Opinion of the Advocate-General
1 Two Spanish taxpayers have invoked Council Directive 69/335/EEC of 17 July 1969 concerning indirect taxes on the raising of capital (hereinafter `the Directive') (1) to challenge the imposition of an ad valorem duty on the issue of the document recording the repayment of a loan. The issue is a simple one of interpretation. Does the prohibition of taxes on loan documentation cover those concerning repayment? As it happens, the same Spanish law was considered by the Court earlier this year. (2)
I - Factual and legal background
(a) Relevant national provisions
2 Article 1 of the Ley del Impuesto sobre Transmisiones Patrimoniales y Actos Jurídicos Documentados (Law concerning duty on transfers of assets and documented legal transactions, hereinafter `the Law') provides as follows:
`(1) Duty on transfers of assets and documented legal transactions is an indirect tax imposed, subject to the conditions set out in the provisions below, on:
1. transfers of assets for consideration; 2. company transactions; 3. documented legal transactions.
(2) In no circumstances may one and the same act be subject to duty on account of both transfer of assets for consideration and company transactions.'
3 Article 28 of the Law applies the duty to notarial acts. Article 31(1) fixes a charge for minutes and copies of official documents and notarial deeds, while Article 31(2) provides in material part that:
`Where original documents and notarial deeds have for their subject-matter a quantity or a thing of value, or contain acts or contracts required to be entered in the Commercial, Mercantile or Industrial Property Register and are not subject to inheritance tax or tax on gifts or the taxes referred to in Article 1(1) and (2) of this Law, they shall give rise in addition to the payment of duty of 0.5% for such acts or contracts.'
4 Article 20 of the implementing provisions provides that where the reimbursement of bonds is not subject to the duty on the transfer of assets, it is subject to payment of the duty on documented legal transactions.
(b) Case C-31/97
5 In June 1990, the applicants in the first case (hereinafter `FECSA') partially redeemed an issue of debentures in an amount of PTA 378 650 000 by an officially attested record of redemption. The defendant tax administration applied the duty on documented legal transactions at a rate of 0.5%, and concluded that the applicants owed PTA 1 893 250 in respect of this operation. FECSA's challenge to this assessment before the Tribunal Económico-Administrativo de Catalunya was rejected, and an appeal lodged at the Tribunal Superior de Justicia de Catalunya (High Court of Justice, Catalonia).
(c) Case C-32/97
6 The dispute in the main proceedings in Case C-32/97 between the applicants (hereinafter `ACESA') and the Spanish tax authorities concerns the imposition of the duty on documented legal transactions in an amount of PTA 367 000 in respect of the reimbursement of a loan in June 1989; ACESA challenged the assessment before the Tribunal Económico-Administrativo de Catalunya and on appeal to the High Court of Justice, Catalonia.
(d) The orders for reference
7 The orders for reference, which are substantially identical, read in material part as follows:
`Loans raised by the issue of debentures or similar securities consist of two distinct phases: first, payment of the loan capital by the issue of debentures or other similar securities; second, return of the loan capital, which is formalised in a record of redemption. According to the Spanish authorities, the officially attested deed of issue is exempt from the duty on transfers of assets and from any other charge. The record of redemption is exempt from the duty on transfers of assets but is liable to the duty on documented legal transactions ... the Duty on transfers of assets and documented legal transactions is in no way similar to the duties on registration in the Commercial Register, which are not the subject-matter of the present case.'
8 The Fourth Chamber of the Division for Contentious-Administrative Proceedings of the High Court of Justice, Catalonia, has referred to the Court the following question in each case:
`Having regard to Articles 11(b) and 12 of Council Directive 69/335/EEC of 17 July 1969, is the purported levying by the Spanish Administration of the Duty on Transfers of Assets and Documented Legal Transactions on records of redemption (repayment of loans) in conformity with Community law, or on the contrary does it conflict with Community law with the result that it must be disallowed as being incompatible therewith?'
9 Written and oral observations have been submitted by FECSA, ACESA, the Generalitat of Catalonia (hereinafter `the Generalitat'), the Kingdom of Spain and the Commission.
II - The capital duty directive
10 As the Court stated in Solred, `the Directive is aimed in particular at achieving harmonisation of the factors involved in the fixing and levying of capital duty in the Community, by means of the elimination of tax obstacles which interfere with the free movement of capital'. (3) With a view to ensuring the effectiveness of the harmonisation secured in particular by Article 4, the Directive recites that `it is advisable to abolish the stamp duty on securities ... regardless of whether they represent a company's own capital or its loan capital' (fifth recital in the preamble), and that `the retention of other indirect taxes with the same characteristics as the capital duty or the stamp duty on securities might frustrate the purpose of the measure provided for in this Directive' (eighth recital).
11 Article 11, which is central to the present cases, reads in material part as follows:
`Member States shall not subject to any form of taxation whatsoever:
(a) ...
(b) loans, including government bonds, raised by the issues of debentures or other negotiable securities, by whomsoever issued, or any formalities relating thereto, or the creation, issue, admission to quotation on a stock exchange, making available on the market or dealing in such debentures or other negotiable securities.'
12 Article 12(1) allows a derogation in respect of certain types of charge, `[notwithstanding] Articles 10 and 11', including `duties on the creation, registration or discharge of mortgages or other charges on land or other property' (paragraph (d)) and `duties paid by way of fees or charges' (paragraph (e)).
III - Analysis
(a) Admissibility of the request for a preliminary ruling
13 Without formally arguing that the requests are inadmissible, Spain has observed that these do not supply sufficient detail on the factual and legal background to the main proceedings in each case, and has referred to the Court's ruling of inadmissibility in Telemarsicabruzzo. (4)
14 While it is true that the orders for reference do not provide either a full description of the applicable national provisions or any information on the factual background, I am of the view, set out at paragraph 10 of my Opinion in Lemmens, that `the sufficiency of the information supplied by the national court must be judged in the light of the questions of Community law posed'. (5) In the present proceedings, the referring court has set out the position in national law regarding the taxation of the transactions in question succinctly but clearly, and has provided references to the principal legislative provisions, while the factual background does not, in the relatively technical context of the Directive, impinge on the tenor of the response the Court is here invited to provide. In my opinion, the Court should therefore admit the present request. (6)
(b) The interpretation of Articles 11 and 12 of the Directive
15 There are essentially two issues which must be addressed in order to respond to the national court: is the contested national tax prohibited by Article 11(b) of the Directive and, if so, is it covered by the derogation provided for by Article 12?
16 In the first place, I do not agree with the approach suggested by the Generalitat on the basis of the second recital in the preamble, that, in seeking to avoid double or discriminatory taxation in respect of the raising of capital, the Directive only applies to the issue but not the reimbursement of loans. The prevention of the double taxation of concentrations of capital to which the Directive aspires is not an aim in itself, but is merely the means to a wider objective, identified by the Court in Ponente Carni thus:
`[t]he Directive aims at encouraging the free movement of capital which is regarded as essential for the creation of an economic union whose characteristics are similar to those of a domestic market ... the pursuit of such an objective presupposes the abolition of indirect taxes in force in the Member States until then and imposing in place of them a duty charged only once in the common market and at the same level in all the Member States.' (7)
17 It follows in my view that, in so far as national measures which formally affect only the splitting up of capital may interfere with the establishment and maintenance of the common market in capital, they can in principle fall within the scope of the provisions of the Directive. The taxation of an operation which is required for the extinction of a loan may `frustrate the purpose of the measures provided for in [this] Directive' like other indirect taxes, despite the deferral in time of its imposition. Furthermore, an interpretation of the Directive which allowed a Member State to tax loans, albeit indirectly by means of a duty on the memorandum of redemption, would have the effect of discouraging capital companies from raising loan capital in that Member State, contrary to the stated aims of the Directive noted above.
18 While it is true, as Spain and the Generalitat have argued, that Article 11(b) does not expressly mention charges on the reimbursement of loans, it is in my view difficult to escape the conclusion that such charges are within the scope of the prohibition it imposes. In the first place, the last recital in the preamble indicates the intention of the Directive to abolish indirect taxes with the same characteristics as the stamp duty on securities, including securities which represent a company's loan capital, a description which, as ACESA has observed, appears to cover the tax at issue in the present case. Secondly, I can see no reason to restrict the term `loans' in Article 11(b) to the issue thereof, as Spain and the Generalitat seek to do. I agree with the applicants that, on its face, this provision is not so restricted and hence must, in the absence of any contrary indication, be interpreted as including the loan transaction in its entirety, and in particular any formality relating to the creation or extinction of loans, such as the emission of a memorandum of redemption. In any case, Article 11 prohibits `any form of taxation whatsoever'; while formally a tax on the official attestation of a document recording the redemption of a loan, the national tax is, in effect, a tax on the loan operation itself and as such falls foul of Article 11.
19 The fact that the tax in question is a general indirect tax does not, in my view, bring it outside the scope of Article 11. In Solred, the Court held, regarding the same duty applied to notarial deeds recording the registration of the paying-up of shares not fully paid up, that it comprised `a tax imposed on account of an essential formality connected with a company's legal form'. (8) By the same token, the application of the duty to notarial deeds recording the redemption of a loan raised by the issue of debentures is a formality relating to loans, caught by the terms of Article 11.
20 Nothing in the terms of Article 12 would, in my view, justify applying the derogation it allows to the duty at issue in the present case. In seeking to argue at the hearing that the national duty can be levied where the loans are secured by mortgages, the Generalitat appears to be confusing two distinct operations, to wit, the discharge of mortgages or other charges on real property, and the financial transaction consisting in the repayment of the loan itself. Even if a loan has, for example, been registered as a charge on real property, the discharge of such a charge must be distinguished from the redemption; a duty may be levied on the former transaction, by virtue of Article 12(1)(d), but not on the latter. Nor has it been suggested that the contested duty falls within the exemption for fees or dues allowed by Article 12(1)(e). Furthermore, as noted by the applicants, in Dansk Sparinvest the Court interpreted Article 12 of the Directive as establishing `an exhaustive list of taxes and duties other than capital duty which affect capital companies in connection with the transactions referred to in Articles 10 and 11'. (9) Clearly no duty such as that at issue in the main proceedings features on that list.
IV - Conclusion
21 In the light of the foregoing, I recommend to the Court that the questions referred by the Fourth Chamber of the Division for Contentious-Administrative Proceedings of the Tribunal Superior de Justicia de Catalunya be answered as follows:
Articles 11 and 12 of Council Directive 69/335/EEC of 17 July 1969 concerning indirect taxes on the raising of capital should be interpreted as precluding the levying of 0.5% duty on the notarial deed recording the redemption of a loan in circumstances such as those of the main proceedings.
(1) - OJ, English Special Edition, First Series 1969 (II), p. 412; the Directive has been amended on a number of occasions (Directive 73/79/EEC, OJ 1973 L 103, p. 13; Directive 73/80/EEC, ibid., p. 15; Directive 74/553/EEC, OJ 1974 L 303, p. 9; Directive 85/303/EEC, OJ 1985 L 156, p. 23) though none of the modifications is material in the present case.
(2) - Case C-347/96 Solred v Administracíon General del Estado [1998] ECR I-0000 (hereinafter `Solred'), paragraph 23.
(3) - Case C-347/96, cited in footnote 2 above, paragraph 3.
(4) - Joined Cases C-320/90, C-321/90 and C-322/90 [1993] ECR I-393.
(5) - Case C-226/97 Criminal proceedings against Johannes Martinus Lemmens [1998] ECR I-0000.
(6) - See, for example, Case C-28/95 Leur-Bloem [1997] ECR I-4161, paragraphs 25 to 27, and the cases cited therein.
(7) - Joined Cases C-71/91 and C-178/91 [1993] ECR I-1915.
(8) - Case C-347/96, cited in footnote 2 above, paragraph 23.
(9) - Case 36/86 Ministeriet for Skatter og Afgifter v Investingsforeningen Dansk Sparinvest [1988] ECR 409, paragraph 9.
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