C-206/99

OPINION OF MR RUIZ-JARABO — CASE C-206/99

OPINION OF ADVOCATE GENERAL RUIZ-JARABO COLOMER delivered on 20 February 2001 1

1. The Tribunal Tributàrio de Primeira of those changes, SONAE was charged the Instância do Porto (Tax Court of First sum of PTE 7 662 000, which was calcu- Instance, Oporto, Portugal) referred to the lated pursuant to the scale of fees of the Court a number of questions for a pre- Commercial Registry. liminary ruling on the interpretation of Council Directive 69/335/EEC of 17 July 1969 concerning indirect taxes on the raising of capital 2('the Directive').

4. SONAE contested this charge, arguing that it infringes the Directive in so far as it 2. The national court has requested, for the constitutes a tax on company capital rather purposes of Article 12(1)(e) of the Direc- than fees levied by a public body for tive, guidance regarding the notion of the providing a service. real cost of the service provided and also wishes to know whether it must reduce the amount payable in accordance with the upper limit laid down in national legisla- tion after the chargeable event occurred.

I I — The relevant national legislation

I — The facts

11. The fees are fixed by order of the Ministry of Justice (Tabela de Emolumen- 8. An entry in the register has essential tos do Registo Comercial). At the time of effects. The document by which a company SONAE's registration the order in force is formed and any subsequent amendments was Order No 883/89 of 13 October thereto may be relied upon by the parties 1989, 4which was subsequently amended and their successors only after it has been by Order No 996/98 of 25 November registered (Article 13(2)), and registration 1998. 5 represents the time from which such docu- ments produced legal effects vis-à-vis third parties (Article 14).

12. Pursuant to Article 1(3) of the scale of fees, where the document to be registered has a specific value in excess of PTE 100 000, the following are to be added to the 9. Registration of an increase in share total amount stated in Article 1(1) and (2) capital is compulsory and an application in respect of each PTE 1 000 or part for registration must be made within three thereof: (a) PTE 10 on values up to months of the date on which the instrument recording the increase was drafted (Arti- cle 15(1)). Pursuant to Article 70, docu- 4 — Diário da República, Series I, No 236. ments whose registration is compulsory 5 — Diário da República, Series I-B, No 273.

I - 4683

OPINION OF MR RUIZ-JARABO — CASE C-206/99

PTE 200 000; (b) PTE 5 on values between 15. Under Portuguese law, employees of PTE 200 000 and PTE 1 000 000; (c) the Commercial Registry are employees of PTE 4 on values between PTE 1 000 000 the State and are subject to a specific and PTE 10 000 000; and (d) PTE 3 on system of public law. values in excess of PTE 10 000 000.

14. The legislation in force at the time when the chargeable event occurred did not contain any provisions setting a ceiling on 17. According to the eighth recital in the the charges. Subsequently, the relevant preamble, the retention of other indirect Portuguese legislation was amended and, taxes with the same characteristics as the although the amount payable is still calcu- capital duty or the stamp duty on securities lated by reference to the sum to which the might frustrate the purpose of the Direc- document relates, there is now a maximum tive, and they should therefore be abol- limit which is laid down in the relevant ished. scales of fees approved by Order No 996/98. In particular, Article 23(c) of the Scale of Fees of the Commercial Reg- i s t r y sets a m a x i m u m limit of PTE 15 000 000 for all kinds of registra- tion. 18. Under Article 1 of the Directive, Mem- ber States are to charge on contributions of 6 — See the replies given by the Portuguese Government to questions put to it during the request for a preliminary capital to capital companies a duty harmo- ruling in Case C-56/98. nised in accordance with the provisions of

I - 4684

SONAE

Articles 2 to 9 and thereafter referred to as 21. Article 10 of the Directive states that, 'capital duty'. 7 apart from capital duty, Member States are not to charge, with regard to companies, firms, associations or legal persons operat- ing for profit, any taxes whatsoever: (a) in respect of the transactions referred to in Article 4; (b) in respect of contributions, 19. Article 4, Article 8 as amended by loans or the provision of services, occurring Council Directive 85/303/EEC 8and Arti- as part of the transactions referred to in cle 9 set out the transactions which are Article 4; and (c) in respect of registration subject to capital duty and the types of or any other formality required before the action which Member States may exempt commencement of business to which a from duty. company, firm, association or legal person operating for profit may be subject by reason of its legal form.

I - 4685

OPINION OF MR RUIZ-JARABO — CASE C-206/99

eia do Porto referred the following ques- 3. Must the fees paid for such services be tions to the Court for a preliminary ruling: calculated in the light of the costs involved in providing the service?

4. Are such costs those incurred in taking '1. May the fees paid for such services 9 be the action and in maintaining the calculated and collected by reference to facilities necessary for taking it? the amount to which the document relates?

5. May the criterion of the economic benefit which the user obtains from the action taken be applied in calculat- ing the amount payable for such (a) May that amount be unlimited? action?'

(b) May that amount be calculated in the manner to which Question 1 V — Examination of the questions refer- relates if there is an upper limit? red

istry charges must be calculated if they are were compatible with the Directive. Subse- to qualify as duties paid by way of fees or quently, in Modelo Continente, 14 the sub- dues as referred to in Article 12(1 )(e) of the ject-matter of which was similar, 1 5the Directive. national judge asked for guidance regard- ing the notion of duties paid by way of fees or dues. Last, in IGI 16 fresh questions relating to the same concept were referred, on this occasion in proceedings concerning the charges levied for entries in the National Register of Legal Persons. The only new element introduced by the referring court is to be found in the second question, where it asks whether the court of the Member State must reduce the amount payable in accordance with the upper limit laid down in national legislation after the action was taken. 26. In so far as the provisions relating to duties paid by way of fees or dues derogate from the prohibitions in Article 10 of the Directive, the Court, in these three judg- ments, considered first whether the charges at issue in the proceedings were caught by that prohibition.

1. Whether the Commercial Registry charges constitute duties paid by way of fees or dues

30. In the cases I have cited, the Court examined the exemption contained in Arti- cle 12(1)(e) of the Directive, that is to say the provision specifically at issue in these 28. This prohibition covers not only proceedings. That provision states that charges paid for the registration of new Member States may charge duties paid by companies but also duties payable for way of fees or dues. registration of increases in share capital, since these are also levied on account of an essential formality relating to the legal form of the companies in question. While regis- tration of an increase in capital does not amount to a procedure which is required before a capital company commences busi- 31. The Court of Justice has stated that ness, it is none the less necessary for the duties paid by way of fees or dues cover carrying on of that business. 18 only payments the amount of which is calculated on the basis of the cost of the service rendered. A payment which had no link with the particular service or the amount of which was calculated not on the basis of the cost of the transaction for which it is a consideration but on the basis 29. Under Portuguese law, it is compulsory of all the running and capital costs of the to enter in the Commercial Register an department responsible for that transaction instrument amending a company's statutes: would have to be regarded as a tax falling demerger-merger and increase of capital. exclusively within the prohibition laid Entry of such an instrument in the register down in Article 10 of the Directive.20 is an essential formality relating to the legal form of a company, which is necessary if the company is to carry on its business. 19 Consequently, charges levied in respect of

for example, the registration of a company, vary in accordance with the costs actually may be difficult to determine. In such a case incurred by the authority in making each the cost can only be assessed on a flat-rate entry and a Member State is entitled to basis and must be fixed in a reasonable prescribe in advance, on the basis of the manner, taking account, in particular, of projected average entry costs, standard the number and qualifications of the offi- charges for making entries in respect of cials, the time taken and the various capital companies. Furthermore, there is material costs incurred in the transac- nothing to prevent those charges from tion. 21 being set for an indefinite period, provided that the Member State checks at regular intervals, for example once a year, that they continue not to exceed the costs of making the entries. 25 33. Pursuant to that line of decisions, for the purpose of calculating the amount of duties paid by way of fees or dues, Member States are entitled to take account not only of the material and salary costs which are directly associated with the registrations to which they relate, but also 22 of the propor- tion of the overheads of the competent authority which can be attributed to those 36. Charges with no upper limit which registrations. 23 increase directly in proportion to the nom- inal 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 though in some cases the complexity of an entry may be linked to 34. The Court has also held that a Member the amount of capital raised, the amount of State may impose charges for major trans- the charge will generally bear no relation to actions only and pass on in those charges the costs actually incurred by the adminis- the costs of minor services performed trative body which provided the service.26 without charge. 24

ruling may be found in the case-law of the and in maintaining the facilities necessary Court of Justice. In the main proceedings, for taking it. the amount of the charges for entries increases in direct proportion to the increase in share capital. However, the Court has held that charges calculated in this manner cannot be construed as con- stituting duties paid by way of fees or dues within the meaning of the Directive. Although in the case of certain transac- tions, such as the registration of a company, 39. I have already noted that for the the cost of the transaction must be calcu- charges to constitute duties paid by way lated at a flat rate, it must also be fixed in a of fees or dues, they must include only reasonable manner. However, the notion of payments where the amount is calculated reasonable cost is not compatible with the on the basis of the cost of the service calculation of charges by reference to the provided. A payment in an amount wholly amount to which the document relates, unconnected with the cost of that specific especially not where that amount is unlim- service or calculated not by reference to the ited. service but by reference to all the running and capital costs of the department respon- sible for the transaction would not meet that condition.

Even where there is a maximum limit on the amount which may be charged, it appears unlikely that it would meet the requirement of reflecting the cost of the 40. In cases where the charges can only be service provided. In any event, it is for the calculated on a flat-rate basis, they must be national court to determine, in the light of fixed in a reasonable manner, taking the factual and legal material available to account, in particular, of the number and it, whether the charge in question relates to qualifications of the officials, the time the average costs of making the entry and taken and the various material costs neces- of operating the service. sary for carrying out the transaction.

43. The answer to this question has also been covered in the foregoing analysis. The 46. However, it is also clear from the order Court has repeatedly held that the charge for reference of the Oporto court that the must be calculated by reference to the cost amount charged to SONAE was PTE 7 662 of the service provided, which necessarily 000, which is significantly lower than the precludes the use of any other criterion. limit laid down in the Portuguese legisla- tion. Accordingly, the amendment to the legislation cannot be applied in these 27 — In other words, the fees may reflect the direct costs and proceedings. overheads of the authority which arc attributable to the services in question. 'Ihus, such costs might include, m addition to direct material costs and the salary and social security costs of the staff carrying out the services, a proportion of the authority's overheads such as lighting and heating, staff management costs, computer operation and development costs, office rents or depreciation, depreciation of other fixed assets such as furniture and equipment, etc. The proportion of such costs referable to registration services should, where possible, be determined by direct allocation, for example by identifving the rent payable for the offices used specifically for the services in 47. On this point, regard should be had to question. Where costs relate both to registration services and to other activities such as preparatory work on the Court's case-law concerning the admis- legislation, it will be necessary to apportion them on the basis of appropriate criteria such as staff employed m the vannus types of activity, office space used, computer time used, and the like. 28 — Article 2.5(c) of Order No 996/98, cited in footnote 5.

51. I note that, first, the limit in question is not a requirement of Community law, which, as the Court has repeatedly stated, requires only that the amount of the charges should be calculated by reference to the cost of the service provided. Where 48. In the present case, the legislative charges have not been calculated in this amendment setting a maximum limit on way, it is the responsibility of the national the charges payable for registration at the court, where it finds that the charges levied Commercial Registry is not relevant, since have to be regarded as caught by the SONAE was charged a lower amount. prohibition laid down in Article 10 of the Accordingly, the question referred for a Directive, to order repayment of the sums preliminary ruling by the national court, collected in breach of that provision.32 and hence any ruling which the Court of Justice might deliver, is not required in order to settle the main dispute.

Article 12(1)(e) of Directive 69/335, as amended by Directive 85/303, must be construed as meaning that for charges to constitute duties paid by way of fees or dues, the amount of the charge levied for registration of capital companies and increases in the share capital thereof must be calculated only by reference to the cost of the necessary formalities, taking account of the fact that this amount may also reflect the costs of minor services performed free of charge. In calculating the amount of the charges, Member States may take into consideration all costs relating to the entry, including the proportion of I - 4693

OPINION OF MR RUIZ-JARABO — CASE C-206/99

the overheads which can be attributed to it. Otherwise, Member States are entitled to fix standard charges and to set the amount of such charges for an indefinite period, provided that they check at regular intervals that they continue not to exceed the average registration costs in question. The economic benefit which the user obtains from the service is not a criterion which may be taken into account when calculating the amount of the charges.

(2) The second question is inadmissible.

I - 4694