Opinion of the Advocate-General
1. The Tribunal Tributário de Primeira Instância do Porto (Tax Court of First Instance, Oporto, Portugal) referred to the Court a number of questions for a preliminary ruling on the interpretation of Council Directive 69/335/EEC of 17 July 1969 concerning indirect taxes on the raising of capital (the Directive).
2. The national court has requested, for the purposes of Article 12(1)(e) of the Directive, guidance regarding the notion of the real cost of the service provided and also wishes to know whether it must reduce the amount payable in accordance with the upper limit laid down in national legislation after the chargeable event occurred.
I - The facts
3. SONAE - Tecnologia de Informação SA (SONAE) executed an instrument amending its statutes: demerger-merger and increase of capital. For the registration of those changes, SONAE was charged the sum of PTE 7 662 000, which was calculated pursuant to the scale of fees of the Commercial Registry.
4. SONAE contested this charge, arguing that it infringes the Directive in so far as it constitutes a tax on company capital rather than fees levied by a public body for providing a service.
II - The relevant national legislation
5. The relevant Portuguese legislation is contained in the Commercial Registry Code, which was approved by Decree-Law No 403/86 of 3 December 1986.
6. Article 1 of the Code provides that the function of the Commercial Registry is to make public the legal status of sole traders, trading companies, trading partnerships and individual establishments with limited liability, in order to ensure the security of legal transactions.
7. Pursuant to Article 3(q), any extension, merger, demerger, conversion or winding-up of a company, any increase, reduction or repurchase of share capital, and any other amendment to a company's statutes must be recorded in the Commercial Register.
8. An entry in the register has essential effects. The document by which a company is formed and any subsequent amendments thereto may be relied upon by the parties and their successors only after it has been registered (Article 13(2)), and registration represents the time from which such documents produced legal effects vis-à-vis third parties (Article 14).
9. Registration of an increase in share capital is compulsory and an application for registration must be made within three months of the date on which the instrument recording the increase was drafted (Article 15(1)). Pursuant to Article 70, documents whose registration is compulsory must be published in the Diário da República.
10. Article 6 of Decree-Law No 403/86 provides that the fees charged for the registration of documents under the Commercial Registry Code constitute income accruing to the Cofre dos Conservadores, Notarios e Funcionarios da Justiça (Fund for Registrars, Notaries and Officers of the Ministry of Justice), which bears the capital and operational costs of the Commercial Registry.
11. The fees are fixed by order of the Ministry of Justice (Tabela de Emolumentos do Registo Comercial). At the time of SONAE's registration the order in force was Order No 883/89 of 13 October 1989, which was subsequently amended by Order No 996/98 of 25 November 1998.
12. Pursuant to Article 1(3) of the scale of fees, where the document to be registered has a specific value in excess of PTE 100 000, the following are to be added to the total amount stated in Article 1(1) and (2) in respect of each PTE 1 000 or part 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.
13. It is useful to recall that certain action taken by companies, including increases of capital, mergers and demergers, does not take effect until a public instrument is executed before a notary and is recorded in the Commercial Register and in the National Register of Legal Persons. Accordingly, Portuguese law provides that transactions to increase capital are subject to several payments of duty and that, in addition to the charges levied by the Commercial Registry, fees must also be paid to a notary and to the National Registry of Legal Persons.
14. The legislation in force at the time when the chargeable event occurred did not contain any provisions setting a ceiling on the charges. Subsequently, the relevant Portuguese legislation was amended and, although the amount payable is still calculated by reference to the sum to which the document relates, there is now a maximum limit which is laid down in the relevant scales of fees approved by Order No 996/98. In particular, Article 23(c) of the Scale of Fees of the Commercial Registry sets a maximum limit of PTE 15 000 000 for all kinds of registration.
15. Under Portuguese law, employees of the Commercial Registry are employees of the State and are subject to a specific system of public law.
III - Community legislation
16. The objective of the Directive is to encourage the free movement of capital, which is regarded as one of the essential conditions for creating an economic union whose characteristics are similar to those of a domestic market (first recital in the preamble).
17. According to the eighth recital in the preamble, 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 Directive, and they should therefore be abolished.
18. Under Article 1 of the Directive, Member States are to charge on contributions of capital to capital companies a duty harmonised in accordance with the provisions of Articles 2 to 9 and thereafter referred to as capital duty.
19. Article 4, Article 8 as amended by Council Directive 85/303/EEC and Article 9 set out the transactions which are subject to capital duty and the types of action which Member States may exempt from duty.
In particular, Article 4(1) provides that the formation of a capital company (subparagraph (a)) and an increase in the capital of a capital company by contribution of assets of any kind (subparagraph (c)) are to be subject to capital duty.
20. Under Article 7, as amended by Article 1(2) of Directive 85/303, 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 also provides that Member States may either exempt from capital duty all transactions other than those referred to in paragraph 1 or charge duty on them at a single rate not exceeding 1%.
21. Article 10 of the Directive states that, apart from capital duty, 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; and (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.
22. Article 12(1) sets out an exhaustive list of the duties, other than capital duty, which, notwithstanding Articles 10 and 11, Member States may charge. In particular, Article 12(1)(e) provides that Member States may charge duties paid by way of fees or dues.
IV - The questions referred for a preliminary ruling
23. By an order received on 31 May 1999, the Tribunal Tributário de Primeira Instância do Porto referred the following questions to the Court for a preliminary ruling:
1. May the fees paid for such services be calculated and collected by reference to the amount to which the document relates?
(a) May that amount be unlimited?
(b) May that amount be calculated in the manner to which Question 1 relates if there is an upper limit?
2. In compliance with the Directive, must the court of the Member State reduce the amount payable in accordance with the upper limit laid down in national legislation after the action was taken?
3. Must the fees paid for such services be calculated in the light of the costs involved in providing the service?
4. Are such costs those incurred in taking the action and in maintaining the facilities necessary for taking it?
5. May the criterion of the economic benefit which the user obtains from the action taken be applied in calculating the amount payable for such action?
V - Examination of the questions referred
24. The questions referred in these proceedings by the Tribunal Tributário de Primeira Instância do Porto closely resemble those referred to the Court in Modelo I, Modelo Continente, and IGI. Specifically, by the first, third, fourth and fifth questions, the national court seeks guidance as to how the Commercial Registry charges must be calculated if they are to qualify as duties paid by way of fees or dues as referred to in Article 12(1)(e) of the Directive.
The only new element introduced by the referring court is to be found in the second question, where it asks whether the court of the Member State must reduce the amount payable in accordance with the upper limit laid down in national legislation after the action was taken.
1. Whether the Commercial Registry charges constitute duties paid by way of fees or dues
25. As I have stated, the Court has already had the opportunity to address in detail the question as to how charges should be calculated if they are to be regarded as duties paid by way of fees or dues and capable of existing alongside capital duty. Thus, in Modelo I the Court was asked whether charges payable for notarially attesting a document recording an increase in share capital and a change in the name and registered office of a capital company were compatible with the Directive. Subsequently, in Modelo Continente, the subject-matter of which was similar, the national judge asked for guidance regarding the notion of duties paid by way of fees or dues. Last, in IGI fresh questions relating to the same concept were referred, on this occasion in proceedings concerning the charges levied for entries in the National Register of Legal Persons.
26. In so far as the provisions relating to duties paid by way of fees or dues derogate from the prohibitions in Article 10 of the Directive, the Court, in these three judgments, considered first whether the charges at issue in the proceedings were caught by that prohibition.
27. Accordingly, the same test must be applied to the charges levied by the Portuguese Commercial Registry. The Court has held that Article 10(c) of the Directive prohibits taxes 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. That prohibition is justified by the fact that, even though the taxes in question are not levied on capital contributions as such, they are nevertheless levied on account of formalities connected with the company's legal form, that is to say, on account of the instrument employed for raising capital, so that their continued existence would similarly risk frustrating the aims of the Directive.
28. This prohibition covers not only charges paid for the registration of new companies but also duties payable for registration of increases in share capital, since these are also levied on account of an essential formality relating to the legal form of the companies in question. While registration of an increase in capital does not amount to a procedure which is required before a capital company commences business, it is none the less necessary for the carrying on of that business.
29. Under Portuguese law, it is compulsory to enter in the Commercial Register an instrument amending a company's statutes: demerger-merger and increase of capital. Entry of such an instrument in the register is an essential formality relating to the legal form of a company, which is necessary if the company is to carry on its business. Consequently, charges levied in respect of such registration, where they amount to a tax within the meaning of the Directive, are, in principle, prohibited under Article 10(c) thereof.
30. In the cases I have cited, the Court examined the exemption contained in Article 12(1)(e) of the Directive, that is to say the provision specifically at issue in these proceedings. That provision states that Member States may charge duties paid by way of fees or dues.
31. The Court of Justice has stated that duties paid by way of fees or dues cover only payments the amount of which is calculated on the basis of the cost of the service rendered. A payment which had no link with the particular service or the amount of which was calculated not on the basis of the cost of the transaction for which it is a 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 exclusively within the prohibition laid down in Article 10 of the Directive.
32. It follows from that line of decisions that the cost of certain transactions such as, for example, the registration of a company, may be difficult to determine. In such a case the cost can only be assessed on a flat-rate basis and must be fixed in a reasonable manner, taking account, in particular, of the number and qualifications of the officials, the time taken and the various material costs incurred in the transaction.
33. Pursuant to that line of decisions, for the purpose of calculating the amount of duties paid by way of fees or dues, Member States are entitled to take account not only of the material and salary costs which are directly associated with the registrations to which they relate, but also of the proportion of the overheads of the competent authority which can be attributed to those registrations.
34. 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.
35. 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 making each entry and a Member State is entitled to prescribe in advance, on the basis of the projected average entry costs, standard charges for making entries in respect of 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 costs of making the entries.
36. Charges with no upper limit which increase directly in proportion to the nominal value of the capital raised cannot, by their very nature, amount to duties paid by way of fees or dues within the meaning of the Directive. Even though in some cases the complexity of an entry 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.
37. It is clear, therefore, that the answers to the questions referred for a preliminary ruling may be found in the case-law of the Court of Justice. In the main proceedings, the amount of the charges for entries increases in direct proportion to the increase in share capital. However, the Court has held that charges calculated in this manner cannot be construed as constituting duties paid by way of fees or dues within the meaning of the Directive. Although in the case of certain transactions, such as the registration of a company, the cost of the transaction must be calculated at a flat rate, it must also be fixed in a reasonable manner. However, the notion of reasonable cost is not compatible with the calculation of charges by reference to the amount to which the document relates, especially not where that amount is unlimited.
Even where there is a maximum limit on the amount which may be charged, it appears unlikely that it would meet the requirement of reflecting the cost of the service provided. In any event, it is for the national court to determine, in the light of the factual and legal material available to it, whether the charge in question relates to the average costs of making the entry and of operating the service.
38. By its third and fourth questions, the Tribunal Tributário de Primeira Instância do Porto asks whether the charges must be calculated in the light of the costs involved in providing the service and whether such costs are those incurred in taking the action and in maintaining the facilities necessary for taking it.
39. I have already noted that for the charges to constitute duties paid by way of fees or dues, they must include only payments where the amount is calculated on the basis of the cost of the service provided. A payment in an amount wholly unconnected with the cost of that specific service or calculated not by reference to the service but by reference to all the running and capital costs of the department responsible for the transaction would not meet that condition.
40. In cases where the charges can only be calculated on a flat-rate basis, they must be fixed in a reasonable manner, taking account, in particular, of the number and qualifications of the officials, the time taken and the various material costs necessary for carrying out the transaction.
41. When calculating the amount of duties paid by way of fees or dues, Member States are entitled to take account not only of the material and salary costs directly related to making the entries 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, using the normal principles of cost or management accounting.
42. Lastly, by its fifth question, the national court asks whether, in calculating the amount payable for carrying out the action, the criterion of the economic benefit which the user obtains from such action may be applied.
43. The answer to this question has also been covered in the foregoing analysis. The Court has repeatedly held that the charge must be calculated by reference to the cost of the service provided, which necessarily precludes the use of any other criterion.
2. The retrospective reduction of the fees paid
44. By its second question, the national court seeks to ascertain whether national legislation fixing an upper limit on the charges payable must be applied retrospectively after the action attracting the charge was taken.
45. The reason for this question, according to the order for reference, lies in the fact that the Portuguese legislation was amended to set a maximum limit on the scale of fees of the Commercial Registry. That limit is PTE 15 million.
46. However, it is also clear from the order for reference of the Oporto court that the amount charged to SONAE was PTE 7 662 000, which is significantly lower than the limit laid down in the Portuguese legislation. Accordingly, the amendment to the legislation cannot be applied in these proceedings.
47. On this point, regard should be had to the Court's case-law concerning the admissibility of questions referred for a preliminary ruling. The Court has consistently held that it is not its function to deliver advisory opinions on general or hypothetical questions and it dismisses questions which plainly have no bearing on the real situation or on the subject-matter of the case in the main proceedings. The Court has also ruled that questions which do not correspond to an objective requirement inherent in the resolution of a dispute are inadmissible.
48. In the present case, the legislative amendment setting a maximum limit on the charges payable for registration at the Commercial Registry is not relevant, since SONAE was charged a lower amount. Accordingly, the question referred for a preliminary ruling by the national court, and hence any ruling which the Court of Justice might deliver, is not required in order to settle the main dispute.
49. I therefore propose that the Court should declare the second question inadmissible.
50. In the alternative, in case the Court should not follow that proposal, I shall briefly examine the question referred by the Portuguese court.
51. I note that, first, the limit in question is not a requirement of Community law, which, as the Court has repeatedly stated, requires only that the amount of the charges should be calculated by reference to the cost of the service provided. Where charges have not been calculated in this way, it is the responsibility of the national court, where it finds that the charges levied have to be regarded as caught by the prohibition laid down in Article 10 of the Directive, to order repayment of the sums collected in breach of that provision.
52. Second, I note that the legislation which lays down the maximum limit does not provide that it is to have retrospective effect. The Portuguese Government and the Commission express the same view in their written observations. It would, in any event, be for the national court to determine, in the light of Portuguese law, whether or not this provision was retrospective in nature.
VI - Conclusion
53. In the light of the foregoing considerations, I propose that the Court of Justice should reply to the questions referred by the Tribunal Tributário de 1ª Instância do Porto as follows:
(1) Pursuant to Article 12(1)(e) 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, fees, such as those at issue in the main proceedings, the amount of which increases directly and without limit in proportion to the share capital raised, and which are levied for entering in a commercial register an instrument recording an amendment to a company's statutes (demerger-merger and increase of capital), do not constitute duties paid by way of fees or dues.
Article 12(1)(e) of Directive 69/335, as amended by Directive 85/303, must be construed as meaning that for charges to constitute duties paid by way of fees or dues, the amount of the charge levied for registration of capital companies and increases in the share capital thereof must be calculated only by reference to the cost of the necessary formalities, taking account of the fact that this amount may also reflect the costs of minor services performed free of charge. In calculating the amount of the charges, Member States may take into consideration all costs relating to the entry, including the proportion of the overheads which can be attributed to it. Otherwise, Member States are entitled to fix standard charges and to set the amount of such charges for an indefinite period, provided that they check at regular intervals that they continue not to exceed the average registration costs in question. The economic benefit which the user obtains from the service is not a criterion which may be taken into account when calculating the amount of the charges.
(2) The second question is inadmissible.
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