Opinion of the Advocate-General
I - Introduction
1. In the present case, the Tax Division of the Supremo Tribunal Administrativo (Supreme Administrative Court of Portugal) is asking the Court to interpret provisions of Council Directive 69/335/EEC of 17 July 1969 concerning indirect taxes on the raising of capital (hereinafter the Directive).
2. The questions submitted by the national court are to a large extent identical to those asked by the same court in Case C-56/98, in which judgment was given on 29 September 1999. First, as in Case C-56/98, the national court asks whether charges payable to a notary for recording in a public instrument as required by law, resolutions to amend a company's statutes or increase its capital are covered by the Directive and, if so, whether those charges may none the less be regarded as permitted by virtue of the derogation in Article 12(1)(e) of the Directive allowing the Member States to charge duties paid by way of fees or dues.
3. Additionally, in the present case the national court asks more specific questions concerned with determining the level of the notarial charges should they be regarded as amounting to fees or dues within the meaning of Article 12(1)(e) of the Directive.
II - Community context
4. The Directive has the aim of promoting the free movement of capital, in order to create an economic union whose characteristics are similar to those of a domestic market.
5. Article 1 of the Directive provides: Member States shall charge on contributions of capital to capital companies a duty harmonised in accordance with the provisions of Articles 2 to 9 and hereinafter called "capital duty".
6. Article 4, Article 8 as amended by Council Directive 85/303/EEC, and Article 9 set out, subject to Article 7, the transactions subject to capital duty and certain transactions for which the Member States may lay down exceptions.
7. In accordance with Article 4(1) of the Directive, capital duty is payable on, inter alia, (a) the formation of a capital company and (c) an increase in the capital of a capital company by contribution of assets of any kind.
8. Article 7, as amended by Article 1(2) of Directive 85/303, provides that the Member States are to exempt from capital duty transactions, other than those referred to in Article 9, which were, as at 1 July 1984, exempted or taxed at a rate of 0.50% or less (Article 7(1)), and that they may either exempt from capital duty all transactions other than those referred to in Article 7(1) or charge duty on them at a single rate not exceeding 1% (Article 7(2)).
9. Article 10 of the Directive provides that, apart from capital duty, the Member States are not to charge, with regard to companies, firms, associations or legal persons operating for profit, any taxes whatsoever: (a) in respect of the transactions referred to in Article 4; (b) in respect of contributions, loans or the provision of services, occurring as part of the transactions referred to in Article 4; or (c) in respect of registration or any other formality required before the commencement of business to which a company, firm, association or legal person operating for profit may be subject by reason of its legal form.
10. Article 12(1) of the Directive sets out an exhaustive list of taxes and duties other than capital duty which, in derogation from Articles 10 and 11, may be levied on capital companies on account of the transactions referred to in those two articles. It states, inter alia, that, notwithstanding Articles 10 and 11, Member States may charge duties paid by way of fees or dues (Article 12(1)(e)).
III - National law
11. The code governing the Portuguese notarial profession, adopted by Decree-Law No 47619 of 31 March 1967, provides that certain acts must be recorded in public instruments drawn up by a notary. Under Article 89(e) of the code, the acts covered include those which incorporate commercial companies, change their form, dissolve them or put them into ordinary liquidation ... and those which amend any company statutes.
12. Charges for drawing up notarially attested acts are laid down in the Table of Notarial Charges (hereinafter the Table), in the version annexed to Decree-Law No 397/83 of 2 November 1983. Article 1 of the Table prescribes the value of such acts. In accordance with Article 1(2)(e) of the Table, the statutory value of a notarially attested act relating to the amendment of a company's statutes is equal to the entire share capital of the company. Under Article 1(2)(f), where the notarially attested act concerns an increase in capital, its statutory value is the amount of that increase. Finally, Article 1(2)(g) provides that the value of an act relating to an increase in capital accompanied by various other amendments to the statutes is the amount of that increase or the amount of the amended share capital resulting from the alteration, whichever yields the higher charge.
13. Under Article 4 of the Table, notarial charges are determined on the basis of the type of the notarially attested act while, under Article 5 of the Table, they are calculated by reference to a percentage of the statutory value of the act. Articles 4 and 5 apply cumulatively.
14. Article 5 provides that where the act recorded in a public instrument is of a given value, the charges comprise, first, a fixed amount and, second, a variable amount which is set by the Table in accordance with a sliding scale. Specifically, Article 5 states that if a notarially attested act has a certain value, the (fixed) charges provided for in the previous article are increased by the following amounts, payable on the whole of the value of the act, in respect of every PTE 1 000 of that value or fraction thereof: (a) PTE 10 on values up to PTE 200 000; (b) PTE 5 on values between PTE 200 000 and PTE 1 000 000; (c) PTE 4 on values between PTE 1 000 000 and PTE 10 000 000; and (d) PTE 3 on values in excess of PTE 10 000 000.
IV - Facts
15. On 31 October 1992, in the first Cartório Notarial do Porto (Oporto Notarial Office), a public instrument was executed recording a partial amendment of the statutes of the Portuguese company Modelo Continente SGPS SA (hereinafter Modelo) and a transfer of ownership effected by it. The Cartório Notarial charged Modelo PTE 16 842 000 for the formalisation of that document.
16. Modelo contested the document determining the amount of those notarial charges before the Tribunal Tributário de Primeira Instância (Tax Court of First Instance), Oporto, but its action was dismissed as unfounded. It then appealed to the Supremo Tribunal Administrativo, asking it to set aside the judgment and, consequently, the determination of the charges, and to order reimbursement of the sum paid together with interest. It submitted that the charge was really a tax, the level of which should have been set not by the Government but by Parliament, that the amount demanded was out of proportion to the services provided and that the levying of the charge was incompatible with the Directive.
V - Questions referred for a preliminary ruling
17. In order to decide the case pending before it, the Supremo Tribunal Administrativo has referred the following questions to the Court for a preliminary ruling:
(1) Is it open to an individual to rely on Articles 10 and 12 of Council Directive 69/335/EEC in his relations with the State even though the latter has not transposed that directive into its national legal system?
(2) Must the transactions referred to in Article 4(3) of Directive 69/335/EEC be regarded as covered by the prohibition laid down in Article 10 of the same Community measure, in such a way as to preclude the collection, with respect to those transactions, not only of capital duty but also of any other levy, of whatever kind, in particular one that is a charge rather than a tax?
(3) Must Articles 10 and 12(1)(e) of the same directive be interpreted as meaning that notarial charges for recording in a public instrument as required by law resolutions to increase the capital or to amend the statutes of a company may not vary according to the amount of the increase and the amount of the capital respectively?
(4) May those charges - see Article 5 of the Table of Notarial Charges - be regarded as reflecting the cost of the service provided?
(5) What must such cost be construed as comprising? Does it include the remuneration of notaries and of the staff in their office, premises and office equipment and the like?
(6) Is it permitted and, consequently, lawful, having regard to Articles 10 and 12(1)(e) of the said directive, for any charge in excess of that cost to be made? And if so, to what extent?
VI - Answers to the questions submitted
A - Questions 1, 2 and 3
18. The first three questions are formulated in almost identical terms to the questions submitted by the same court in Case C-56/98. I therefore consider that the answers must be the same as those given by the Court in that case (paragraphs 1 to 4 of the operative part of the judgment).
19. The Court held in Case C-56/98 that Directive 69/335, as amended by Directive 85/303, had to be interpreted as meaning that charges constituted taxes for the purposes of the Directive where they were collected for drawing up notarially attested acts recording a transaction covered by the Directive, under a system where notaries were employed by the State and the charges in question were paid in part to that State for the financing of its official business.
20. In other words, the Court found in that instance that the notarial charges constituted a tax, having regard to the specific features of the Portuguese notarial profession.
21. The Court also held that a charge payable for drawing up a notarially attested act recording an increase in the share capital or a change in the name or registered office of a capital company was, where it amounted to a tax for the purposes of Directive 69/335, as amended by Directive 85/303, in principle prohibited under Article 10(c) thereof.
22. The Court then ruled that fees or dues within the meaning of Article 12(1)(e) of Directive 69/335, as amended by Directive 85/303, did not cover a charge collected for drawing up a notarially attested act recording an increase in the share capital or a change in the name or registered office of a capital company, such as the charge at issue in the main proceedings in that case, the amount of which increased in direct proportion to the share capital raised and in respect of which there was no upper limit.
23. Finally, the Court recalled its settled-case law according to which Article 10 of Directive 69/335, as amended by Directive 85/303, creates rights on which individuals may rely in proceedings before the national courts.
24. In other words, it was held in Case C-56/98 that the notarial charges set in that instance, in accordance with national law, fell within the scope of the Directive, that they were prohibited by Article 10, and that such charges/duties, the amount of which increased in direct proportion to the share capital raised and in respect of which there was no upper limit, did not amount to fees or dues. In my view, the same answers must equally be given to the first three questions in the present case.
B - Questions 4, 5 and 6
25. It is appropriate to consider the final three questions together and to give them a joint answer. By those questions, the national court essentially enquires about the nature of the charges if they are paid by way of fees or dues. Specifically, it asks whether the amount of the notarial charges may be determined by reference to the cost of the service provided and what that cost may include. That is to say, it asks whether the charges must be calculated solely on the basis of the cost of the services provided or may be set so as to cover the whole or part of the outgoings of the department entrusted with their provision.
26. The necessary criteria for answering the national court's final three questions can be found in both Ponente Carni and Fantask.
27. The Court has already held that the distinction between taxes prohibited by Article 10 of the Directive and duties paid by way of fees or dues implies that the latter cover only payments collected on registration whose amount is calculated on the basis of the cost of the service rendered. A payment the amount of which had no link with the cost of the particular service or was calculated not on the basis of the cost of the transaction for which it is consideration but on the basis of all the running and capital costs of the department responsible for that transaction would have to be regarded as a tax falling solely under the prohibition of Article 10 of the Directive.
28. Accordingly, charges levied on registration of public and private limited companies and on their capital being increased cannot be by way of fees or dues within the meaning of Article 12(1)(e) of the Directive if their amount is calculated so as to cover costs ... [which are] unrelated to the registrations in respect of which the contested charges are paid.
29. The Court has also held that a Member State may impose charges for major transactions only and pass on in those charges the costs of minor services performed without charge. The reasons why that is possible were analysed by Advocate General Jacobs in paragraphs 37 and 45 of his Opinion in Fantask. In paragraph 37 he stated: ... it is clear that the services provided to individual companies by the Office [the Danish registration authority] include a number of tasks for which no specific charge is made. It appears that the Office makes a charge only for first registration and for registration of increases in capital. ... a registration authority is responsible for ensuring compliance with numerous other registration and disclosure requirements. ... it is in my view open to a Member State to confine its charges solely to more substantial transactions and to take account of the costs of minor tasks performed in connection with maintenance of the register in the fees or dues charged for such transactions. In paragraph 45, the Advocate General proposed that in the interests of administrative simplicity the registration authority should be able to limit its charges to major transactions and pass on the costs of comparatively minor services (for example, recording changes of registered office or directors) in the registration charges which it does make. He pointed out that the contrary view would require the authority to make individual charges for every service which it performs, however small. In its judgment in Fantask, the Court, following the Advocate General's Opinion, had regard to the redistributive functioning of the charges collected.
30. In the present case, given the particular nature of the arrangements governing the notarial profession under Portuguese law, the consequence of having regard to the abovementioned redistributive element in connection with the notarial charges levied would be that Portugal may impose higher notarial charges for major transactions and pass on in those charges the costs of any minor services performed without charge. In that way it is possible for individuals to have wide access to notarial services, without distinction on the basis of their income.
31. In addition, the Court held that in calculating the amount of duties paid by way of fees or dues, the Member States are entitled to take account not only of the material and salary costs which are directly related to the effecting of the registrations in respect of which they are incurred, but also ... of the proportion of the overheads of the competent authority which can be attributed to those registrations. To that extent only, the costs specified by the national court ... may form part of the basis for calculating the charges.
32. In paragraph 43 of his Opinion in Fantask, Advocate General Jacobs provided more detailed guidance on the manner in which the costs of a registration authority are to be calculated. He explained that it would be appropriate to base the calculation of the relevant costs on the normal principles of cost or management accounting. In other words, the fees may reflect the direct costs and overheads of the authority attributable to the services in question. Thus, such costs might include, in addition to direct material costs and the salary and social security costs of the staff carrying out the services, a proportion of the overheads of the authority 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 attribution, for example by identifying the rent payable for the offices used specifically for the services in question. Where costs relate both to registration services and to other activities such as preparatory work on legislation, it will be necessary to make an apportionment on the basis of appropriate criteria such as staff employed on the various types of activity, office space used, computer time used etc.
33. In the present case, I would say that those costs include the remuneration of notaries and of the staff in their office and regard may be had to the time which they devote to carrying out each operation (for example, registration of an increase in company capital), the expenditure on their professional training and the cost of running their offices. Account may also be taken, when determining the authority's costs, of the insurance cover in respect of the notaries' personal liability for the documents which they draw up and, more generally, of the costs of setting up and maintaining the authority in question.
34. The Court has nevertheless made it clear that the amount of duties paid by way of fees or dues does not necessarily have to vary in accordance with the costs actually incurred by the authority in effecting each registration and a Member State is entitled to prescribe in advance, on the basis of the projected average registration costs, standard charges for carrying out registration formalities in relation to capital companies.
35. In view of the foregoing considerations, I consider that it is for the national court to review the extent to which the notarial charges at issue are paid by way of fees or dues and, where appropriate, to order a refund on that basis. The sums levied may cover the costs of any minor services performed without charge. Furthermore, as has been made clear by the Court, the Member State may impose flat-rate charges and fix their amount for an indefinite period, provided that it checks at regular intervals that they continue not to exceed the average cost of the registrations at issue.
36. Thus, the answer to Questions 4, 5 and 6 should be that Article 12(1)(e) of the Directive must be interpreted as meaning that, in order for notarial charges levied in respect of increases in the capital of capital companies or amendments of their statutes to be by way of fees or dues, their amount must be calculated solely on the basis of the cost of the formalities in question. It may, however, also cover the costs of any minor services performed without charge. In calculating their amount, a Member State is entitled to take account of all the costs related to the effecting of registration, including the proportion of the overheads which may be attributed thereto. A Member State may impose flat-rate notarial charges and fix their amount for an indefinite period, provided that it checks at regular intervals that they continue not to exceed the average cost of the registrations at issue.
VII - Conclusion
37. Having regard to the matters set out above, I consider that the questions submitted by the Tax Division of the Supremo Tribunal Administrativo should be answered as follows:
(1) Council Directive 69/335/EEC of 17 July 1969 concerning indirect taxes on the raising of capital, as amended by Council Directive 85/303/EEC of 10 June 1985, must be interpreted as meaning that charges constitute taxes for the purposes of the directive where they are collected for drawing up notarially attested acts recording a transaction covered by the directive, under a system where notaries are employed by the State and the charges in question are paid in part to that State for the financing of its official business.
(2) A charge payable for drawing up a notarially attested act recording an increase in the share capital or a change in the name or registered office of a capital company is, where it amounts to a tax for the purposes of Directive 69/335, as amended by Directive 85/303, in principle prohibited under Article 10(c) thereof.
(3) Fees or dues within the meaning of Article 12(1)(e) of Directive 69/335, as amended by Directive 85/303, do not cover a charge collected for drawing up a notarially attested act recording an increase in the share capital or a change in the name or registered office of a capital company, such as the charge at issue in the main proceedings, the amount of which increases in direct proportion to the share capital raised and in respect of which there is no upper limit.
(4) Article 10 of Directive 69/335, as amended by Directive 85/303, creates rights on which individuals may rely in proceedings before the national courts.
(5) Article 12(1)(e) of the directive must be interpreted as meaning that, in order for notarial charges levied in respect of increases in the capital of capital companies or amendments of their statutes to be paid by way of fees or dues, their amount must be calculated solely on the basis of the cost of the formalities in question. It may, however, also cover the costs of any minor services performed without charge. In calculating their amount, a Member State is entitled to take account of all the costs related to the effecting of registration, including the proportion of the overheads which may be attributed thereto. A Member State may impose flat-rate notarial charges and fix their amount for an indefinite period, provided that it checks at regular intervals that they continue not to exceed the average cost of the registrations at issue.
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