CELEX: 62009CJ0540
Reference for a preliminary ruling
Sixth VAT Directive
Article 13B(d)(5)
Exemptions
Underwriting guarantee provided against payment of a commission by credit institutions to the issuing companies in respect of a share issue on the capital markets
Transactions in securities

This reference for a preliminary ruling concerns the interpretation of Article 13B(a) and (d)(1), (2) and (5) of Sixth Council
Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes – Common
system of value added tax: uniform basis of assessment (OJ 1977 L 145, p. 1) (‘the Sixth Directive’).
The reference was made in the course of proceedings between Skandinaviska Enskilda Banken AB Momsgrupp (‘SEB’) and the Skatteverket
(Swedish Tax Board) concerning the classification, for the purposes of exemption from value added tax (‘VAT’) of underwriting
guarantee services.

Legal context

European Union law
Article 2 of the Sixth Directive provides:
‘The following shall be subject to [VAT]:
1.      the supply of goods or services effected for consideration within the territory of the country by a taxable person acting
as such;
…’
Under Article 13B of the Sixth Directive:
‘Without prejudice to other Community provisions, Member States shall exempt the following under conditions which they shall
lay down for the purpose of ensuring the correct and straightforward application of the exemptions and of preventing any possible
evasion, avoidance or abuse:
(a)      insurance and reinsurance transactions, including related services performed by insurance brokers and insurance agents;
…
(d)      the following transactions:
(1)      the granting and the negotiation of credit and the management of credit by the person granting it;
(2)      the negotiation of or any dealings in credit guarantees or any other security for money and the management of credit guarantees
by the person who is granting the credit;
…
(5)      transactions, including negotiation, excluding management and safe keeping, in shares, interests in companies or associations,
debentures and other securities, excluding:
–        documents establishing title to goods,
–        the rights or securities referred to in Article 5(3),
…’

National law
Chapter 1, Paragraph 1, of the Law (1994:200) on value added tax (mervärdesskattelagen (1994:200)) of 30 March 1994 (SFS 1994
No 200; ‘the ML’) provides:
‘[VAT] is payable to the State in accordance with this Law
1.      on supplies within the territory of the State of goods or services which are subject to tax and carried out as part of a professional
activity;
…’
Chapter 3, Paragraph 9, of the ML provides:
‘Supplies of banking and financial services and transactions involving securities and comparable activities are exempt from
taxation.
Banking and financial services shall not include notarial activity, collection of invoices or administrative services relating
to factoring or the leasing of storage facilities.
“Transactions in securities” shall mean
1.      trading and brokerage of shares, other equities and debts, whether or not represented by instruments, and
2.      management of investment funds pursuant to Law (2004:46) on investment funds.’
Chapter 3, Paragraph 10, of the ML states as follows:
‘Supplies of insurance and reinsurance services, including services supplied by brokers or other insurance intermediaries
relating to insurance or reinsurance, shall be exempt from VAT.’

The facts of the main proceedings and the question referred for a preliminary ruling
SEB is a Swedish credit institution at the head of a ‘VAT group’ (‘mervärdesskattegrupp’). That credit institution also supplies
company financing services in conjunction with the issue of financial instruments.
During 2002, SEB, with another company in the same VAT group, supplied to a third company underwriting guarantees pursuant
to which the members of that group undertook to acquire any shares in that company which were not subscribed at the end of
the subscription period (‘the underwriting guarantee’). The members of the group were remunerated for the supply of that guarantee
by payment of a commission.
Taking the view that the supply of underwriting guarantees benefited from exemption from VAT, that group neither invoiced
nor accounted for VAT in respect of the payment of that commission.
Following a tax audit carried out in 2005, the Skatteverket took the view that the supply of underwriting guarantees did not
constitute a transaction exempt from VAT and, by decision of 30 December 2005, issued an additional VAT assessment for the
accounting period pertaining to the month of October 2002.
That decision was challenged by SEB before the länsrätten i Stockholms län (Regional Administrative Court, Stockholm), which
dismissed the action.
The VAT group appealed against that judgment before the Kammarrätten i Stockholm (Administrative Court of Appeal, Stockholm).
Since that court dismissed the appeal, SEB lodged a further appeal before the Regeringsrätten (Supreme Administrative Court),
arguing that the underwriting guarantee at issue can be compared to other services supplied in the financial sector without
giving rise to payment of VAT, such as transactions in securities, insurance, granting of credit, guarantees, or put options.
In that regard, the referring court states first that, under Swedish case-law, the issue of underwriting guarantees does not
constitute an exempted transaction for the purposes of Article 13B(d)(5) of the Sixth Directive (transactions in securities).
Nevertheless, the Regeringsrätten finds that there are divergences between the national laws of a number of Member States
as regards the application of the exemption provided for by that provision of the Sixth Directive to underwriting guarantee
services. Thus, in Ireland and in the United Kingdom, express exemption from VAT has been introduced for such services in
particular.
In addition, the referring court points out that, in its case-law on the interpretation of the exemptions under Article 13B(a)
or (d)(1), (2) and (5) of the Sixth Directive, the Court has not given any clear indication as to whether one of those exemptions
is applicable to services consisting in the issue of underwriting guarantees.
In those circumstances, the Regeringsrätten decided to stay the proceedings and to refer the following question to the Court
of Justice for a preliminary ruling:
‘Is Article 13B of the [Sixth Directive] to be interpreted as meaning that the [VAT] exemptions provided for therein also
include services (underwriting) which involve a credit institution providing, for consideration, a guarantee to a company
which is about to issue shares, where under that guarantee the credit institution undertakes to acquire any shares which are
not subscribed within the period for share subscription?’

Consideration of the question referred

Preliminary observations
Before analysing the legal basis of any exemption of an underwriting guarantee such as that at issue in the main proceedings,
it is appropriate to state that that guarantee falls within the scope of the Sixth Directive inasmuch as it constitutes a
supply of services effected for consideration within the meaning of Article 2(1) of that directive, having regard to the fact
that there is a legal relationship between the issuer and the guarantor and that the commission received by the latter from
the issuer represents the value actually given in return for the guarantee supplied to the issuer by the guarantor (see, to
that effect, Case C‑16/93
Tolsma
[1994] ECR I‑743, paragraph 14; Case C‑172/96
First National Bank of Chicago
[1998] ECR I‑4387, paragraph 26; and Case C‑270/09
MacDonald Resorts
[2010] ECR I‑0000, paragraph 16).
It must be borne in mind that, in accordance with the case-law of the Court, the exemptions referred to in Article 13 of the
Sixth Directive constitute independent concepts of European Union law whose purpose is to avoid divergences in the application
of the VAT system as between one Member State and another (see, in particular, Case C‑349/96
CPP
[1999] ECR I‑973, paragraph 15, and Case C‑473/08
Eulitz
[2010] ECR I‑0000, paragraph 25 and the case-law cited).
As regards whether such an underwriting guarantee can be exempted from VAT under Article 13B(a) or (d)(1), (2) or (5) of the
Sixth Directive, it must be borne in mind that the terms used to specify the exemptions in Article 13 of the Sixth Directive
are to be interpreted strictly, since those exemptions constitute exceptions to the general principle that VAT is to be levied
on all services supplied for consideration by a taxable person. Nevertheless, the interpretation of those terms must in particular
be consistent with the objectives pursued by those exemptions and comply with the requirements of the principle of fiscal
neutrality inherent in the common system of VAT. Thus, the requirement of strict interpretation does not mean that the terms
used to define the exemptions referred to in Article 13 should be construed in such a way as to deprive the exemptions of
their intended effect (see
Eulitz
, paragraph 27 and the case-law cited).
Finally, with regard to the reasons underlying the adoption of VAT exemptions for the transactions set out in Article 13B,
it is apparent from the case-law of the Court that the purpose of those exemptions is to alleviate the difficulties connected
with determining the tax base and the amount of VAT deductible and to avoid an increase in the cost of consumer credit (Case
C‑455/05
Velvet & Steel Immobilien
[2007] ECR I‑3225, paragraph 24).
It is in the light of those considerations that the answer must be given to the question referred.

Exemption under Article 13B(d)(5) of the Sixth Directive
Although it is not excluded that the underwriting guarantee at issue in the main proceedings may fall within a number of categories
of transactions exempt from VAT under Article 13B(a) or (d)(1), (2) and (5) of the Sixth Directive, having regard to the observations
submitted to the Court in the proceedings before it, the question referred must first be considered in the light of the provisions
of Article 13B(d)(5) of that directive concerning transactions in securities.
Observations submitted to the Court
SEB argues that the underwriting guarantee service at issue in the main proceedings is autonomous in nature in Sweden and
can be dissociated from the overall service of issuing securities. Furthermore, it states that, in the present case, the underwriting
guarantee was issued by entities other than those which carried out the share issue.
While agreeing that this underwriting guarantee service does not constitute an element in a group of financial services and
that it should be assessed separately for VAT purposes, the Swedish Government takes the view that that service is not exempt
from VAT pursuant to Article 13B(d)(5) of the Sixth Directive.
As regards the classification of that service, SEB, supported in its view by the European Commission, argues that that underwriting
guarantee service represents a transaction in securities such as defined in the case-law of the Court, since it is liable
to create, alter or extinguish parties’ rights and obligations in respect of securities and to alter the legal and economic
conditions between parties within the meaning of the judgments in Case C‑2/95
SDC
[1997] ECR I‑3017, paragraphs 72 and 73, and in Case C‑235/00
CSC Financial Services
[2001] ECR I‑10237, paragraph 33.
Ireland submits that, in that Member State, an underwriting guarantee represents only one element in a global and indivisible
service connected with the issue of securities which includes, inter alia, advisory and marketing services. That global service
is exempt from VAT in Ireland in so far as it constitutes a transaction in securities falling within Article 13B(d)(5) of
the Sixth Directive.
The Skatteverket takes the view that the grant of an underwriting guarantee cannot be regarded as a transaction in securities
since, of itself, an underwriting guarantee does not create, alter or extinguish rights or obligations concerning ownership
of shares. Those legal effects are produced as between the guarantor and the issuer only if the issue was not entirely covered
by other investors and if the guarantor was called upon to subscribe the unsubscribed remainder thereof. It would therefore
be only in that hypothetical situation that exemption from VAT would be possible. However, if the issue were entirely covered
by market investors, there would be no alteration to the rights and obligations pertaining to the ownership of the shares
and, accordingly, no exemption would be possible.
Answer of the Court
It must first be borne in mind that, having regard to the observations submitted to the Court by SEB and the Swedish Government,
which are in agreement on this subject, clearly, in Sweden, the underwriting guarantee in question can be regarded as a stand-alone
service which can be supplied autonomously and not as a service linked to other services supplied during a share issue.
In order to answer the question referred, it must be borne in mind that, with regard to the scope of the exemption based on
Article 13B(d)(5) of the Sixth Directive, the Court has held that transactions in shares and other securities are transactions
on the market in marketable securities and that trade in securities involves acts which alter the legal and financial situation
as between the parties (
SDC
, paragraphs 72 and 73).
Nevertheless, the Court has also held that transactions in securities within the meaning of Article 13B(d)(5) of the Sixth
Directive refer to transactions which are liable to create, alter or extinguish parties’ rights and obligations in respect
of securities (
CSC Financial Services
, paragraph 33).
In the light of the criterion thus applied by the Court in the judgment in
CSC Financial Services
, that is to say, the amendment, even potential, of the legal and financial situation as between the parties concerned, it
must be found that, in the present case, as the Advocate General noted in point 53 of his Opinion, the underwriting guarantee
at issue in the main proceedings meets the requirements laid down in that case-law.
Even if the share issue were ultimately to be entirely covered by market investors, so that the purchase of the remaining
shares by the guarantor were no longer necessary, conclusion of a contract for an underwriting guarantee, such as that at
issue in the main proceedings, would be liable of itself to create, alter or extinguish rights in ownership of shares, such
a possibility being alone sufficient to classify such an underwriting guarantee as a transaction in securities within the
meaning of that case-law.
Furthermore, following the position of the Skatteverket, a credit institution which has granted a guarantee in respect of
a share issue which led to the full subscription by market investors of the shares issued would not benefit, in respect of
such a transaction, from exemption from VAT since there would be no transfer of shares between the parties and, accordingly,
no effective alteration of their rights and obligations as regards ownership of shares.
However, if another credit institution granted the same type of underwriting guarantee in respect of a share issue which was
not fully subscribed and was then obliged to purchase the shares not subscribed, such a transaction which, contrary to the
submission of the Skatteverket, falls within the scope of the Sixth Directive and is autonomous as regards the share issue,
would be exempt from VAT since, in that case, there would be effective alteration to the rights and obligations of the parties
as regards ownership of shares.
In those circumstances, an interpretation of Article 13B(d)(5) of the Sixth Directive according to which an underwriting guarantee
service would or would not be exempt from VAT depending on whether the shares issued were fully or partially subscribed would
be contrary to the principle of fiscal neutrality on which, in particular, the common system of VAT established by the Sixth
Directive is based, and which precludes economic operators carrying out the same transactions being treated differently in
relation to the levying of VAT (Case C‑363/05
JP Morgan Fleming Claverhouse Investment Trust and The Association of Investment Trust Companies
[2007] ECR I‑5517, paragraph 29 and the case-law cited).
Since an underwriting guarantee such as that at issue in the main proceedings is exempt from VAT as a transaction in securities
within the meaning of Article 13B(d)(5) of the Sixth Directive, it is no longer necessary, for the purposes of the resolution
of the dispute in the main proceedings and thus of the answer to be given to the referring court, also to consider such a
guarantee in the light of Article 13B(a) or (d)(1) and (2) of the Sixth Directive.
Having regard to the foregoing, the answer to the question referred is that Article 13B(d)(5) of the Sixth Directive must
be interpreted as meaning that the exemption from VAT laid down therein covers services supplied by a credit institution,
for consideration, in the form of an underwriting guarantee to a company wishing to issue shares, where under that guarantee
the credit institution undertakes to acquire any shares which are not subscribed within the period for share subscription.

Costs
Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court,
the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs
of those parties, are not recoverable.
On those grounds, the Court (Fourth Chamber) hereby rules:
Article 13B(d)(5) of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States
relating to turnover taxes – Common system of value added tax: uniform basis of assessment must be interpreted as meaning
that the exemption from value added tax laid down therein covers services supplied by a credit institution, for consideration,
in the form of an underwriting guarantee to a company wishing to issue shares, where under that guarantee the credit institution
undertakes to acquire any shares which are not subscribed within the period for share subscription.
[Signatures]
*
Language of the case: Swedish.