Opinion of the Advocate-General
1. By orders of 17 February and 30 March 2000, the Verwaltungsgerichtshof (Administrative Court), Austria, referred to the Court of Justice for a preliminary ruling under Article 234 EC two questions concerning the interpretation of Council Directive 69/335/EEC of 17 July 1969 concerning indirect taxes on the raising of capital (OJ, English Special Edition 1969 (II), p. 412, the Directive'). Essentially what the Court is being asked to decide is whether capital duty can be charged on certain payments made in consideration of the acquisition of dividend certificates (Genussscheine) issued by capital companies.
Relevant legislation
Community legislation
2. According to its first recital, the purpose of Directive 69/335 is to promote the free movement of capital in order to create an economic union whose characteristics are similar to those of a domestic market. It is inherent in this objective that duty on the raising of capital ... by a company or firm should be charged only once and that the level of this duty should be the same in all Member States so as not to interfere with the movement of capital' (sixth recital). The Directive therefore envisages the harmonisation of the duty with regard both to its structures and to its rates (seventh recital).
3. With a view to such harmonisation, the chargeable transactions are expressly set out in Article 4 of the Directive; paragraph 1 of that article provides, in so far as concerns us here, that the following transactions are to be subject to capital duty:
...
(d) an increase in the assets of a capital company by contribution of assets of any kind, in consideration, not of shares in the capital or assets of the company, but of rights of the same kind as those of members, such as voting rights, a share in the profits or a share in the surplus upon liquidation;
...'.
4. As regards the basis of assessment, Article 5(1) provides, in so far as concerns us here, that [t]he duty shall be charged:
(a) in the case of formation of a capital company or of an increase in its capital or assets, as referred to in Article 4(1)(a), (c) and (d): on the actual value of assets of any kind contributed or to be contributed by the members, after the deduction of liabilities assumed and of expenses borne by the company as a result of each contribution. Member States may postpone the charging of capital duty until the contributions have been effected:
...'.
National legislation
5. According to the order for reference, capital duty in Austria is regulated by the Kapitalverkehrsteuergesetz (the KVG'). For present purposes, it may be noted that under Paragraph 2 of the KVG [c]apital duty is chargeable on
1. the acquisition by the first acquirer of rights in a domestic capital company;
...'.
6. Paragraph 5, point 1, of the KVG then specifies that rights in capital companies include: ... dividend rights (Genussrechte)'. Point 2 goes on to provide that [t]he owners of the rights set forth in point 1 are treated as members'.
7. As regards the basis of assessment, Paragraph 7 of the KVG provides that [t]he duty shall be computed:
1. in the case of an acquisition of rights in a company (Paragraph 2(1)):
(a) if consideration is to be furnished: on the value of the consideration. The consideration shall include the costs of the company formation or capital increase borne by the members, but not the capital duty payable in respect of the acquisition of rights in the company;
...'.
Facts and procedure in Case C-71/00
8. In December 1995, Develop Baudurchführungs- und Stadtentwicklungs GmbH (Develop') issued dividend certificates having a cumulative nominal value of ATS 1 615 000 to RLB Beteiligungs- und Treuhandverwaltungs GmbH (RLB-BT').
9. According to the terms of the issue, the dividend certificates carried the right to participate rateably in the company's profits, its assets (including secret reserves), its goodwill value and any surplus on liquidation of the company. Holders were also entitled to be repaid the nominal value of their certificates plus any premium paid thereon. In the event of termination of the dividend rights by notice, the holders had the right to a compensation payment equal to the percentage of the value of the company attributable to them as at the time of termination, or the nominal value of their dividend certificates together with any premium paid, whichever was the greater.
10. The terms of the loan also explicitly provided that the dividend certificates did not confer any form of shareholder status; consequently, the holders of the certificates did not enjoy membership rights such as the right to vote, the right to participate in general meetings, the right to propose resolutions or the right to challenge resolutions passed by the members in general meeting.
11. In addition to the nominal value of the dividend certificates, Develop also received further consideration (described as a Großmutterzuschuss or parent company contribution') of ATS 321 385 000 from RLB Immobilienprojekt Entwicklungs- und Beteiligungs GmbH (RLB-IEB'), the parent company of RLB-BT.
12. As regards the capital duty charge on the transaction in question, Develop expressly requested, in its income tax return submitted in February 1996, that the premium paid by the parent company should not be included in the basis of assessment. The relevant tax authority (the Finanzamt für Gebühren und Verkehrssteuern) rejected this request, however, and on 29 May 1996 issued an assessment based on the aggregate figure of ATS 323 000 000.
13. An appeal to the Finanzlandesdirektion itself was dismissed. Develop thereupon challenged the decision rejecting its request before the Verwaltungsgerichtshof, on the ground that the charging of the duty on the premium paid by the parent company was incompatible with Article 4(1)(d) of the Directive. In order to decide this issue, the Verwaltungsgerichtshof deemed it necessary to refer the following question to the Court of Justice under Article 234 EC:
Do payments which an acquirer of dividend rights in a capital company does not make itself but makes through its parent company constitute a "contribution of assets of any kind" within the meaning of Article 4(1)(d) of Directive 69/335?'
14. In the proceedings before the Court, submissions were received from Develop, the Austrian Government, the Netherlands Government and the Commission. None of the parties requested an oral hearing.
Facts and procedure in Case C-138/00
15. The second question was referred to the Court by the Verwaltungsgerichtshof in two joined cases involving appeals by two Austrian companies, Solida Raiffeisen Immobilien Leasing GmbH (Solida') and Tech Gate Vienna Wissenschafts- und Technologiepark GmbH (Tech'), against decisions of the tax administration.
Solida
16. On 10 March 1995, Solida issued dividend certificates having a cumulative nominal value of ATS 465 000 to Pelias Raiffeisen Immobilien Leasing GmbH (Pelias'). The terms of the issue were essentially identical, in all material respects, to those described in point 9 above.
17. On 24 March 1995, the parent company of Pelias, Raiffeisen Landesbank Tirol reg. Gen.m.b.H. (RLB') made a further payment (described as a Großmutterzuschuss or parent company contribution') of ATS 92 565 000 in consideration of the allotment of the dividend certificates.
18. The relevant tax administration (the Vienna Finanzamt für Gebühren und Verkehrsteuern) took the view that, for the purposes of the charge to capital duty, no distinction was to be made between the sum paid in respect of the nominal value of the dividend certificates and the premium and, on 29 January 1997, it assessed the transaction to capital duty on the basis of the aggregate figure of ATS 93 030 000.
19. Solida appealed against this assessment to the Finanzlandesdirektion, arguing among other things that consideration paid for dividend certificates by parties unconnected with a company cannot attract capital duty within the meaning of Directive 69/335. The appeal was dismissed by the tax administration, whose decision was then challenged before the Verwaltungsgerichtshof as being in breach of Directive 69/335.
Tech
20. On 30 June and 12 October 1998, respectively, Tech issued dividend certificates having a nominal value of ATS 2 000 000 to Wirtschaftsparken-twicklungs GmbH (WEG') and dividend certificates having a nominal value of ATS 1 000 000 to Wiener Hafen GmbH (WHG'). Once again, the terms of issue were essentially identical, in all material respects, to those described in point 9 above.
21. By assessments issued on 15 October and 11 December 1998, the relevant tax administration (the Finanzamt für Gebühren und Verkehrsteuern Wien) assessed the transactions to capital duty on the basis of the respective sums of ATS 2 000 000 and ATS 1 000 000, being the nominal values of the dividend certificates issued.
22. On 18 June 1999, after those assessments had been issued, Tech notified the Finanzamt that it had in due course received additional payments in consideration of the allotment of the dividend certificates, namely:
- a payment of ATS 68 000 000 made on 6 August 1998 by the Gesellscaft des Bundes für Industriepolitische Maßnahmen' in respect of the dividend certificates allotted to WEG;
- and a payment of ATS 69 000 000 made on 12 October 1998 by the City of Vienna in respect of the dividend certificates allotted to WHG.
23. The Finanzlandesdirektion took the view that these payments were also liable to capital duty and accordingly annulled the assessments so as to include them in the basis of assessment. Tech challenged this decision before the Verwaltungsgerichtshof, arguing that the provisions of Directive 69/335 preclude the charging of capital duty on sums paid by parties unconnected with a company in consideration of the allotment of dividend certificates.
The order for reference and the procedure before the Court
24. After having joined the two cases on account of the similarity between them, the national court deemed it necessary to refer a question to the Court of Justice under Article 234 EC further to those already referred on related issues in Case C-339/99 Energie Steiermark and Case C-71/00 Develop. The question referred by the national court is:
Do payments which a non-member of a capital company makes to the company for the acquisition of dividend rights constitute "assets of any kind contributed or to be contributed by the members" within the meaning of Article 5(1)(a) of Directive 69/335?'
25. The parties to the proceedings before the Court were Solida, the Republic of Austria and the Commission, which submitted written observations and took part in the hearing held on 26 September 2001.
Legal analysis
Preliminary remarks
26. Given the obvious similarity between the questions of interpretation referred to the Court in these cases, it is best, in my view, to deal with them together. In both, what the Court is being asked to decide is whether capital duty can be charged on sums paid to a capital company in consideration of the acquisition of dividend certificates: in Case C-71/00 Develop, the specific question is whether the duty can be charged on consideration paid by the acquirer through the intermediary of its parent company; in Case C-138/00 Solida/Tech, the question is the more general one of whether capital duty can be charged on consideration (direct or indirect) paid by parties who are not already members of the issuing company.
27. The difference in the scope of the questions referred in the two cases is essentially due to the difference in the claims pending before the national court. In the Develop case, only the charging of duty on the additional consideration paid by the parent company was contested, there was no dispute in relation to the consideration (equal to the nominal value) paid by the acquirer of the dividend certificates. In the Solida and Tech cases, by contrast, the applicants disputed the charge to duty in respect of the entire consideration paid for the dividend certificates, on the basis that the acquirers were not members.
28. It is therefore appropriate, in analysing the two questions referred to the Court, to consider first the more general issue as to whether the charge to capital duty is precluded where dividend certificates are not allotted to members (Solida/Tech question). That having been elucidated, I will then consider whether capital duty is chargeable on consideration paid indirectly by acquirers of such certificates through their parent companies (Develop question). Before embarking on this analysis, however, I think it is worth pointing out that the latter question raises similar legal issues to those referred to the Court by the Verwaltungsgerichtshof in Case C-339/99 Energie Steiermark, in which my Opinion will be delivered on the same date. The discussion in relation to this question will therefore coincide, at least to some extent, with the discussion in that case.
The question referred in the Solida/Tech case
29. To begin therefore with the question referred in Solida/Tech, it will be recalled that the issue is whether the charge to capital duty is precluded if the acquirers of the dividend certificates are not members of the issuing company.
30. First of all, it is clear from the order for reference and it is not in dispute between the parties that while the dividend certificates do not confer shareholder status they do confer property rights akin to those of members. There is no doubt, therefore, that the acquisition of dividend certificates is in principle a transaction subject to capital duty under Article 4(1)(d) of the Directive, since it consists of an increase in the assets of a capital company by contribution of assets of any kind, in consideration, not of shares in the capital or assets of the company, but of rights of the same kind as those of members, such as voting rights, a share in the profits or a share in the surplus upon liquidation'.
31. As noted above, however, Solida and Tech deny that a charge to duty arises in the not infrequent cases where the acquirers are not members of the company issuing the certificates. In support of this view, they cite Article 5(1)(a) of the Directive (which is explicitly mentioned in the question referred), according to which in the case of formation of a capital company or of an increase in its capital or assets, as referred to in Article 4(1)(a), (c) and (d)', the duty is to be charged on the actual value of assets of any kind contributed or to be contributed by the members'. Since, as pointed out above, the acquisition of dividend certificates does not confer membership status, they argue that this means that liability to duty can arise only where the certificates are allotted to existing members. Essentially the same argument is put forward by Develop in its submissions to the Court.
32. The opposite view is taken by the Austrian Government and by the Commission, who maintain that the reference to members' in Article 5(1)(a) of the Directive must be construed in a non-technical' or informal' sense, in such a way as to include the holders of rights of the same kind as those of members' within the meaning of Article 4(1)(d).
33. To my mind, the latter is decidedly the better view. Like its proponents, I find the alternative interpretation suggested by Solida, Tech and Develop to be unduly formalistic and effectively liable to defeat the purpose of Article 4(1)(d). For it would mean inserting in that article a condition (of a highly restrictive nature), which does not appear in the article, whereby a charge to capital duty would arise in cases of an increase in the assets of a capital company by contribution of assets of any kind, in consideration ... of rights of the same kind as those of members' on condition that the assets are contributed by members.
34. But the impugned argument is also lacking in rigour, given that, as its opponents have pointed out, it reverses for no reason the respective roles of Articles 4 and 5 in the scheme of the Directive. It is Article 4 which sets out the transactions that are subject to duty, including, as in this case, an increase in the assets of the company by contribution of assets in consideration of rights of the same kind as those of members' (Article 4(1)(d)). Article 5, on the other hand, specifies the basis of assessment to be used in computing the duty payable on the various transactions that are subject to duty under Article 4. Clearly, then, it is to Article 4 and not Article 5 that one must look to find which transactions are taxable, under which circumstances and as between which parties.
35. This is also borne out if one observes that when the Community legislature intended to make certain transactions taxable only if effected by members, it specified this explicitly in the provisions subjecting those transactions to duty (ubi voluit dixit). Thus, in Article 4(2)(b) it is expressly provided that Member States may charge the duty in the case of 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 in the rights in the company or which may increase the value of the company's shares'. The absence of any such qualification in Article 4(1)(d) of the Directive indicates to me that this condition is not necessary in order for the transactions set forth in that provision to be subject to duty.
36. These considerations lead me to favour a broad and non-technical' interpretation of the reference to members in Article 5(1)(a) of the Directive, extending it to include the holders of rights of the same kind as those of members' within the meaning of Article 4(1)(d). I therefore take the view that the answer to be given to the question referred in the Solida/Tech case is that Article 5(1)(a) of the Directive must be interpreted as meaning that payments which a non-member of a capital company makes to the company for the acquisition of dividend certificates do constitute assets of any kind contributed or to be contributed by the members' within the meaning of that provision.
The question referred in the Develop case
37. By the question referred in the Develop case, the Verwaltungsgerichtshof asks whether, in the cases contemplated by Article 4(1)(d), capital duty may be charged on assets which an acquirer of dividend rights contributes not directly but through its parent company. Given that, under the provision in question, assets contributed by the holders of rights of the same kind as those of members' (such as dividend rights) must be made subject to capital duty, the issue that arises, therefore, is whether the charge to duty under Article 5(1)(a) must also apply to assets contributed by such parties via their parent companies.
38. Like the Austrian and Netherlands Governments and the Commission, I believe that this question must be answered in the affirmative. For even though in the scenario described the assets are contributed indirectly, through the parent company, they are nevertheless contributed, in effect, by the party acquiring rights of the same kind as those of members'. It is common cause in the main proceedings, according to the order for reference, that the additional consideration furnished by the parent company (RLB-IEB) was paid on behalf of its subsidiary (RLB-BT), and it is to the latter that the payment must ultimately be attributed. That being so, I do not believe that the fact that the assets were technically contributed by the parent company can have any bearing on the issue of the charge to duty.
39. There is, moreover, a specific precedent in the Community case-law for the substantive' approach proposed here, according to which the charge to duty must encompass indirect contributions of assets. As noted by the Commission and by the Netherlands Government, the Court has held - with reference to the services contemplated by Article 4(2)(b) of the Directive - that [a] transfer of profits from one company to another, both being controlled by one and the same member, must be regarded as a service provided by a member within the meaning of the aforesaid provision of the directive if it is clear from the circumstances of the case that the transfer in fact constitutes a payment by that member to one company through the other'. In that case, therefore, the Court treated as services provided by a member, within the meaning of the Directive, payments made by a member through a company under its control, the Court thereby seeing fit to look beyond the formal arrangement and identify the party which was in fact behind the payments in question. By the same token, but with roles reversed, I believe that assets contributed indirectly by parties acquiring rights of the same kind as those of members', in the form of payments made (on their behalf) by their parent companies, must be regarded as assets contributed by those parties.
40. Another point in favour of this interpretation is that it preserves the effectiveness of the Directive and avoids the harmonised duty being easily circumvented. The effect of Article 4(1)(d) would be substantially diminished, if not entirely undermined, if companies belonging to a group could avoid the duty by simply having other companies in their group pay on their behalf the consideration due for dividend certificates acquired by them.
41. I therefore take the view that the answer to be given to the question referred in the Develop case is that Article 4(1)(d) of the Directive must be interpreted as meaning that payments which an acquirer of dividend certificates in a capital company does not make itself but makes through its parent company constitute a contribution of assets of any kind' within the meaning of that provision.
Conclusion
In the light of the foregoing considerations, I suggest that the Court answer the Verwaltungsgerichtshof as follows:
- in Case C-138/00 Solida/Tech, that Article 5(1)(a) of Directive 69/335 must be interpreted as meaning that payments which a non-member of a capital company makes to the company for the acquisition of dividend certificates do constitute "assets of any kind contributed or to be contributed by the members" within the meaning of that provision';
- in Case 71/00 Develop, that Article 4(1)(d) of Directive 69/335 must be interpreted as meaning that payments which an acquirer of dividend certificates in a capital company does not make itself but makes through its parent company constitute a "contribution of assets of any kind" within the meaning of that provision'.
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