CELEX: 62013CJ0299
Taxation
Directive 2008/7/EC
Articles 5(2) and 6
Indirect taxes on the raising of capital
Tax on the conversion of bearer securities into registered securities or dematerialised securities

This request for a preliminary ruling concerns the interpretation of Articles 5(2) and 6 of Council Directive 2008/7/EC of 12 February 2008 concerning indirect taxes on the raising of capital (
OJ 2008 L 46, p. 11
).
The request has been made in proceedings between Mrs Gielen and the Ministerraad (Council of Ministers) regarding the tax on the conversion of bearer securities into dematerialised securities or registered securities.
Legal context
EU law
Recitals 2 and 9 in the preamble to Directive 2008/7 are worded as follows:
‘(2)
The indirect taxes on the raising of capital, namely the capital duty (the duty chargeable on contributions of capital to companies and firms), the stamp duty on securities, and duty on restructuring operations, regardless of whether those operations involve an increase in capital, give rise to discrimination, double taxation and disparities which interfere with the free movement of capital. The same applies as regards other indirect taxes with the same characteristics as capital duty and the stamp duty on securities.
…
(9)
Apart from capital duty, no indirect taxes on the raising of capital should be levied. …’
According to Article 1 of that directive:
‘This Directive regulates the levying of indirect taxes in respect of the following:
(a)
contributions of capital to capital companies;
(b)
restructuring operations involving capital companies;
(c)
the issue of certain securities and debentures.’
Article 3 of that directive lists a series of transactions which are considered to be contributions of capital for the purposes of the directive.
Article 5 of Directive 2008/7, entitled ‘Transactions not subject to indirect tax’, provides:
‘1.   Member States shall not subject capital companies to any form of indirect tax whatsoever in respect of the following:
(a)
contributions of capital;
(b)
loans, or the provision of services, occurring as part of contributions of capital;
(c)
registration or any other formality required before the commencement of business to which a capital company may be subject by reason of its legal form;
(d)
alteration of the constituent instrument or regulations of a capital company, and in particular the following:
(i)
the conversion of a capital company into a different type of capital company;
(ii)
the transfer from a Member State to another Member State of the centre of effective management or of the registered office of a capital company;
(iii)
a change in the objects of a capital company;
(iv)
the extension of the period of existence of a capital company;
(e)
the restructuring operations referred to in Article 4.
2.   Member States shall not subject the following to any form of indirect tax whatsoever:
(a)
the creation, issue, admission to quotation on a stock exchange, making available on the market or dealing in stocks, shares or other securities of the same type, or of the certificates representing such securities, by whomsoever issued;
(b)
loans, including government bonds, raised by the issue of debentures or other negotiable securities, by whomsoever issued, or any formalities relating thereto, or the creation, issue, admission to quotation on a stock exchange, making available on the market or dealing in such debentures or other negotiable securities.’
Article 6 of that directive, entitled ‘Duties and value added tax’, provides:
1.   Notwithstanding Article 5, Member States may charge the following duties and taxes:
(a)
duties on the transfer of securities, whether charged at a flat rate or not;
(b)
transfer duties, including land registration taxes, on the transfer, to a capital company, of businesses or immovable property situated within their territory;
(c)
transfer duties on assets of any kind transferred to a capital company, insofar as such property is transferred for a consideration other than shares in the company;
(d)
duties on the creation, registration or discharge of mortgages or other charges on land or other property;
(e)
duties in the form of fees or dues;
(f)
value added tax.
2.   The amount charged by way of the duties and taxes listed in points (b) to (e) of paragraph 1 shall not vary according to whether or not the centre of effective management or the registered office of the capital company is situated within the territory of the Member State charging the duties or taxes. Those amounts may not exceed those of duties or taxes applicable to like transactions which take place within the Member State charging them.’
Pursuant to Articles 16 and 17 thereof, Directive 2008/7 repealed and replaced, as from 1 January 2009, Council Directive 69/335/EEC of 17 July 1969 concerning indirect taxes on the raising of capital (
OJ 1969 L 249, p. 25
), as amended by Council Directive 85/303/EEC of 10 June 1985 (
OJ 1985 L 156, p. 23
) (‘Directive 69/335’). Articles 5(2) and 6(1) of Directive 2008/7 reproduce, in essence, the content of Articles 11 and 12(1) of Directive 69/335.
Belgian law
Articles 3 to 5 and 7 of the Law of 14 December 2005 on the abolition of bearer securities (
Belgisch Staatsblad
of 23 December 2005, p. 55488 and of 6 February 2006, p. 6111) provide, in essence, for the prohibition from 1 January 2008 of the issue and physical delivery of new bearer securities, conversion by operation of law of certain bearer securities into dematerialised securities, and an obligation to convert other bearer securities into registered securities or dematerialised securities, depending on the choice of the person concerned, by no later than 31 December 2013. The progressive abolition of bearer bills is part of the campaign against abuse, financial crime, terrorist financing, money laundering practices and tax fraud.
Article 167 of the Code on miscellaneous levies and taxes (‘the Code’), as inserted by the Law of 28 December 2011 on miscellaneous provisions (
Belgisch Staatsblad
, 30 December 2011, p. 81644), states:
‘A tax shall be imposed on the conversion of bearer securities into dematerialised securities or registered securities in accordance with the Law of 14 December 2005 on the abolition of bearer securities, except in respect of securities referred to in Article 2(1)(1) of the aforementioned Law of 14 December 2005 maturing before 1 January 2014.’
Article 168 of the Code states:
‘The rate of the tax shall be fixed at:
—
1% in the case of a conversion effected in 2012;
—
2% in the case of a conversion effected in 2013.’
Article 169 of the Code provides as follows:
‘The tax due shall be calculated on the date of deposit:
(a)
for transferable securities admitted to the regulated market or in a multilateral trading facility, on the basis of the last rate established before the date of deposit;
(b)
for debt securities not admitted to the regulated market, on the basis of the nominal amount of capital of the debt;
(c)
for units in investment undertakings at a variable number of units, on the basis of the last asset value calculated before the date of deposit;
(d)
in other cases, on the basis of the accounting value — not including interest — of the securities on the day of deposit, to be assessed by whomever has the securities converted.
Where the value of the securities to be converted is denominated in a foreign currency, it shall be converted into euros on the basis of the exchange sell rate on the date of deposit.’
Article 170 of the Code states:
‘The tax shall be paid:
1.
by professional intermediaries where the bearer securities are registered in a securities account following their deposit by the holder;
2.
by issuing companies where the securities are deposited for the purposes of their conversion into registered securities.’
The dispute in the main proceedings and the question referred for a preliminary ruling
Together with her two children, Mrs Gielen holds a number of bearer securities issued by two public limited companies established in Belgium. On 21 December 2011 she converted the securities into registered securities in accordance with the Law of 14 December 2005 on the abolition of bearer securities, but the conversion could not proceed prior to the entry into force on 1 January 2012 of the tax on bearer securities introduced by the Law of 28 December 2011 on miscellaneous provisions.
Mrs Gielen brought before the Grondwettelijk Hof (Constitutional Court) an action for annulment of the provisions imposing that tax on the grounds of infringement, inter alia, of Article 5(2) of Directive 2008/7. She takes the view that, since the conversion of the bearer securities is obligatory, it forms part of the ‘overall transaction’ of the raising of capital and cannot therefore be subject to any indirect tax.
The Belgian Government takes the view that the tax is not intended to affect voluntary economic or financial transactions involving stocks or loans, but is intended to encourage companies to comply with an earlier ‘anti-abuse’ rule. It does not, therefore, fall within the scope of Article 5(2) of Directive 2008/7, which, in its opinion, is aimed at transactions on the primary market. It takes the view that that directive relates to the issue of new securities or their being made available on the market, and thus not to their conversion. The conversion transaction under the Law of 14 December 2005 on the abolition of bearer securities takes place neither on the primary market nor on the secondary market, and has nothing to do with the raising of capital.
In the light of the case-law of the Court, and in particular the judgments in
FECSA and ACESA
(C‑31/97 and C‑32/97,
EU:C:1998:508
) and in
Commission
v
Belgium
(C‑415/02,
EU:C:2004:450
), the Grondwettelijk Hof is uncertain whether, in the light of the obligation to convert bearer securities by 31 December 2013 at the latest, the tax must be considered to be indirect tax within the meaning of Article 5(2) of Directive 2008/7.
In those circumstances, the Grondwettelijk Hof decided to stay proceedings and to refer the following question to the Court for a preliminary ruling:
‘Is Article 5(2) of Directive 2008/7/EC to be interpreted as precluding the taxation of the conversion — prescribed by law — of bearer securities into registered securities or dematerialised securities, and, if so, can such a tax be justified on the basis of Article 6 of that directive?’
The question referred for a preliminary ruling
By its question, the referring court asks whether Article 5(2) of Directive 2008/7 must be interpreted as precluding the taxation of the conversion of bearer securities into registered or dematerialised securities, such as that at issue in the main proceedings, and, if so, whether such a tax can be justified on the basis of Article 6 of that directive.
It should be recalled at the outset that, as is apparent from the preamble to Directive 69/335, which was replaced by Directive 2008/7 as from 1 January 2009, that directive seeks to promote the free movement of capital, which is considered essential to the creation of an economic union whose characteristics are similar to those of a domestic market. As far as concerns taxes on the raising of capital, the pursuit of that objective presupposes the abolition of indirect taxes in force in the Member States until then and imposing in their place a duty charged only once in the internal market and at the same level in all the Member States (see judgment in
HSBC Holdings and Vidacos Nominees
, C‑569/07,
EU:C:2009:594
, paragraph 28).
In that regard, Article 5(1) of Directive 2008/7 prohibits any form of indirect tax whatsoever, inter alia in respect of contributions of capital. In addition, Article 5(2)(a) and (b) of that directive prohibits the Member States from subjecting to indirect tax, in any form whatsoever, first, the creation, issue, admission to quotation on a stock exchange, making available on the market or dealing in stocks, shares or other securities of the same type, or of the certificates representing such securities, by whomsoever issued, and, secondly, inter alia, loans, including government bonds, raised by the issue of debentures or other negotiable securities, by whomsoever issued, or any formalities relating thereto.
As regards Article 11(b) of Directive 69/335, the wording of which is reproduced in Article 5(2)(b) of Directive 2008/7, the Court stated, in its judgment in
FECSA and ACESA
(
EU:C:1998:508
, paragraph 18), that, although that article does not expressly mention the repayment of debenture loans, nevertheless, prohibiting the levying of duty when debenture loans are issued but authorising it when such loans are repaid would have the effect, contrary to the objective pursued by the directive, of taxing loans as overall operations for raising capital.
Similarly, in the judgment in
Commission
v
Belgium
(
EU:C:2004:450
, paragraph 32), the Court held that, while Article 11(a) of Directive 69/335, which is worded in identical terms to Article 5(2)(a) of Directive 2008/7, does not expressly mention the first acquisition of stocks or the delivery of bearer securities, the fact remains that to permit the levying of tax on the initial acquisition of a newly issued security or tax on the physical delivery of bearer securities upon their issue amounts in reality to taxing the very issue of that security as it forms an integral part of an overall transaction with regard to the raising of capital.
It is thus apparent from the case-law of the Court relating to Article 11 of Directive 69/335, and in particular from the judgments in
FECSA and ACESA
(
EU:C:1998:508
) and in
Commission
v
Belgium
(
EU:C:2004:450
), that, in accordance with the objectives of that directive, the prohibition of the taxation of transactions for the raising of capital also applies to transactions which are not expressly covered by that prohibition, where such taxation is tantamount to taxing a transaction forming an integral part of an overall transaction with regard to the raising of capital. That interpretation is capable of being applied to Article 5(2) of Directive 2008/7 which reproduces, in identical terms, Article 11 of Directive 69/335.
In the present case, while it is true, as the Belgian Government submits, that Article 5(2)(a) of Directive 2008/7 does not expressly mention the conversion of stocks, the fact remains that the conversion of bearer stocks into dematerialised securities or registered securities, which was made compulsory by the Law of 14 December 2005 on the abolition of bearer securities, falls within the issue of stocks within the meaning of Article 5(2)(a) of Directive 2008/7.
Therefore, by establishing a tax on that conversion, Article 167 of the Code amounts in reality to taxing the very issue of that security as it forms an integral part of an overall transaction with regard to the raising of capital, thereby undermining the effectiveness of Article 5(2)(a) of the directive (see, to that effect, judgments in
FECSA and ACESA
,
EU:C:1998:508
, paragraphs 18 and 19, and in
Commission
v
Belgium
,
EU:C:2004:450
, paragraphs 32 and 33).
It follows that Article 5(2)(a) of Directive 2008/7 must be interpreted as meaning that the prohibition on subjecting the issue of stocks to indirect tax, in any form whatsoever, precludes a tax on the conversion of already issued bearer stocks into dematerialised securities or registered securities such as that at issue in the main proceedings.
As regards the question whether such a tax may be justified by Article 6(1) of Directive 2008/7, which allows Member States to charge a duty on the transfer of securities, the Court has already had occasion to rule that Article 12 of Directive 69/335, the wording of which was substantially the same as that of Article 6 of Directive 2008/7, is an exception to the prohibition in principle of taxes with the same characteristics as capital duty (judgment in
Grillo Star Fallimento
, C‑443/09,
EU:C:2012:213
, paragraph 28).
That provision, which, as an exception to the non-imposition rule, is to be strictly interpreted, cannot apply in the case of a tax on the conversion of bearer stocks such as that at issue in the main proceedings.
In the course of that conversion, bearer stocks are converted into dematerialised securities or registered securities without a transfer of a right from a first holder to a second holder.
In the light of the foregoing considerations, the answer to the question referred is that Article 5(2) of Directive 2008/7 precludes the taxation of the conversion of bearer securities into registered securities or dematerialised securities such as that at issue in the main proceedings. Such a tax cannot be justified under Article 6 of that directive.
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 (Fifth Chamber) hereby rules:

Article 5(2) of Council Directive 2008/7/EC of 12 February 2008 concerning indirect taxes on the raising of capital must be interpreted as precluding the taxation of the conversion of bearer securities into registered securities or dematerialised securities such as that at issue in the main proceedings. Such a tax cannot be justified under Article 6 of that directive.

[Signatures]
(
*1
)	Language of the case: Dutch.