C-508/99

PALAIS AM STADTPARK HOTELBETRIEBSGESELLSCHAFT

OPINION OF ADVOCATE GENERAL TIZZANO delivered on 10 January 2002 1

1. By order of 16 December 1999, the which is to promote the free movement of Verwaltungsgerichtshof (Higher Adminis­ capital with the objective of creating an trative Court, Austria) referred to the Court economic union whose characteristics are of Justice for a preliminary ruling under similar to those of a domestic market (first Article 234 EC a question on the inter­ recital). That objective presupposes in par­ pretation of Council Directive 69/335/EEC ticular that the taxes in question 'on the of 17 July 1969 concerning indirect taxes raising of capital within the common on the raising of capital 2(hereinafter 'the market by a company... should be charged directive'). The question essentially con­ only once and that the level of this duty cerns whether capital duty may be levied in should be the same in all Member States so accordance with Directive 69/335 when a as not to interfere with the movement of partnership is converted into a capital capital' (sixth recital). To that end, the company if the contributions have already directive provides for the harmonisation of been subject to a similar charge before capital duty with regard both to its struc­ entry into force of the directive. tures and to its rates (seventh recital), and the abolition of other indirect taxes with the same characteristics (eighth recital).

Legal framework

Community law

3. In line with the objectives set out above, Article 1 of the directive provides that 2. The system of indirect taxes on the 'Member States shall charge on contribu­ raising of capital is governed at Community tions of capital to capital companies a duty level by Directive 69/335, the purpose of harmonised in accordance with the provi­ sions' of the directive. The meaning of a 'capital company' and the transactions 1 — Original language: Italian. subject to 'capital duty' are set out in 2 — OJ, English Special Edition 1969 (II), p. 412. Articles 3 and 4.

(c) any company, firm, association or legal person operating for profit, whose members have the right to dispose of their shares to third parties without prior authorisation and are only responsible for the debts of the com­ pany, firm, association or legal person to the extent of their shares.' (b) the conversion into a capital company of a company, firm, association or legal person which is not a capital company;

5. Article 3(2) provides that 'for the pur­ poses of the application of this directive, any other company, firm or association or legal person operating for profit shall be deemed to be a capital company. However, a Member State shall have the right not to ...’.

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Article 4(3) states , however , that (c) in respect of registration or any other 'formation, within the meaning of para­ formality required before the com­ graph 1(a), shall not include... the con­ mencement of business to which a version of a capital company into a dif­ company, firm, association or legal ferent type of capital company.' person operating for profit may be subject by reason of its legal form'.

7. In order to ensure effective harmon­ isation in this area and to avoid double charging, Article 10 of the directive pro­ vides that 'apart from capital duty, Member States shall not charge, with regard to companies, firms, associations or legal persons operating for profit, any taxes whatsoever:

11. When Austria acceded to the Commu­ 9. The order for reference states that before nity, important changes were made in this Austria's accession to the Community, area. For our purposes it is sufficient to under Paragraph 5 of the Kapitalverkehr­ note that from 1 January 1995 the duty steuergesetz (Law on capital transfer tax) mentioned in Paragraph 33, item 16(1)(b), (hereinafter 'the KVG') the following were of the GebG was abolished and the defini­ deemed to be capital companies: 'com­ tion of a 'capital company' was modified. panies known as Aktiengesellschaften, Paragraph 4(1) of the KVG in the version in Kommanditgesellschaften auf Aktien, force from 1 January 1995 defines as Gesellschaften mit beschränkter Haftung..., capital companies 'companies known as associations operating for profit where Aktiengesellschaften and Gesellschaften their members are liable for the debts of mit beschränkter Haftung (GmbH)'. Under the association only in the amount of their Paragraph 4(2), the following companies individual shares and have the right to are deemed equivalent to capital com­ transfer their shares to third parties'. panies: 'companies known as Kommandit­ gesellschaften (limited partnerships) (KG)', and 'companies known as Kommandit-Er- werbsgesellschaften (limited trading part­ nerships) (KEG), in which one of the personally liable partners is a capital com­ pany'.

10. Also prior to Austria's accession to the Community, Paragraph 33, item 16(1)(b), 12. As far as capital duty on capital com­ of the Gebührengesetz (Law on fees) (here­ panies is concerned, it must be observed inafter 'the GebG') provided for a duty on that, for present purposes, under Paragraph legal instruments applicable to the follow­ 2(1)(1) of the KVG (in the version in force ing where assets were raised: 'constituent from 1 January 1995), 'the acquisition of instruments, except those which relate to rights in a domestic capital company by the capital companies within the meaning of first acquirer' is subject to capital duty. In the Kapitalverkehrsteuergesetz, by which applying that, moreover, Austria exercised two or more persons agree to associate to its right under Article 6(1) of Directive operate for profit'. The duty was equal to 69/335 to exclude from the basis of assess-

14. In March 1994 the corporate form of the appellant was changed to a 'limited trading partnership' (KEG). That change, however, did not signify that the company had become a capital company within the 17. By decision of 23 September 1996 the meaning of the national legislation in force. first-instance revenue authority dismissed the appeal as unfounded. It claimed that the duty referred to in Paragraph 33, item 16, of the GebG could not be equated to capital duty and that therefore there was no case of 'double charging' in this instance. 15. By deed of 17 May 1996, the per­ The second-instance revenue authority was sonally liable partners of Palais assigned of the same opinion and, by decision of their shares to Rudolf Hinteregger GmbH, 3 September 1997, dismissed the appeal by which became the sole personally liable Palais with a further statement of grounds partner with unlimited liability. From the stating that the charge could not be equated time that that capital company joined it as to 'double charging' prohibited by the a personally liable partner with unlimited directive since the duty referred to in liability Palais was considered to be a Paragraph 33, item 16, of the GebG had

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been applied before Austria's accession to of the charge in issue with Community law, the Community. the Austrian court decided to refer to the Court of Justice under Article 234 EC the question:

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acteristics of a capital duty and, therefore, neither the decision of the Republic of it may not be considered to be covered by Austria to exercise the power referred to in the prohibition on 'double charging' in paragraph 1 of that article, nor whether Article 10 of the directive. any of the transactions envisaged in para­ graph 2 occurred is not contested. It is clear in fact from the order for reference and the question referred that in this case the matter in issue is the alleged breach of the prohibition on 'double charging' in Article 10 of the directive. In analysing the question, therefore, reference must be made to Article 10. Legal analysis

20. The referring court seeks to ascertain by its question esstentially whether Direc­ tive 69/335 allows a charge to be levied on contributions when a limited trading part­ nership becomes a capital company (due to a capital company joining as a partner), if, when that company was formed (before the entry into force of the directive), a charge of the type set out in Paragraph 33, item 16, of the GebG had already been applied.

other words on account of the instrument a breach of Article 10 of the directive in employed for raising capital, so that their this instance; that is to say, in general continued existence would similarly risk terms, I do not consider that Article 10 frustrating the aims of the directive.' 3 prohibits the levying of capital duty when a partnership becomes a capital company if a similar charge has already been levied when the partnership was formed.

26. On that basis, however, it must be considered whether that duty must never­ theless be ruled out in accordance with Article 10 in cases where a partnership has been formed and a duty similar to capital duty has been levied. To answer that 24. The solution put forward by the question, it is, in my view, necessary to national court does not, however, appear take into account, as Article 1 clearly to me to be convincing. Even assuming the states, the fact that Directive 69/335 is two premisses on which it is based to be intended to harmonise the duty charged on correct, I do not believe that there would be 'contributions of capital to capital com­ panies', calculating the structure and the applicable rates on a Community basis. The 3 — Case C-188/95 Fantask [1997] ECR I-6783, paragraph 21; decision to restrict the scope of Community see also to this effect Case C-2/94 Denkavit Internationaal and Others [1996] ECR I-2827, paragraph 23. harmonisation to capital duty levied on 4 — The court cites to this effect Joined Cases C-71/91 and capital companies was probably made on C-178/91 Ponente Carni [1993] ECR I-1915; Fantask, cited above; and Case C-347/96 Solred [1998] ECR I-937. the basis that capital within those com-

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— 'any company, firm, association or legal person the shares in whose capital 28. If, then, the capital duty on partner­ or assets can be dealt in on a stock ships is not harmonised by the directive, it exchange' (Article 3(b)) follows — as the Commission and the Austrian Government also stress — that it does not fall within the prohibition on 'double charging' mentioned in Article 10. I have already stated that Article 10 'pro­ hibits in particular indirect taxes with the same characteristics as capital duty', on the basis that 'their continued existence would... risk frustrating the aims of the directive'; the intention is to prevent Member States from getting round the — and 'any company, firm, association or provisions harmonising capital duty on legal person operating for profit, whose capital companies, indirectly making those members have the right to dispose of capital contributions subject to other their shares to third parties without charges with similar characteristics (which prior authorisation and are only might for example lead to a substantial responsible for the debts of the com­ increase in the maximum applicable rate). pany, firm, association or legal person If, however, the aim of Article 10 of the to the extent of their shares' (Ar­ directive is to guarantee the harmonisation ticle 3(c)). of capital duty on capital companies, it is

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clear that the prohibition under Article 10 of the directive, given that capital duty has concerns only charges which affect, even already been levied by virtue of Article 4(1) indirectly, capital contributions to capital when the capital company was formed. companies. Therefore, charges on capital That requirement, however, does not apply contributions to partnerships may not be when a partnership is converted into a included in the prohibition on 'double capital company because, as I have said, charging' which, as I have said, are not capital duty on partnerships is not gov­ governed at Community level but are the erned by the directive and, therefore, does responsibility of the Member States. not fall within the prohibition on 'double charging' under Article 10.

32. As we have seen, Palais was formed in 1982 as a limited partnership and therefore constituted a partnership under the Aus­ 30. Furthermore, indirect confirmation of trian law in force at the time; for that the above is provided by the fact that while reason the charge under Paragraph 33, Article 4(1) of the directive requires capital schedule item 16, of the GebG was levied. duty to be levied in the case of 'the At the time, constituent instruments of conversion into a capital company of a partnerships only were subject to that company, firm, association or legal person charge when assets were raised. The nature which is not a capital company' , of Palais as a partnership remained intact Article 4(3) provides that 'the conversion following its conversion to a limited trad­ of a capital company into a different type ing partnership in March 1994; and also of capital company' may not constitute a following Austria's accession to the Com­ transaction subject to capital duty. That munity, given that Austria decided — in exception appears to me to be clearly accordance with the last sentence of justified by the need to avoid 'double Article 3(2) of the directive — that Austria charging' within the meaning of Article 10 decided to include in the definition of

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capital companies only limited partnerships 33. Clearly, therefore, when the charge and limited trading partnerships whose under Paragraph 33, item 16, of the GebG personally liable partners included a capital was levied, Palais was a partnership and company (Paragraph 4(1) of the KVG). remained such following the entry into Only when Rudolf Hinteregger GmbH force of the directive. It must therefore be became sole limited partner did Palais concluded, in the light of the above, that became a capital company within the the subsequent levying of capital duty when meaning of Paragraph 4(1) of the KVG it became a capital company could not have with the result that the charge in question constituted a form of 'double charging' was levied. prohibited by Article 10 of the directive.