not receive any income for that year. The applicant in those proceed- ings, who had been appointed insolvency administrator for the company on 19 March 1996, challenged that notice before the Austrian courts. On 17 March 1999, the Verwaltungsgerichtshof, Wien (Administrative Court, Vienna) referred the following question to the Court: 12. In its order for reference, the referring court cited the judgment in Ponente Carni, in which the Court held that an annual charge for the registration of capital com- panies, or any other 'charge imposed in respect of one of the essential formalities for [the] formation' of such companies, 'Does Article 10 of Council Directive falls within the prohibition laid down by 69/335/EEC of 17 July 1969 concerning Article 10 of the Directive.5 It therefore indirect taxes on the raising of capital wondered if, for capital companies whose preclude the levying for 1996 of the tax annual income is less than ATS 44 118, 6 provided for by Paragraph 24(4) of the the national tax should be regarded as a 1988 Körperschaftsteuergesetz (Corpora- duty unrelated to income which 'in its tion Tax Law) as amended in BGBl. economic effects, amounts to a duty (Bundesgesetzblatt, Federal Law Gazette) No 680/1994?' 5—joined Cases C-71/91 and C-178/91 Ponente Carni and Cispadana Costruzioni [1993] ECR I-1915. 4 — The order for reference cites the version of Para- 6 — Being the amount at which corporation tax on actual graph 26a(5) of the KSG 1988 contained in BGBl. income equals the minimum corporation tax of ATS 15 000: No 70/1997. 34% of ATS 44 118 = ATS 15 000.

13. The order for reference is based on the presumption that the national tax is an indirect tax within the scope of application of the Directive. It is true that, according to settled case-law, 'the nature of a tax, duty or charge must be determined by the Court, under Community law, according to the objective characteristics by which it is levied, irrespective of its classification under national law'. 7The Court should therefore examine the question referred in the light of the objective characteristics of the national tax. 15. As to Article 10(c), it is clear that, though levied exclusively on capital com- panies, the national tax is not imposed 'in respect of registration or any other form- ality required before the commencement of business to which a company, firm, asso- ciation or legal person operating for profit may be subject by reason of its legal form'. Payment of the national tax is not required for inclusion on the registry of companies, and non-payment, as the Commission has 14. As the Court noted in Nonwoven, 'the pointed out, has no direct consequence on various transactions which, in accordance the registration of a company, such as with Article 4(1) of the Directive, must be exclusion from the registry. Corporation subjected to capital duty are all transac- tax is levied irrespective of any transaction tions involving the transfer of capital or or formality on all corporations whose assets to a capital company in the taxing management or registered office is in Member State[, while] the categories of Austria, in accordance with Paragraph 1(2) transaction which, under Article 4(2), may of the KSG 1988, regardless of their legal be subject to capital duty all result in an form.

18. In Denkavit, the Court explained the prohibition of Article 10(c) as being 'justi- fied by the fact that, even though the taxes in question are not imposed on capital contributions as such, they are nevertheless imposed on account of formalities con- nected with the company's legal form, in other words on account of the instrument employed for raising capital, so that their 17. The annual minimum corporation tax continued existence would similarly risk imposed on capital companies is, according frustrating the aims of the directive'. 9 It is to its terms, an advance on the amount of clear that Paragraph 24(4) of the KSG their potential liability to corporation tax 1988 does not involve any formalities of in a given year. It is therefore not 'a duty the kind envisaged by Article 10(c) of the bearing no relation to income', as the Directive as thus explained. It does not national court has suggested; in accordance therefore have 'the same characteristics as with Paragraph 24(4) of the KSG 1988, it is the capital duty or the stamp duty on only where the company's actual income securities', nor does it involve an increase in fails to surpass the threshold of ATS 44 118 the rate of capital duty paid or a fresh over several years, or where the company levying of such duty. I am therefore of the goes into liquidation, that the amount of opinion that it is outside the scope of the the national tax cannot be set off against prohibition of Article 10 of the Directive. actual tax liability. The fact that in such As a result, Article 12 of the Directive does circumstances the advance cannot be set off not come into play in the present proceed- does not, in my opinion, change the nature ings. of the tax for the purposes of the Directive; it remains a direct tax which is payable in respect of income imputed to a capital 9 — Case C-2/94 Denkavit International and Others v Kamer van Koophandel en Fabrieken voor Midden-G elderland and company, the amount of which actually Others [1996] ECR I-2827, paragraph 23.