Opinion of the Advocate-General
I - Introduction
1. In the present case, the Supremo Tribunal Administrativo (Supreme Administrative Court), 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 Court is, in essence, called on to rule whether charges for entries in the Registo Nacional de Pessoas Colectivas (National Register of Legal Persons; hereinafter the RNPC) are covered by the Directive; if the answer is in the affirmative, it is asked whether the levying of those charges is prohibited by virtue of Article 10(c) of the Directive or allowed under the derogation in Article 12(1)(e), according to which the Member States may charge duties paid by way of fees or dues, and how the charges are to be calculated.
3. The questions submitted by the national court in the present case are similar to those put by the same court in Case C-56/98 Modelo SPGS v Director-Geral dos Registos e Notariado (hereinafter Modelo I), in which judgment was given on 29 September 1999, and in Case C-19/99 Modelo Continente SPGS v Fazenda Pública (hereinafter Modelo II). Those cases were different inasmuch as they raised issues relating to 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.
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. The free movement of capital is promoted by the harmonisation of indirect taxes on capital contributions to companies, stamp duty on securities and other indirect taxes with the same characteristics as capital duty or stamp duty on securities. It is stated in the eighth recital in the preamble to the Directive 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 measures provided for in this Directive and those taxes should therefore be abolished.
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". Article 1 thus prescribes a harmonised duty on contributions of capital to capital companies. As the Court has held, 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.
6. Article 4, Article 8, as amended by Council Directive 85/303/EEC, and Article 9 set out 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, now 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. Article 24 of Decree-Law (Decreto-Lei) No 144/83 of 31 March 1983 provides that legal persons must enter in the RNPC certain documents and events, including (a) their constitution and (d) a change in their objects or capital.
12. Article 62(1)(b) of Decree-Law No 42/89 of 3 February 1989 provides for the imposition of fines (coimas) in the event of infringement of the rules relating to the obligation to register (regras do registo).
13. Article 73 of Decree-Law No 144/83 states that charges (taxas) set by order (portaria) of the Minister of Justice are payable for entries in the RNPC and for the issue of certificates (certificados de amissibilidade) attesting that names of firms (firmas) and business names (denominações) are permitted. The revenue from those charges is paid to a body called the Cofre dos Conservadores, Notários e Funcionários de Justiça (Fund for Registrars, Notaries and Officers of the Ministry of Justice; hereinafter the Fund). By means of the sums levied, that body bears the capital and operational costs of the RNPC.
14. Article 3(1) of the Tabela de Emolumentos do Registo Nacional de Pessoas Colectivas (Schedule of Charges for the National Register of Legal Persons; hereinafter the TERNPC), in the version resulting from Order (Portaria) No 366/89 of 22 May 1989, provides for a charge of PTE 1 500 in respect of every entry made pursuant to Article 36 et seq. of Decree-Law No 42/89. In accordance with Article 3(4) of the TERNPC, where an entry records an increase in the capital of a legal person, a sum equivalent to 0.5% of the increase is added to the charge. Under Article 3(5), the amount laid down in Article 3(4) is raised further for entries recording increases in the capital of certain undertakings.
15. Article 57(1) of Law No 10-B/96 of 23 March 1996 provides that the statutory charges (emolumentos) payable on account of increases in the share capital of companies effected in the course of 1996 are halved in certain cases.
16. The charge for registration in the RNPC is one of the charges levied under Portuguese law where the share capital of a capital company is increased, two further charges being imposed on such an increase. First, a charge is payable for the drawing up of a notarially attested act recording the increase in share capital, a fee which was held by the Court in Modelo I to amount to a tax for the purposes of the Directive. Second, a charge is payable for entering the increase at the commercial registry (Conservatória do Registo Comercial). However, in accordance with Article 1(2) and (3) of Decree-Law No 32/85, applications for entering in the RNPC operations (such as an increase in capital) which must also be entered in the commercial register are made simultaneously, by the same act and on the same form, at the competent office of the commercial registry.
17. Finally, the Portuguese Government states (paragraph 19 of its written observations) that until 1996 a capital duty (Imposto de Selo) was imposed in respect of the formation of companies and increases in capital and that it was abolished pursuant to the Directive.
IV - Facts
18. The Portuguese company IGI - Investimentos Imobiliários SA (hereinafter IGI) entered an increase in its share capital in the RNPC. On 8 July 1996 the Conservatória do Registo Comercial do Porto (Oporto Commercial Registry) determined that the registration charges amounted to PTE 12 501 500.
19. IGI contested the calculation of that sum before the Tribunal Tributário de Primeira Instância (Tax Court of First Instance), Oporto, which found against it. IGI appealed on a point of law to the Supremo Tribunal Administrativo, submitting that the levying of the charges was incompatible with the Directive, because the amount demanded was out of proportion to the cost and nature of the service provided, and with the Constitution of the Portuguese Republic.
V - Questions referred for a preliminary ruling
20. In order to decide the case before it, the Supremo Tribunal Administrativo has referred the following questions to the Court of Justice 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 where 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 the charges payable for entry (prescribed by law) on the National Register of Legal Persons of increases of capital may not vary according to the amount of such increases?
(4) May such variables also be regarded as a function of the cost of the service provided?
(5) Does that cost include the salary of officials, agents or other public employees, expenses incurred in respect of minor operations carried out free of charge, and a portion of overheads (rent of premises, data-processing and communications equipment, electricity, water and the like) attributable to registration operations?
(6) Is it permitted, having regard to the abovementioned articles of the said directive, to regard those variables deriving from increases of capital as a manifestation of standardised charges and, as such, authorised charges?
(7) Is it permitted, having regard to the same provisions of the directive, for any charge in excess of the cost of the service to be made? And if so, to what extent? If the excess were to be manifest and unreasonable, could the amount of the charges be reduced on an equitable basis?
VI - Answers to the questions submitted
A - Question 1
21. With regard to the issue raised by the first question - whether it is open to an individual to rely on Articles 10 and 12 of the Directive in his relations with the State where the latter has not transposed the Directive into its national legal system - the Court has consistently held that where the provisions of a directive appear, as far as their subject-matter is concerned, to be unconditional and sufficiently precise, those provisions may be relied upon in national courts by individuals against the State where the State fails to implement the directive in national law by the end of the period prescribed or where it fails to implement the directive correctly.
22. The Court has found that the prohibition laid down in Article 10 of the Directive and the derogation from that prohibition in Article 12(1)(e) are expressed in sufficiently precise and unconditional terms to be relied on by individuals in their national courts in order to contest a provision of national law which infringes the Directive.
23. I therefore consider that, having regard to the dispute pending before the national court, the same answer must be given to the first question, concerning an individual's ability to rely on Articles 10 and 12(1)(e) of the Directive in his relations with the State.
B - The remaining questions
24. By its remaining questions, the national court essentially asks whether the sums payable for the entry (prescribed by law) in the RNPC of increases in capital fall within the scope of the Directive, that is to say whether they are regarded as a tax (1), the levying of which is prohibited under the Directive (2), whether they are to be defined as charges paid by way of fees or dues (3), and, if they are, whether they may vary in accordance with the amount of the increase in question or whether they must be set according to the cost of the service provided, together with the question of what that cost may include (4).
(1) The meaning of tax for the purposes of the Directive
25. First of all, a point of clarification is required. The question of whether a particular charge imposed by a Member State when capital is raised constitutes a tax for the purposes of the Directive is for the Court to decide, according to the objective characteristics by which it is levied, irrespective of national classifications, conceptual distinctions and theoretical constructions of domestic law, as is, moreover, dictated by the principle of supremacy of Community law over national law. The Court has held that the term "duties paid by way of fees or dues" is contained in a provision of Community law which does not refer to the law of the Member States in order to determine the term's meaning and scope. Furthermore, the objectives of the Directive would be undermined if the Member States were entirely free to retain taxes with the same characteristics as capital duty by categorising them as duties paid by way of fees or dues. It follows that the interpretation of the term at issue, considered in its entirety, cannot be left to the discretion of each Member State. In other words, that concept is independent from the concept under national law.
26. Following the above clarification, it is necessary to decide whether the registration charges amount to a tax falling within the scope of the Directive.
27. The Portuguese Government (paragraph 30 of its written observations) considers that the RNPC's services are not provided solely in the interest of whomever has recourse to the RNPC but also more generally in the public interest. However, it maintains that, because of their structure and characteristics, the charges levied by the RNPC do not amount to a tax but to consideration paid for the provision of a service. Therefore, in its view, the Directive does not apply here.
28. In order to decide whether the registration charge paid to the RNPC on an increase in share capital may be regarded as a tax for the purposes of Article 1 of the Directive, it is necessary to examine its objective characteristics. I consider that, having regard to those characteristics, under Portuguese law, the registration charge must be considered to be an indirect tax on the raising of capital for the purposes of the Directive.
29. First of all, the charge is levied on the basis of a rule of law laid down by the Portuguese Republic. Also, although the chargeable event is the entering in the RNPC of the increase in capital of a capital company, that is to say not the increase itself, and therefore it is not the same as the chargeable event for the capital duty, the basis for calculation of the charge is the amount of the increase. The amount calculated by way of registration charge, not being voluntary, is mandatory in nature.
30. Next, the registration charges constitute payment by individuals to a State authority. More precisely, RNPC employees are civil servants and are governed by a set of public law rules specific to them, as the Commission points out (paragraph 11 et seq. of its written observations). The registration charges are levied by civil servants for the State.
31. Finally, the fact that - as is, moreover, apparent from the order for reference - those charges are public revenue, since they are paid over to the State and earmarked for particular purposes, is of decisive importance. Specifically, they are paid to the Fund, which uses them to finance a variety of public expenditure, including the operational costs of the RNPC.
32. Thus, given the particular features of Portuguese law, under which the RNPC is a public service and the Fund is a State body financed by, amongst other means, the charges paid for entering increases in the capital of capital companies in the RNPC, that is to say the sums levied are paid to the State to finance its official business, I consider that those charges amount to a tax for the purposes of the Directive.
(2) The prohibition laid down in Article 10 of the Directive
33. We can find both in Ponente Carni and in Fantask the criteria which enable us to answer the question whether the levying of registration charges, as they are described in the national legislation, is prohibited under Article 10 of the Directive, since those cases raised issues similar to those in the present case.
34. Specifically, in Ponente Carni the Court, after stating that indirect taxes which have the same characteristics as capital duty fall within the scope of Article 10 of the Directive, concluded that the various charges and duties levied for the registration of a capital company fall within the scope of the aforementioned provisions [of Article 10] and are, in principle, prohibited, subject to the derogating provisions of Article 12.
35. The Court also held in Ponente Carni that there is no reason based on the wording of the provision or on its objectives which makes it possible to refrain automatically from applying Article 10 in cases where the product of the charge contributes to the financing of the department responsible for keeping the register in which companies are registered. On the contrary, the interpretation proposed by certain governments in that case, by enabling Member States to impose a charge, other than capital duty, on capital companies in respect of one of the essential formalities for their formation, the amount of which moreover would not be restricted by the provisions of Community law, ... would run counter to the objectives of the Directive. As the Court held, the need to ensure that the provisions of the Directive had practical effect led to that solution.
36. Thus, the Court has held that Article 10 of the Directive prohibits in particular indirect taxes with the same characteristics as capital duty. It therefore applies, inter alia, to taxes in any form which are payable in respect of the formation of a capital company or an increase in its capital (Article 10(a)), or in respect of registration or any other formality required before the commencement of business, to which a company may be subject by reason of its legal form (Article 10(c)). As the Court has stated, that latter prohibition is justified by the fact that, even though the taxes in question are not imposed on capital contributions as such, they are nevertheless imposed on account of formalities connected with the company's legal form, in other words on account of the instrument employed for raising capital, so that their continued existence would similarly risk frustrating the aims of the Directive.
37. Under Portuguese law, an increase in the capital of a capital company must be entered in the RNPC. That registration constitutes an essential formality connected with the company's legal form and provision is made for the imposition of a fine in the event of failure to register. Thus, I consider that in the present case the prohibition laid down by Article 10(c) of the Directive directly covers the sums payable, as registration charges, for the entry (prescribed by law) of increases of capital in the RNPC.
38. The Portuguese Government submits in the alternative (paragraph 33 of its written observations) that the Directive does not prevent it from retaining such a charge, as capital duty; it merely requires there to be a single levy at a rate not exceeding 1%, a percentage which the registration charge levied does not exceed.
39. I consider that, while the Portuguese Republic abolished in 1996 the capital duty (Imposto de Selo) which was imposed in respect of the formation of companies and increases in capital, that does not mean that it could retain other charges, that is to say other indirect taxes, which, whatever they are called, have the effect of hindering achievement of the objective pursued by the Directive, which is to facilitate free movement and the raising of capital.
(3) The registration charges as charges paid by way of fees or dues
40. It is, in my view, clear beyond doubt from the file that the RNPC provides services to the persons entitled to them which justify a payment in return.
41. The Directive has not harmonised charges paid by way of fees or dues as such, since it does not specify what services may be provided to companies in return for payment or what the level of such payment must be. However, the Court has found that the Directive imposes limits on what a Member State may lawfully levy as charges paid by way of fees or dues. Thus, it has held that charges with no upper limit which increase directly in proportion to the nominal value of the capital raised cannot, by their very nature, constitute duties paid by way of fees or dues within the meaning of the Directive. Even though in some cases the complexity of a registration may be linked to the amount of capital raised, the amount of the charge will generally bear no relation to the costs actually incurred by the administrative body which provided the service.
42. In addition, the Court has stated that the distinction drawn between taxes prohibited by Article 10 of the Directive and duties paid by way of fees or dues implies that the latter comprise only remuneration the amount of which is calculated on the basis of the cost of the service rendered. Where the amount payable is wholly unrelated to the cost of the service in question or is calculated, not by reference to the costs of the transaction for which it constitutes the consideration, but to all the operational and capital costs incurred by the department responsible for that transaction, it would have to be regarded as a tax falling exclusively within the prohibition laid down in Article 10 of the Directive.
43. Thus, Articles 10 and 12(1)(e) of the Directive do not permit a Member State, in the present case the Portuguese Republic, to set the amount of the charges demanded on entry of an increase in capital in the RNPC by applying the not inconsiderable rate of 0.5% of the increase in the share capital.
44. In conclusion, a charge which is levied, under national law, on registration of increases in the capital of capital companies falls within the scope of the Directive and is prohibited by Article 10; such charges with no upper limit which increase directly in proportion to the increase in share capital cannot, by their very nature, constitute duties paid by way of fees or dues.
(4) Calculation of the amount of charges paid by way of fees or dues
45. With regard to calculation of the amount of charges paid by way of fees or dues and the issue of what is included in the department's operational costs that may be taken into account, I consider that the Court's case-law, in particular both Ponente Carni and Fantask, provide us with the necessary criteria for answering the questions of the national court.
46. The Court of Justice has 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 [in Fantask] ... may form part of the basis for calculating the charges.
47. I consider that those overheads include the salaries of the civil servants and other staff of the RNPC and personnel management costs. In addition, account may be taken of the costs of running their offices, computing costs, training costs and, more generally, the costs of setting up and maintaining the department in question so that it fulfils as well as possible the duties entrusted to it by the national legislature. Those costs must as far as possible be set by apportioning overheads on the basis of appropriate criteria, such as the staff employed for the various types of activity, the amount of office space used and so forth.
48. Furthermore, the Court has acknowledged 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. In other words, the Court has had regard to the redistributive functioning of the charges collected.
49. In the present case, given the particular features of the system under Portuguese law for entering increases in capital in the RNPC, the consequence of having regard to that redistributive element in connection with the registration charges levied is that a Member State may impose higher 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 the services of the RNPC, without distinction on the basis of their income.
50. It is for the national authorities to decide, having regard to the foregoing factors, what level of charges is reasonable and whether it is possible to have recourse to a general principle of national law, such as the principle of equity which the national court refers to, in order to justify a reduction in the sum payable.
51. It is, however, to be noted that the Court has pointed out 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. Furthermore, there is nothing to prevent those charges from being set for an indefinite period, provided that the Member State checks at regular intervals, for example once a year, that they continue not to exceed the registration costs.
52. Having regard to the foregoing, I consider that it is for the national court, on the basis of the Court's case-law set out above and the criteria resulting therefrom, to review the extent to which the charges set for entries in the RNPC are paid by way of fees or dues and, where appropriate, to order a refund on that basis.
53. In conclusion, Article 12(1)(e) of the Directive is to be interpreted as meaning that, in order for charges for entries in the RNPC which are levied in respect of increases in the capital of capital companies 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 the 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 registration 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
54. I therefore consider that the questions submitted by the Supremo Tribunal Administrativo should be answered as follows:
(1) Article 10 of 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, in conjunction with Article 12(1)(e) thereof, creates rights on which individuals may rely in proceedings before the national courts.
(2) Directive 69/335, as amended by Directive 85/303, is to be interpreted as meaning that the charge which is levied when an increase in the share capital of a capital company is entered in the Registo Nacional de Pessoas Colectivas (National Register of Legal Persons) is covered by the directive and constitutes a tax for the purposes of the directive.
(3) The charge which is levied when an increase in the share capital of a capital company is entered in the Registo Nacional de Pessoas Colectivas 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.
(4) 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 duty levied on entering an increase in capital of a capital company in the Registo Nacional de Pessoas Colectivas, such as the registration charge at issue in the main proceedings, the amount of which increases in direct proportion to the increase in share capital and in respect of which there is no upper limit.
(5) Article 12(1)(e) of Directive 69/335, as amended by Directive 85/303, is to be interpreted as meaning that, in order for charges for entries in the Registo Nacional de Pessoas Colectivas which are levied in respect of increases in the capital of capital companies 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 the 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. Furthermore, a Member State may impose flat-rate registration 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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