C-71/00

DEVELOP

OPINION OF ADVOCATE GENERAL TIZZANO delivered on 7 February 2002 1

1. By orders of 17 February and 30 March inherent in this objective that duty 'on the 2000, the Verwaltungsgerichtshof (Admin- raising of capital... by a company or firm istrative Court), Austria, referred to the should be charged only once and that the Court of Justice for a preliminary ruling level of this duty should be the same in all under Article 234 EC two questions con- Member States so as not to interfere with cerning the interpretation of Council Direc- the movement of capital' (sixth recital). tive 69/335/EEC of 17 July 1969 concern- The Directive therefore envisages the har- ing indirect taxes on the raising of capital monisation of the duty with regard both to (OJ, English Special Edition 1969 (II), its structures and to its rates (seventh p. 412, 'the Directive'). Essentially what recital). the Court is being asked to decide is whether capital duty can be charged on certain payments made in consideration of the acquisition of dividend certificates (Genussscheine) issued by capital com- panies. 3. With a view to such harmonisation, the chargeable transactions are expressly set out in Article 4 of the Directive; paragraph 1 of that article provides, in so far as concerns us here, that the following transactions are to be subject to capital Relevant legislation duty:

Community legislation '...

2. According to its first recital, the purpose of Directive 69/335 is to promote the free movement of capital in order to create an economic union whose characteristics are similar to those of a domestic market. It is (d) an increase in the assets of a capital company by contribution of assets of any kind, in consideration, not of 1 — Original language: Italian. shares in the capital or assets of the

6. Paragraph 5, point 1, of the KVG then specifies that 'rights in capital companies include:... dividend rights (Genussrechte)'. Point 2 goes on to provide that '[t]he owners of the rights set forth in point 1 ...'. are treated as members'.

I-8880

DEVELOP

7. As regards the basis of assessment, 9. According to the terms of the issue, the Paragraph 7 of the KVG provides that dividend certificates carried the right to '[t]he duty shall be computed: participate rateably in the company's profits, its assets (including secret reserves), its goodwill value and any surplus on liquidation of the company. Holders were also entitled to be repaid the nominal value of their certificates plus any premium paid 1. in the case of an acquisition of rights in thereon. In the event of termination of the a company (Paragraph 2(1)): dividend rights by notice, the holders had the right to a compensation payment equal to the percentage of the value of the company attributable to them as at the time of termination, or the nominal value of their dividend certificates together with any premium paid, whichever was the (a) if consideration is to be furnished: on greater. the value of the consideration. The consideration shall include the costs of the company formation or capital increase borne by the members, but not the capital duty payable in respect of the acquisition of rights in the company;

10. The terms of the loan also explicitly provided that the dividend certificates did not confer any form of shareholder status; consequently, the holders of the certificates ' did not enjoy membership rights such as the right to vote, the right to participate in general meetings, the right to propose resolutions or the right to challenge reso- lutions passed by the members in general meeting.

15. The second question was referred to the Court by the Verwaltungsgerichtshof in 13. An appeal to the Finanzlandesdirektion two joined cases involving appeals by two itself was dismissed. Develop thereupon Austrian companies, Solida Raiffeisen challenged the decision rejecting its request Immobilien Leasing GmbH ('Solida') and before the Verwaltungsgerichtshof, on the Tech Gate Vienna Wissenschafts- und ground that the charging of the duty on the Technologiepark GmbH ('Tech'), against premium paid by the parent company was decisions of the tax administration. incompatible with Article 4(l)(d) of the Directive. In order to decide this issue, the Verwaltungsgerichtshof deemed it necess- ary to refer the following question to the Court of Justice under Article 234 EC:

Solida

'Do payments which an acquirer of divi- 16. On 10 March 1995, Solida issued divi- dend rights in a capital company does not dend certificates having a cumulative nom-

I - 8882

DEVELOP

inal value of ATS 465 000 to Pelias nected with a company cannot attract Raiffeisen Immobilien Leasing GmbH ('Pe- capital duty within the meaning of Direc- lias'). The terms of the issue were essen- tive 69/335. The appeal was dismissed by tially identical, in all material respects, to the tax administration, whose decision was those described in point 9 above. then challenged before the Verwaltungs- gerichtshof as being in breach of Directive 69/335.

I - 8883

OPINION OF MR TIZZANO — CASES C-71/00 AND C-138/00

22. On 18 June 1999, after those assess- duty on sums paid by parties unconnected ments had been issued, Tech notified the with a company in consideration of the Finanzamt that it had in due course allotment of dividend certificates. received additional payments in consider- ation of the allotment of the dividend certificates, namely:

The order for reference and the procedure before the Court

— a payment of ATS 68 000 000 made on 6 August 1998 by the 'Gesellscaft des Bundes für Industriepolitische Maß- 24. After having joined the two cases on nahmen' in respect of the dividend account of the similarity between them, the certificates allotted to WEG; national court deemed it necessary to refer a question to the Court of Justice under Article 234 EC further to those already referred on related issues in Case C-339/99 Energie Steiermark and Case C-71/00 Develop. The question referred by the national court is:

— and a payment of ATS 69 000 000 made on 12 October 1998 by the City of Vienna in respect of the dividend certificates allotted to WHG. 'Do payments which a non-member of a capital company makes to the company for the acquisition of dividend rights constitute "assets of any kind contributed or to be contributed by the members" within the meaning of Article 5(l)(a) of Directive 69/335?'

28. It is therefore appropriate, in analysing the two questions referred to the Court, to consider first the more general issue as to 26. Given the obvious similarity between whether the charge to capital duty is the questions of interpretation referred to precluded where dividend certificates are the Court in these cases, it is best, in my not allotted to members (Solida/Tech ques- view, to deal with them together. In both, tion). That having been elucidated, I will what the Court is being asked to decide is then consider whether capital duty is whether capital duty can be charged on chargeable on consideration paid indirectly sums paid to a capital company in con- by acquirers of such certificates through sideration of the acquisition of dividend their parent companies (Develop question). certificates: in Case C-71/00 Develop, the Before embarking on this analysis, how- specific question is whether the duty can be ever, I think it is worth pointing out that charged on consideration paid by the the latter question raises similar legal issues acquirer through the intermediary of its to those referred to the Court by the parent company; in Case C-138/00 Solidai Verwaltungsgerichtshof in Case C-339/99 Tech, the question is the more general one Energie Steiermark, in which my Opinion of whether capital duty can be charged on will be delivered on the same date. The consideration (direct or indirect) paid by discussion in relation to this question will parties who are not already members of the therefore coincide, at least to some extent, issuing company. with the discussion in that case.

capital duty is precluded if the acquirers of to in Article 4(l)(a), (c) and (d)', the duty is the dividend certificates are not members of to be charged 'on the actual value of assets the issuing company. of any kind contributed or to be con- tributed by the members'.1 Since, as pointed out above, the acquisition of divi- dend certificates does not confer member- ship status, they argue that this means that liability to duty can arise only where the certificates are allotted to existing members. Essentially the same argument is put forward by Develop in its sub- missions to the Court. 30. First of all, it is clear from the order for reference and it is not in dispute between the parties that while the dividend certifi- cates do not confer shareholder status they do confer property rights akin to those of members. There is no doubt, therefore, that the acquisition of dividend certificates is in principle a transaction subject to capital duty under Article 4(l)(d) of the Directive, since it consists of 'an increase in the assets 32. The opposite view is taken by the of a capital company by contribution of Austrian Government and by the Commis- assets of any kind, in consideration, not of sion, who maintain that the reference to shares in the capital or assets of the 'members' in Article 5(l)(a) of the Directive company, but of rights of the same kind must be construed in a 'non-technical' or as those of members, such as voting rights, 'informal' sense, in such a way as to include a share in the profits or a share in the the holders of 'rights of the same kind as surplus upon liquidation'. those of members' within the meaning of Article 4(l)(d).

(of a highly restrictive nature), which does voluit dixit). Thus, in Article 4(2)(b) it is not appear in the article, whereby a charge expressly provided that Member States may to capital duty would arise in cases of 'an charge the duty in the case of 'an increase in increase in the assets of a capital company the assets of a capital company through the by contribution of assets of any kind, in provision of services by a member which do consideration... of rights of the same kind not entail an increase in the company's as those of members' on condition that the capital, but which do result in variation in assets are contributed by members. the rights in the company or which may increase the value of the company's shares'. The absence of any such qualification in Article 4(l)(d) of the Directive indicates to me that this condition is not necessary in order for the transactions set forth in that provision to be subject to duty.

I - 8887

OPINION OF MR TIZZANO — CASES C-71/00 AND C-138/00

The question referred in the Develop case fact that the assets were technically con- tributed by the parent company can have any bearing on the issue of the charge to duty.

I-8888

DEVELOP

40. Another point in favour of this inter- 41. I therefore take the view that the pretation is that it preserves the effective- answer to be given to the question referred ness of the Directive and avoids the har- in the Develop case is that Article 4(1 )(d) of monised duty being easily circumvented. the Directive must be interpreted as mean- The effect of Article 4(1 )(d) would be ing that payments which an acquirer of substantially diminished, if not entirely dividend certificates in a capital company undermined, if companies belonging to a does not make itself but makes through its group could avoid the duty by simply parent company constitute a 'contribution having other companies in their group pay of assets of any kind' within the meaning of on their behalf the consideration due for that provision. dividend certificates acquired by them.

Conclusion

In the light of the foregoing considerations, I suggest that the Court answer the Verwaltungsgerichtshof as follows:

— in Case C-138/00 Solida/Tecb, that 'Article 5(l)(a) of Directive 69/335 must be interpreted as meaning that payments which a non-member of a capital company makes to the company for the acquisition of dividend certificates do constitute "assets of any kind contributed or to be contributed by the members" within the meaning of that provision';