C-134/99

OPINION OF MR COSMAS — CASE C-134/99

O P I N I O N OF ADVOCATE GENERAL COSMAS delivered on 2 5 May 2000 *

I — Introduction 3. The questions submitted by the national court in the present case are similar to those put by the same court in Case C-56/98 Modelo SPGS v Director-Geral dos Regis­ tos e Notariado (hereinafter 'Modelo ľ),2 in which judgment was given on 29 Sep­ tember 1999, and in Case C-19/99 Modelo Continente SPGS v Fazenda Pública (here­ 1. In the present case, the Supremo Tribu­ inafter 'Modelo II'). 3 Those cases were nal Administrativo (Supreme Administra­ different inasmuch as they raised issues tive Court), Portugal, is asking the Court to relating to charges payable to a notary for interpret provisions of Council Directive recording in a public instrument, as 69/335/EEC of 17 July 1969 concerning required by law, resolutions to amend a indirect taxes on the raising of capital 1 company's statutes or increase its capital. 4 (hereinafter 'the Directive').

teristics are similar to those of a domestic 6. Article 4, Article 8, as amended by market'. 5 The free movement of capital is Council Directive 85/303/EEC, 7and Arti- promoted by the harmonisation of indirect cle 9 set out 8the transactions subject to taxes on capital contributions to compa- capital duty and certain transactions for nies, stamp duty on securities and other which the Member States may lay down indirect taxes with the same characteristics exceptions. 9 as capital duty or stamp duty on securities. It is stated in the eighth recital in the preamble to the Directive that 'the reten- tion of other indirect taxes with the same characteristics as the capital duty or the 7. In accordance with Article 4(1) of the stamp duty on securities might frustrate the Directive, capital duty is payable on, inter purpose of the measures provided for in alia, (a) the formation of a capital com- this Directive and those taxes should there- pany 10 and (c) an increase in the capital of fore be abolished'. a capital company by contribution of assets of any kind.

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transactions other than those referred to in III— National law Article 7(1) or charge duty on them at a single rate not exceeding 1% (Article 7(2)).

11. Article 24 of Decree-Law (Decreto-Lei) No 144/83 of 31 March 1983 13 provides that legal persons must enter in the RNPC 14 certain documents and events, 9. Article 10 of the Directive provides that, including (a) their constitution and (d) a apart from capital duty, the Member States change in their objects or capital. 15 are not to charge, with regard to compa- 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 12. Article 62(1)(b) of Decree-Law company, firm, association or legal person No 42/89 of 3 February 1989 16 provides operating for profit may be subject by for the imposition of fines (coimas) in the reason of its legal form. event of infringement of the rules relating to the obligation to register (regras do registo).

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13. Article 73 of Decree-Law No 144/83 increase is added to the charge. Under states that charges (taxas) set by order Article 3(5), the amount laid down in (portaria) of the Minister of Justice are Article 3(4) is raised further for entries payable for entries in the RNPC and for the recording increases in the capital of certain issue of certificates (certificados de amissi- undertakings. bilidade) attesting that names of firms (firmas) and business names (denomina- ções) are permitted. The revenue from those charges is paid to a body called the Cofre dos Conservadores, Notarios e Fun- cionarios de Justiça (Fund for Registrars, Notaries and Officers of the Ministry of Justice; hereinafter 'the Fund'). By means of the sums levied, that body bears the capital and operational costs of the RNPC. 17 15. Article 57(1) of Law No 10-B/96 of 23 March 1996 19 provides that the statu- tory charges (emolumentos) payable on account of increases in the share capital of companies effected in the course of 1996 are halved in certain cases.

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increase at the commercial registry 22 (Con- tória do Registo Comercial do Porto servatória do Registo Comercial). 23 How- (Oporto Commercial Registry) determined ever, in accordance with Article 1(2) and that the registration charges amounted to (3) of Decree-Law No 32/85, applications PTE 12 501 500. for entering in the RNPC operations (such as an increase in capital) which must also be entered in the commercial register are made simultaneously, by the same act and on the same form, at the competent office 19. IGI contested the calculation of that of the commercial registry. sum before the Tribunal Tributário de Primeira Instância (Tax Court of First Instance), Oporto, which found against it. IGI appealed on a point of law to the Supremo Tribunal Administrativo, submit- ting that the levying of the charges was 17. Finally, the Portuguese Government incompatible with the Directive, because states (paragraph 19 of its written observa- the amount demanded was out of propor- tions) that until 1996 a capital duty tion to the cost and nature of the service (Imposto de Selo) was imposed in respect provided, and with the Constitution of the of the formation of companies and Portuguese Republic. 24 increases in capital and that it was abol- ished pursuant to the Directive.

V — Questions referred for a preliminary ruling

IV — Facts 20. In order to decide the case before it, the Supremo Tribunal Administrativo has referred the following questions to the 18. The Portuguese company IGI — Inves- Court of Justice for a preliminary ruling: timentos Imobiliários SA (hereinafter 'IGI') entered an increase in its share capital in the RNPC. On 8 July 1996 the Conserva-

(7) Is it permitted, having regard to the same provisions of the directive, for any charge in excess of the cost of the (3) Must Articles 10 and 12(1)(e) of the service to be made? And if so, to what same directive be interpreted as mean- extent? If the excess were to be mani- ing that the charges payable for entry fest and unreasonable, could the (prescribed by law) on the National amount of the charges be reduced on Register of Legal Persons of increases an equitable basis?' of capital may not vary according to the amount of such increases?

(4) May such variables also be regarded as VI — Answers to the questions submitted a function of the cost of the service provided?

A — Question 1

(5) Does that cost include the salary of officials, agents or other public employees, expenses incurred in respect 21. With regard to the issue raised by the of minor operations carried out free of first question — whether it is open to an charge, and a portion of overheads individual to rely on Articles 10 and 12 of

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25. First of all, a point of clarification is required. The question of whether a parti- 23. I therefore consider that, having regard cular charge imposed by a Member State to the dispute pending before the national when capital is raised constitutes a tax for court, the same answer must be given to the the purposes of the Directive is for the first question, concerning an individual's Court to decide, 'according to the objective ability to rely on Articles 10 and 12(1)(e) of characteristics by which it is levied', 28 the Directive in his relations with the State. irrespective of national classifications, con- ceptual distinctions and theoretical con- structions of domestic law, as is, moreover, 25 — Case C-188/95 Fantask and Others v Industriministeriet dictated by the principle of supremacy of [1997] ECR I-6783, paragraph 54. 26 — See also, for example, Case C-236/92 Comitato di Coordinamento per la Difesa della Cava and Others [1994] ECR I-483, paragraph 8. 27 — Fantask, paragraph 55. With regard specifically to the 28 —Joined Cases C-197/94 and C-252/94 Bautiaa and Société ability of individuals to rely on Article 10 of the Directive Française Maritime [1996] ECR I-505, paragraph 39. See before national courts, see Modelo I, paragraph 35, and also Case C-4/97 Nonwouen v Direzione Regionale delle Solred, cited above in footnote 6, paragraph 29. Entrate per la Toscana [1998] ECR I-6469, paragraph 19.

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29. First of all, the charge is levied on the basis of a rule of law laid down by the Portuguese Republic. 35 Also, although the chargeable event is the entering in the RNPC of the increase in capital of a capital company, that is to say not the increase 27. The Portuguese Government (para- itself, and therefore it is not the same as the graph 30 of its written observations) con- chargeable event for the capital duty, the siders that the RNPC's services are not provided solely in the interest of whomever has recourse to the RNPC but also more 32 — This is disputed by IGI. 33 — See the theoretical analysis of the issue in points 57 and 58 of my Opinion in Modelo I. 34 — In Modelo I (paragraph 23), the Court had regard to the objectives pursued by the Directive, set out in the second, 29 — See point 59 et seq. of my Opinion in Modelo I. sixth and eighth recitals in the preamble thereto, in 30 — See Fantask, cited above in footnote 25, paragraph 26, and particular the abolition of indirect taxes having the same Case 270/81 Felicitas v Finanzamt für Verkehrsteuern characteristics as capital duty, and held that charges [1982] ECR 2771, paragraph 14. collected by public officials for notarising a transaction 31 — Thus, Community law is not concerned with the issue of covered by the Directive, which were in part paid to the whether, under Portuguese law, the charge demanded is State in order to subsidise public expenditure, had to be duty paid by way of fees or dues or a tax. In the latter case, regarded as taxes for the purposes of the Directive. competence to impose the charge rests with Parliament 35 —Namely Article 3(1) of the TERNPC in the version under the Portuguese constitution. resulting from Order No 366/89.

33. We can find both in Ponente Carni 37 31. Finally, the fact that — as is, moreover, and in Fantask 38 the criteria which enable apparent from the order for reference — us to answer the question whether the those charges are public revenue, since they levying of 'registration charges', as they are are paid over to the State and earmarked described in the national legislation, is for particular purposes, is of decisive prohibited under Article 10 of the Direc- importance. Specifically, they are paid to the Fund, which uses them to finance a variety of public expenditure, including the 37 — Joined Cases C-71/91 and C-178/91 Ponente Carni and operational costs of the RNPC. 36 Cispadana Costruzioni [1993] ECR I-1915, in particular paragraphs 41 and 42. That case was concerned with the issue of whether certain provisions of Italian law imposing administrative charges for the registration of company details (namely the principal measures regarding the 36 — In addition, as stated by the Portuguese Government in existence and operation of companies) in the relevant Modelo I (see paragraph 20 of the judgment), the Fund is register of capital companies were compatible with the responsible for paying the fixed portion of the salaries Directive. It was also concerned, inter alia, with the issue payable to notaries and other civil servants, it meets the of whether the charges could be considered to constitute cost of training notaries and of acquiring office space and duties paid by way of fees or dues, and with the relation- equipment for them and, subject to authorisation from the ship between the amount of duties paid by way of fees or Ministry of Justice, it covers other expenditure in the field dues and the cost of the service provided. of legal administration. In its judgment (paragraph 21), the 38 — Cited above in footnote 25. The issues in that case included Court referred to the fact that 'a proportion of the charges whether charges levied on registration of new public and at issue in the main proceedings, payable pursuant to a rule private limited companies and on registration of increases of law laid down by the State, is paid by a private in their capital could be considered to be paid by way of individual to the State for the financing of its official fees or dues, and how the amount of those charges was to business'. be calculated.

34. Specifically, in Ponente Carni 39 the Court, after stating that indirect taxes which have the same characteristics as capital duty fall within the scope of Arti- cle 10 of the Directive, concluded 40 that 36. Thus, the Court has held 42 that Arti- 'the various charges and duties levied for cle 10 of the Directive prohibits in particu- the registration of a capital company fall lar indirect taxes with the same character- within the scope of the aforementioned istics as capital duty. It therefore applies, provisions [of Article 10] and are, in prin- inter alia, to taxes in any form which are ciple, prohibited, subject to the derogating payable in respect of the formation of a provisions of Article 12'. capital company or an increase in its capital (Article 10(a)), or in respect of registration or any other formality required before the commencement of business, to which a company may be subject by reason of its legal form (Article 10(c)). As the Court has stated, 43 'that latter prohibition is justified by the fact that, even though the taxes in 35. The Court also held in Ponente Carni question are not imposed on capital con- that 'there is no reason based on the tributions as such, they are nevertheless wording of the provision or on its objec- imposed on account of formalities con- tives which makes it possible to refrain nected with the company's legal form, in automatically from applying Article 10 in other words on account of the instrument cases where the product of the charge employed for raising capital, so that their contributes to the financing of the depart- continued existence would similarly risk ment responsible for keeping the register in frustrating the aims of the Directive'. 44 which companies are registered'. On the contrary, the interpretation proposed by certain governments in that case, 'by 41 — Specifically, the Court held in Ponente Carni (paragraph enabling Member States to impose a 31): 'The fact that the charge is due not only on registration of the company but also in each subsequent charge, other than capital duty, on capital year, cannot of itself free the charge from the prohibition companies in respect of one of the essential laid down by Article 10. As the Commission and the undertakings which are parties to the main proceedings formalities for their formation, the amount emphasise, any other interpretation would deprive the provisions of Article 10 of any practical effect since it of which moreover would not be restricted would enable Member States to burden capital companies by the provisions of Community law,... with an annual fiscal charge the chargeable event for which would be merely the maintenance of the company in the would run counter to the objectives of the register.' Directive'. As the Court held, the need to 42 — Fantask, paragraph 21, and Ponente Carni, paragraphs 41 and 42. 43 — fantask, paragraph 21, and Ponente Carni, paragraphs 41 and 42. 44 — See also the judgment in Denkavit International, cited 39 — Cited above in footnote 37, paragraph 29. above in footnote 12, paragraph 23, and paragraph 37 of 40 — Paragraph 30. the Opinion of Advocate General Jacobs in that case.

40. It is, in my view, clear beyond doubt from the file that the RNPC provides 38. The Portuguese Government submits in services to the persons entitled to them the alternative (paragraph 33 of its written which justify a payment in return. observations) that the Directive does not prevent it from retaining such a charge, as capital duty; it merely requires there to be a single levy at a rate not exceeding 1%, a percentage which the registration charge levied does not exceed. 41. The Directive has not harmonised charges paid by way of fees or dues as such, since it does not specify what services may be provided to companies in return for payment or what the level of such payment must be. 49 However, the Court has found 39. I consider that, while the Portuguese that the Directive imposes limits on what a Republic abolished in 1996 the capital duty Member State may lawfully levy as 'charges (Imposto de Selo) which was imposed in paid by way of fees or dues'. Thus, it has respect of the formation of companies and held 5 0 that 'charges with no upper limit increases in capital, that does not mean that which increase directly in proportion to the it could retain other charges, that is to say nominal value of the capital raised cannot, other indirect taxes, 4 6 which, whatever by their very nature, constitute duties paid they are called, have the effect of hindering by way of fees or dues within the meaning of the Directive. Even though in some cases the complexity of a registration may be 45 — That was recognised by the Court in Fantask (paragraph 22) with regard to the basic charge and the supplementary charge under Danish law in so far as they were paid on the registration of new public and private limited companies. 47 — See the sixth recital in the preamble to the Directive. 46 — It is to be recalled that the chargeable event in the present 48 — See Modelo I, paragraphs 24 and 25. case is the entering in the RNPC of the increase in capital of a capital company, that is to say not the increase itself, 49 — See, for example, paragraph 27 of the Opinion of and it is therefore not the same as the chargeable event for Advocate General Jacobs in Fantask, cited above in the capital duty, even though the basis for calculation of footnote 25. the charge is the amount of the increase. 50 — Fantask, paragraph 31, and Modelo 1, paragraph 30.

43. Thus, Articles 10 and 12(1)(e) of the Directive do not permit a Member State, in 45. With regard to calculation of the the present case the Portuguese Republic, to amount of charges paid by way of fees or set the amount of the charges demanded on dues and the issue of what is included in the department's operational costs that may be taken into account, I consider that the 51 — Modelo 1, paragraph 29. 52 — In Modelo 7, the Court found (paragraph 31): 'Even Court's case-law, in particular both though the charge is levied in accordance with a sliding Ponente Carni 54 and Fantask, 55 provide scale, the amount of tax payable increases in direct proportion to the nominal value of the capital raised. us with the necessary criteria for answering Moreover, given that in the case of values above the questions of the national court. PTE 10 000 000 the charge is levied at the not inconsider- able rate of 0.3%, and that no upper limit has been set, the amount payable could be substantial.' It therefore con- cluded (paragraph 32 of the judgment, and paragraph 3 of its operative part): '"Fees or dues" within the meaning of 53 — This follows from the settled case-law of the Court Article 12(1)(e) of the Directive do not cover a charge whenever it has been faced with such an issue; see, for collected for drawing up a notarially attested act recording example, the judgments in Fantask, paragraph 31, and in an increase in the share capital or a change in the name or Modelo I, paragraph 30 and paragraph 3 of its operative registered office of a capital company, such as the charge at part. issue in the main proceedings, tne amount of which increases in direct proportion to the share capital raised 54 — Cited above in footnote 37, paragraphs 41 and 42. and in respect of which there is no upper limit'. 55 — Cited above in footnote 25.

48. Furthermore, the Court has acknowl- edged that a Member State may impose charges for major transactions only and pass on in those charges the costs of minor services performed without charge. In other words, the Court 61 has had regard to the redistributive functioning of the charges collected. 62 47. I consider that those overheads include the salaries of the civil servants and other 60 — With regard to the manner in which the costs of a staff of the RNPC and personnel manage- registration authority are to be calculated, see paragraph 4 3 of the Opinion or Advocate General Jacobs in Fantask, ment costs. In addition, account may be where he provided more detailed guidance on the matters taken of the costs of running their offices, 58 to be taken into account. Specifically, he stated that it would be appropriate 'to base the calculation of the computing costs, 5 9 training costs and, relevant costs on the normal principles of cost or manage- ment accounting. In other words, the fees may reflect the more generally, the costs of setting up and direct costs and overheads of the authority attributable to the services in question. Thus, such costs might include, in maintaining the department in question so addition to direct material costs and the salary and social security costs of the staff carrying out the services, a that it fulfils as well as possible the duties entrusted to it by the national legislature. proportion of the overheads of the authority such as lighting and heating, staff management costs,computer operation and development costs, office rents or deprecia- Those costs must as far as possible be set by tion, depreciation of other fixed assets such as furniture apportioning overheads on the basis of and equipment etc. The proportion of such costs referable to registration services should, where possible, be deter- appropriate criteria, such as the staff mined by direct attribution, for example by identifying the rent payable for the offices used specifically for the services employed for the various types of activity, in question. Where costs relate both to registration services and to other activities such as preparatory work on legislation, it will be necessary to make an apportionment on the basis of appropriate criteria such as staff employed on the various types of activity, office space used, 56 — Fantask, paragraph 30. computer time used etc.' 5 7 — The conditions under which this may occur are set o u t by 61 — The reasons why that is possible were analysed thoroughly Advocate General Jacobs in paragraph 43 of his Opinion by Advocate General Jacobs in paragraphs 37 and 45 of his in Fantask. Opinion in Fantask. 58 — I reached similar conclusions with regard to the question of 62 — In paragraph 50 of his Opinion in Fantask, Advocate the amount of notarial fees which I examined in my General Jacobs pointed out that 'individual costing is Opinion in Modelo II (paragraph 33). unlikely to be practicable in the case of a companies' 59 — For example, the acquisition, management and withdrawal registry responsible for processing large numbers of of software and hardware systems. comparatively small transactions'.

49. In the present case, given the particular provided that the Member State checks at features of the system under Portuguese law regular intervals, for example once a year, for entering increases in capital in the that they continue not to exceed the RNPC, the consequence of having regard registration costs.' to that redistributive element in connection with the registration charges levied is that a Member State may impose higher charges for major transactions and pass on in those charges the costs of any minor services performed without charge. In that way it is possible for individuals to have wide access 52. Having regard to the foregoing, I to the services of the RNPC, without consider that it is for the national court, distinction on the basis of their income. on the basis of the Court's case-law set out . above and the criteria resulting therefrom, to review the extent to which the charges set for entries in the RNPC are paid by way of fees or dues and, where appropriate, to order a refund on that basis. 64 50. It is for the national authorities to decide, having regard to the foregoing factors, what level of charges is reasonable and whether it is possible to have recourse to a general principle of national law, such as the principle of equity which the national court refers to, in order to justify 53. In conclusion, Article 12(1)(e) of the a reduction in the sum payable. Directive is to be interpreted as meaning that, in order for charges for entries in the RNPC which are levied in respect of increases in the capital of capital companies 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 51. It is, however, to be noted that the question. It may, however, also cover the Court has pointed out 63 that 'the amount costs of any minor services performed of duties paid by way of fees or dues does without charge. In calculating the amount, not necessarily have to vary in accordance a Member State is entitled to take account with the costs actually incurred by the of all the costs related to the effecting of authority in effecting each registration and registration, including the proportion of the a Member State is entitled to prescribe in overheads which may be attributed thereto. advance, on the basis of the projected A Member State may impose flat-rate average registration costs, standard charges registration charges and fix their amount for carrying out registration formalities in for an indefinite period, provided that it relation to capital companies. Furthermore, checks at regular intervals that they con- there is nothing to prevent those charges tinue not to exceed the average cost of the from being set for an indefinite period, registrations at issue.

(2) Directive 69/335, as amended by Directive 85/303, is to be interpreted as meaning that the charge which is levied when an increase in the share capital of a capital company is entered in the Registo Nacional de Pessoas Colectivas (National Register of Legal Persons) is covered by the directive and constitutes a tax for the purposes of the directive.

(3) The charge which is levied when an increase in the share capital of a capital company is entered in the Registo Nacional de Pessoas Colectivas 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.

(4) '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 duty levied on entering an increase in capital of a capital company in the Registo Nacional de Pessoas Colectivas, such as the registration charge at issue in the main proceedings, I - 7734

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the amount of which increases in direct proportion to the increase in share capital and in respect of which there is no upper limit.