C-392/00

1 — Original language: German. 3 — For the current position regarding free movement of capital, 2 — ... concerning indirect taxes on the raising or capital (OJ, see the Opinion of Advocate General Geelhoed delivered on English Special Edition 1969 (II), p. 412), in the version 20 Novemher 2001 in Joined Cases C-515/99, C-519/99 to contained in Council Directive 85/303/EEC of 10 June 1985 C-524/99 and C-526/99 to C-540/99 Reiscb and Others, (OJ 1985 L 156, p. 23). [2002] ECR I-2157, I-2161, point 46 et seq.

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OPINION OF MRS STIX-HACKL — CASE C-392/00

6. According to German domestic case- law, the grant of an interest-free loan by a member is deemed to be a 'transfer of assets' within the meaning of the afore- mentioned provision.

(b) an increase in the assets of a capital company through the provision of services by a member which do not entail an increase in the company's capital, but which do result in variation II — Facts and proceedings in the rights in the company or which may increase the value of the com- pany's shares;

7. The claimant and respondent in the main proceedings (hereinafter referred to as 'the claimant') is a limited company (Gesells- chaft mit beschränkter Haftung, GmbH) governed by German law whose members ...'. in the year at issue (1990) were Preussen Elektra AG and Gemeinschaftswerke Weser GmbH. The members had in 1986 joined together in a civil-law partnership (Gesellschaft bürgerlichen Rechts, here- inafter referred to as 'the GbR') for the purpose of uniform development of policy within the claimant company.

9. Notwithstanding this agreement, how- ever, the members granted the claimant interest-free loans in the year at issue (1990). The defendant and appellant (here- inafter referred to as 'the Finanzamt' (Tax 11. According to the judgment of the Court Office)) assessed the claimant to capital of Justice in Case C-38/88, 4'the absorp- duty in respect of that transaction. The tion of a company's losses by a [member] claimant made a profit of DEM 28 948 279 pursuant to a profit and loss transfer in the year at issue (1990). agreement concluded before those losses are determined does not increase the assets of that company for the purposes of Article 4(2)(b) of Directive 69/335 [con- cerning indirect taxes] on the raising of capital'. 10. The action brought against the capital duty assessment succeeded in the Nieder- sächsisches Finanzgericht (Lower Saxony Finance Court). The view of the Bundesfi- nanzhof, as the appeal court, is that the success of the appeal against the judgment of the Finanzgericht depends upon the 12. This conclusion is based on the concept interpretation of Directive 69/335. The that a company's future losses cannot have Bundesfinanzhof has therefore referred the any effect on the level of its assets where a following question for a preliminary ruling: member has given an undertaking to absorb those losses. 5

4 — Case C-38/88 Siegen [1990] ECR I-1447. 5 — Paragraph 13 of the judgment cited. See also the Opinion of Advocate General Darmon in this case, at point 10: '...if the Is it compatible with Article 4 of Council losses are determined, not before the conclusion of the contract for the transfer of the negative results but after that Directive 69/335/EEC concerning indirect contract comes into force, they do not in any way alter the taxes on the raising of capital to subject to economic potential of the company, since it was certain from the outset that neither losses nor profits would capital duty the grant of an interest-free ultimately have any effect on the company itself.

17. The grant of an interest-free loan is liable, in principle, to increase the assets of the company because it results in a saving in expenditure on interest. The Court has ruled accordingly in its judgment in the Trave case 7 cited above and in its judgment in Case C-287/94. 8 15. A comparison of the conclusions reached in the two judgments cited is necessary for the purposes of this reference. The issue in question is whether the liability to duty on an interest-free loan, as con- cluded by the Court of Justice in its judg- ment in the Trave case on its interpretation of Article 4(2)(b) of Directive 69/335, is affected by the existence of a previously 18. In its judgment in the Stegen case 9 the concluded profit and loss transfer agree- Court said that the absorption of a loss by a ment. 7 — See above, footnote 6. 8 — Case C-287/94 Frederiksen [1996] ECR I-4581, paragraph 6 — Case C-249/89 Trave Schiffahrts-Gessellschaft [1991] ECR 12 et seq. I-257. 9 — Cited in footnote 4, paragraphs 10 to 13.

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NORDDEUTSCHE GESELLSCHAFT ZUR BERATUNG UND DURCHFÜHRUNG VON ENTSORGUNGSAUFGABEN BEI KERNKRAFTWERKEN

member does, in principle, constitute a occurred primarily because the grant of the transaction which increases the assets of the loan was a transaction independent in law company as that transaction restores the of the profit and loss transfer agreement. It assets to the level which they had reached stressed that an interest-free loan is an before the loss was sustained. The Court autonomous commercial transaction by did, however, draw one fundamental dis- which the economic potential of the recipi- tinction, namely that it is a different matter ent company is immediately enhanced 'when the shareholder absorbs the losses by because of the saving in interest. The virtue of an undertaking which he entered Finanzamt also argued in this context that into before those losses were sustained' capital duty is a tax on transactions and not (emphasis added). a tax on earnings.

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OPINION OF MRS STIX-HACKL — CASE 0392/00

economic point of view, because the grant that the Court ruled, in the Trave case, 12 of the interest-free loan — in addition to that the economic potential of the company saving interest — helped to enhance the was enhanced when an interest-free loan company's economic potential at the date was granted because the company was able that the loan was granted to the extent that to benefit from the saving in interest in the the loan figure was immediately available long-term provided that the company was for use. In the view of the Finanzamt the not already obliged to return it as a transfer presumption of enhancement of the econ- of profits. When applying the criterion of omic potential of the company benefiting enhancement of economic potential, atten- from it is also supported by the fact that the tion is therefore directed not only to the profit and loss transfer agreement cannot increase in company capital which occurs reverse the enhancement which has already at the date that the loan is made, but also to occurred due to the grant of the interest- the more long-term effects of that capital free loan. It argues that this financial transaction on the nature of an increase in enhancement occurs at the date that the the value of the company's shares. loan is granted because at that date the value of the liability is less than the sum of money actually received. The Finanzamt also notes that a company's economic potential is constantly changing; the assets shown in the company's annual accounts do not take such changes into account and 26. The presumption of enhancement of do not therefore accurately reflect that the economic potential of a company potential. benefiting from an interest-free loan could therefore be defeated by economic con- siderations without relevance to time. This is required here. 13

pany's loan capital that leads to an be equated, for capital duty purposes, with improvement in its results — which then the grant of a loan at a normal market have to be transferred under the profit and interest rate. In the main proceedings the loss transfer agreement which has already claimant also makes the point that, from an been concluded. Where there is a profit and economic point of view, there is no dif- loss transfer agreement in existence such ference in the two transactions as regards enhancement can only be presumed where the economic potential of the company the benefit accruing to the company is not concerned as the timing of fulfilment of the merely directly reflected in its annual duty to pay interest 14 and fulfilment of accounts. obligations under an existing profit and loss transfer agreement would coincide. When viewed from this angle, therefore, it could certainly be considered that the act of passing on the saving in interest under a profit and loss transfer agreement should be treated in economic terms as the equiv- alent of paying interest.

28. As rightly argued by the Commission, a saving in interest to the company as a result of being granted an interest-free loan has a direct effect on its results in that it influences its annual accounts. When the profit and loss transfer agreement takes 30. One crucial factor must be, however, effect, however, this benefit is then passed that the Court in Trave 15 invoked the on in full to the members either in the form saving in interest where an interest-free of an increase in the amount of profit loan is granted for the purposes of deter- transferred or a reduction in the loss which mining the real value of the service pro- has to be made good. vided — and hence for the purposes of determining the basis of assessment.

be to pass on the saving in interest in full such as the grant of an interest-free loan are without the company's economic potential still subject to capital duty where the being increased. accompanying benefit to the company continues and therefore inter alia where a previously concluded profit and loss transfer agreement is not performed or cannot be performed. Hence the continu- ation of the profit and loss transfer agree- ment matters less than the possibility of its performance. 32. The final issue requiring consideration is the extent to which this conclusion is affected by the continuation of the profit and loss transfer agreement beyond the date that the loan is granted up to the date on which the annual accounts are pub- lished. This very question was disputed by the parties in the oral proceedings. The 34. This therefore means that Article 4(2)(b) Finanzamt emphatically argues that a profit of Directive 69/335 is to be construed to and loss transfer agreement should not be the effect that the grant of an interest-free allowed, in particular, to defeat a capital loan by a member of a company to that allocation which it considers to be liable to company cannot be subject to capital duty capital duty if that agreement can be if before the granting of the loan a profit terminated or revoked before the profit is and loss transfer agreement including an transferred. The Commission also associ- obligation to absorb losses was concluded ates tax exemption with the continued between the company and the member and existence of the agreement. The claimant, performance of that agreement did not however, points out that interim accounts become impossible. would have to be drawn up if the agree- ment were to come to an end during the period between the grant of the loan and the end of the financial year.

It is not compatible with Article 4(2)(b) of Council Directive 69/335/EEC of 17 July 1969 concerning indirect taxes on the raising of capital to subject to capital duty the grant of an interest-free loan by a member of a company to that company if at the time of granting the loan there existed a profit and loss transfer agreement between the company and the member and its performance did not become impossible.

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