# 62018CO0373

ORDER OF THE COURT (First Chamber)

31 January 2019 (
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(Reference for a preliminary ruling — Article 99 of the Rules of Procedure of the Court of Justice — Indirect taxes on the raising of capital — Directive 69/335/EEC — Articles 4 and 7 — Incorporation of a capital company — Stamp duty in force on 1 July 1984 — Subsequent abolition of that stamp duty, followed by its reintroduction)

In Case C‐373/18,

REQUEST for a preliminary ruling under Article 267 TFEU from the Tribunal Administrativo e Fiscal de Penafiel (Administrative and Tax Court, Penafiel, Portugal), made by decision of 30 May 2018, received at the Court on 7 June 2018, in the proceedings

Prosa — Produtos e Serviços Agrícolas SA

Prosa — Produtos e Serviços Agrícolas SA

v

Autoridade Tributária e Aduaneira

Autoridade Tributária e Aduaneira

THE COURT (First Chamber),

composed of J.-C. Bonichot (Rapporteur), President of the Chamber, C. Toader, A. Rosas, L. Bay Larsen and M. Safjan, Judges,

Advocate General: M. Szpunar,

Registrar: A. Calot Escobar,

having decided, after hearing the Advocate General, to give a decision by reasoned order, pursuant to Article 99 of the Rules of Procedure of the Court of Justice,

makes the following

Order

Order

| 1 | This request for a preliminary ruling concerns the interpretation of Article 7(1) 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), as amended by Council Directive 85/303/EEC of 10 June 1985 (OJ 1985 L 156, p. 23). |
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1

This request for a preliminary ruling concerns the interpretation of Article 7(1) 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), as amended by Council Directive 85/303/EEC of 10 June 1985 (OJ 1985 L 156, p. 23).

| 2 | The request has been made in proceedings between Prosa — Produtos e Serviços Agrícolas SA (‘Prosa’) and Fazenda Pública (State Treasury, Portugal) concerning payment of stamp duty on the incorporation of that company. |
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2

The request has been made in proceedings between Prosa — Produtos e Serviços Agrícolas SA (‘Prosa’) and Fazenda Pública (State Treasury, Portugal) concerning payment of stamp duty on the incorporation of that company.

Legal context

Legal context

EU law

EU law

| 3 | According to its first recital, Directive 69/335 was intended to promote the free movement of capital, which is considered to be a fundamental freedom essential to the creation of an internal market. To that end, as is apparent from the sixth to eighth recitals thereof, that directive aimed to harmonise the duty to which capital contributions to companies are subject within the European Union by introducing a single duty on the raising of capital that could be charged only once within the internal market and by abolishing all other indirect taxes with the same characteristics as that single duty. |
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3

According to its first recital, Directive 69/335 was intended to promote the free movement of capital, which is considered to be a fundamental freedom essential to the creation of an internal market. To that end, as is apparent from the sixth to eighth recitals thereof, that directive aimed to harmonise the duty to which capital contributions to companies are subject within the European Union by introducing a single duty on the raising of capital that could be charged only once within the internal market and by abolishing all other indirect taxes with the same characteristics as that single duty.

| 4 | To that end, Article 1 of Directive 69/335 provided that:
  ‘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”.’ |
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4

To that end, Article 1 of Directive 69/335 provided that:

‘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”.’

| 5 | Directive 85/303 made certain substantive amendments to Directive 69/335, in particular to Articles 4(2) and Article 7 of that directive. The second and third recitals of Directive 85/303 stated:
  ‘Whereas the economic effects of capital duty are detrimental to the regrouping and development of undertakings; whereas such effects are particularly harmful in the present economic situation in which there is a paramount need for priority to be given to stimulating investment;
  Whereas the best solution for attaining these objectives would be to abolish capital duty; whereas, however, the losses of revenue which would result from such a measure are unacceptable for certain Member States; whereas the Member States must therefore be given the opportunity to exempt from or subject to capital duty all or part of the transactions coming within its scope, it being understood that a single rate of tax must be charged within one and the same Member State.’ |
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5

Directive 85/303 made certain substantive amendments to Directive 69/335, in particular to Articles 4(2) and Article 7 of that directive. The second and third recitals of Directive 85/303 stated:

‘Whereas the economic effects of capital duty are detrimental to the regrouping and development of undertakings; whereas such effects are particularly harmful in the present economic situation in which there is a paramount need for priority to be given to stimulating investment;

Whereas the best solution for attaining these objectives would be to abolish capital duty; whereas, however, the losses of revenue which would result from such a measure are unacceptable for certain Member States; whereas the Member States must therefore be given the opportunity to exempt from or subject to capital duty all or part of the transactions coming within its scope, it being understood that a single rate of tax must be charged within one and the same Member State.’

| 6 | Article 4(1)(a) and (c) of Directive 69/335, in the version resulting from Directive 85/303 (‘Directive 69/335’), provided:
  ‘1.   The following transactions shall be subject to capital duty:





  (a) | the formation of a capital company; |
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6

Article 4(1)(a) and (c) of Directive 69/335, in the version resulting from Directive 85/303 (‘Directive 69/335’), provided:

‘1.   The following transactions shall be subject to capital duty:

(a)

the formation of a capital company;

...

| (c) | an increase in the capital of a capital company by contribution of assets of any kind.’ |
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(c)

an increase in the capital of a capital company by contribution of assets of any kind.’

| 7 | Pursuant to the first and second subparagraphs of Article 7(1) and Article 7(2) of Directive 69/335:
  ‘1.   Member States shall 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.
  The exemption shall be subject to the conditions which were applicable, on that date, for the grant of the exemption or, as the case may be, for imposition at a rate of 0.50% or less.
  ...
  2.   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%.’ |
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7

Pursuant to the first and second subparagraphs of Article 7(1) and Article 7(2) of Directive 69/335:

‘1.   Member States shall 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.

The exemption shall be subject to the conditions which were applicable, on that date, for the grant of the exemption or, as the case may be, for imposition at a rate of 0.50% or less.

...

2.   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%.’

| 8 | The time limit for transposition of Directive 85/303 was set at 1 January 1986. |
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8

The time limit for transposition of Directive 85/303 was set at 1 January 1986.

| 9 | Directive 69/335 was repealed by Council Directive 2008/7/EC of 12 February 2008 concerning indirect taxes on the raising of capital (OJ 2008 L 46, p. 11). That repeal, however, took place after the events giving rise to the dispute in the main proceedings. |
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9

Directive 69/335 was repealed by Council Directive 2008/7/EC of 12 February 2008 concerning indirect taxes on the raising of capital (OJ 2008 L 46, p. 11). That repeal, however, took place after the events giving rise to the dispute in the main proceedings.

Portuguese law

Portuguese law

| 10 | Article 155(b) of the Código do Imposto de Selo (Stamp Duty Code), in the version in force on 1 July 1984, laid down that the incorporation of capital companies was subject to stamp duty at the rate of 1% of share capital. |
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10

Article 155(b) of the Código do Imposto de Selo (Stamp Duty Code), in the version in force on 1 July 1984, laid down that the incorporation of capital companies was subject to stamp duty at the rate of 1% of share capital.

| 11 | Law No 150/99 of 11 September 1999, amending that code, exempted that transaction from stamp duty. |
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11

Law No 150/99 of 11 September 1999, amending that code, exempted that transaction from stamp duty.

| 12 | The incorporation of capital companies was again made subject to stamp duty at the rate of 0.4%, pursuant to Paragraph 26.1 of the Tabela Geral do Imposto de Selo (General Schedule of Stamp Duties), as amended by Decree-Law No 322-B/2001 of 14 December 2001, which entered into force on 1 January 2002. |
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12

The incorporation of capital companies was again made subject to stamp duty at the rate of 0.4%, pursuant to Paragraph 26.1 of the Tabela Geral do Imposto de Selo (General Schedule of Stamp Duties), as amended by Decree-Law No 322-B/2001 of 14 December 2001, which entered into force on 1 January 2002.

The dispute in the main proceedings and the question referred for a preliminary ruling

The dispute in the main proceedings and the question referred for a preliminary ruling

| 13 | By notarial act of 29 October 2004, Prosa was incorporated as a limited company having a share capital of EUR 50000, fully paid up in cash. |
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13

By notarial act of 29 October 2004, Prosa was incorporated as a limited company having a share capital of EUR 50000, fully paid up in cash.

| 14 | On that occasion, Prosa had to pay stamp duty in the amount of EUR 200 in accordance with the legislation referred to in paragraph 12 above. |
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14

On that occasion, Prosa had to pay stamp duty in the amount of EUR 200 in accordance with the legislation referred to in paragraph 12 above.

| 15 | Prosa challenged the assessment notice for that stamp duty before the Tribunal Administrativo e Fiscal de Penafiel (Administrative and Tax Court, Penafiel, Portugal), claiming, in essence, that the levying of stamp duty on its incorporation was contrary to Article 7(1) of Directive 69/335. |
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15

Prosa challenged the assessment notice for that stamp duty before the Tribunal Administrativo e Fiscal de Penafiel (Administrative and Tax Court, Penafiel, Portugal), claiming, in essence, that the levying of stamp duty on its incorporation was contrary to Article 7(1) of Directive 69/335.

| 16 | Relying on the judgment of 21 June 2007, Optimus — Telecomunicações (C‐366/05, EU:C:2007:366), Prosa argued, in particular, that the obligation provided by that provision prevented the Portuguese Republic from taxing the incorporation of a capital company, since, although on 1 July 1984, that is, the date to which the first paragraph of Article 7(1) of Directive 69/335 refers, the Portuguese legislation did not exempt the incorporation of a capital company from stamp duty, the Portuguese legislation, thereafter, exempted that transaction from stamp duty. |
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16

Relying on the judgment of 21 June 2007, Optimus — Telecomunicações (C‐366/05, EU:C:2007:366), Prosa argued, in particular, that the obligation provided by that provision prevented the Portuguese Republic from taxing the incorporation of a capital company, since, although on 1 July 1984, that is, the date to which the first paragraph of Article 7(1) of Directive 69/335 refers, the Portuguese legislation did not exempt the incorporation of a capital company from stamp duty, the Portuguese legislation, thereafter, exempted that transaction from stamp duty.

| 17 | The Tax and Customs Authority considers, by contrast, that Article 7(1) of Directive 69/335 requires the Member States to exempt from capital duty only the transactions which, as at 1 July 1984, were exempt or subject to a tax rate equal to or lower than 0.5%. However, that is not the case in respect of the incorporation of a capital company which, as at 1 July 1984, was subject to stamp duty. Consequently, it considers that nothing prevented the Portuguese Republic from reintroducing such a duty. |
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17

The Tax and Customs Authority considers, by contrast, that Article 7(1) of Directive 69/335 requires the Member States to exempt from capital duty only the transactions which, as at 1 July 1984, were exempt or subject to a tax rate equal to or lower than 0.5%. However, that is not the case in respect of the incorporation of a capital company which, as at 1 July 1984, was subject to stamp duty. Consequently, it considers that nothing prevented the Portuguese Republic from reintroducing such a duty.

| 18 | The Tax and Customs Authority states that in the case leading to the judgment of 21 June 2007, Optimus — Telecomunicações (C‐366/05, EU:C:2007:366), the transaction at issue, namely, a capital increase, was exempt from stamp duty at 1 July 1984, whereas the incorporation of a capital company was not. According to the Authority, that case-law is therefore not applicable to the facts of the present case. |
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18

The Tax and Customs Authority states that in the case leading to the judgment of 21 June 2007, Optimus — Telecomunicações (C‐366/05, EU:C:2007:366), the transaction at issue, namely, a capital increase, was exempt from stamp duty at 1 July 1984, whereas the incorporation of a capital company was not. According to the Authority, that case-law is therefore not applicable to the facts of the present case.

| 19 | Considering that an interpretation of Article 7(1) of Directive 69/335 was necessary in order to resolve the dispute before it, the Tribunal Administrativo e Fiscal de Penafiel (Administrative and Tax Court, Penafiel) decided to stay the proceedings and to refer the following question to the Court:
  ‘Is Paragraph 26.1 of the General Schedule of Stamp Duties, as amended by Decree-Law No 322-B/2001 of 14 December 2001, pursuant to which stamp duty is to be levied on the incorporation of a capital company (in particular, a public limited company) whose share capital is paid entirely in cash, contrary to Article 7(1) of Council Directive 69/335 ...?’ |
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19

Considering that an interpretation of Article 7(1) of Directive 69/335 was necessary in order to resolve the dispute before it, the Tribunal Administrativo e Fiscal de Penafiel (Administrative and Tax Court, Penafiel) decided to stay the proceedings and to refer the following question to the Court:

‘Is Paragraph 26.1 of the General Schedule of Stamp Duties, as amended by Decree-Law No 322-B/2001 of 14 December 2001, pursuant to which stamp duty is to be levied on the incorporation of a capital company (in particular, a public limited company) whose share capital is paid entirely in cash, contrary to Article 7(1) of Council Directive 69/335 ...?’

Consideration of the question referred

Consideration of the question referred

| 20 | Pursuant to Article 99 of the Rules of Procedure of the Court of Justice, where the reply to the question referred to the Court for a preliminary ruling may be clearly deduced from existing case-law or where the answer to the question referred for a preliminary ruling admits of no reasonable doubt, the Court may at any time, on a proposal from the Judge-Rapporteur and after hearing the Advocate General, decide to rule by reasoned order. |
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20

Pursuant to Article 99 of the Rules of Procedure of the Court of Justice, where the reply to the question referred to the Court for a preliminary ruling may be clearly deduced from existing case-law or where the answer to the question referred for a preliminary ruling admits of no reasonable doubt, the Court may at any time, on a proposal from the Judge-Rapporteur and after hearing the Advocate General, decide to rule by reasoned order.

| 21 | That provision should be applied in the present case. |
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21

That provision should be applied in the present case.

| 22 | By its question, the referring court asks, in essence, whether Article 4(1)(a) and Article 7(1) of Directive 69/335 preclude legislation of a Member State, such as that at issue in the main proceedings, which reintroduces stamp duty on the incorporation of capital companies which were subject to such duty on 1 July 1984, but which were subsequently exempted from it. |
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22

By its question, the referring court asks, in essence, whether Article 4(1)(a) and Article 7(1) of Directive 69/335 preclude legislation of a Member State, such as that at issue in the main proceedings, which reintroduces stamp duty on the incorporation of capital companies which were subject to such duty on 1 July 1984, but which were subsequently exempted from it.

| 23 | In the present case, as is clear from the question referred for a preliminary ruling, on 1 July 1984, national legislation subjected the incorporation of a capital company, such as that at issue in the main proceedings, to stamp duty at the rate of 1%. After waiving, in 1991, the levying of that capital duty, it was reintroduced at the rate 0.40% from 1 January 2002 by the legislation whose compatibility with EU law is called into question by the national court. |
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23

In the present case, as is clear from the question referred for a preliminary ruling, on 1 July 1984, national legislation subjected the incorporation of a capital company, such as that at issue in the main proceedings, to stamp duty at the rate of 1%. After waiving, in 1991, the levying of that capital duty, it was reintroduced at the rate 0.40% from 1 January 2002 by the legislation whose compatibility with EU law is called into question by the national court.

| 24 | In that regard, it should be recalled, as is apparent from the Court’s case-law, that Directive 69/335 has the objective of limiting or abolishing capital duty, and that it was only by reason of the budgetary difficulties they would be faced with if capital duty were abolished that Member States which had not waived the levying of that duty could maintain such a duty (see, to that effect, judgment of 12 June 2014, Ascendi Beiras Litoral e Alta, Auto Estradas das Beiras Litoral e Alta, C‐377/13, EU:C:2014:1754, paragraph 49). |
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24

In that regard, it should be recalled, as is apparent from the Court’s case-law, that Directive 69/335 has the objective of limiting or abolishing capital duty, and that it was only by reason of the budgetary difficulties they would be faced with if capital duty were abolished that Member States which had not waived the levying of that duty could maintain such a duty (see, to that effect, judgment of 12 June 2014, Ascendi Beiras Litoral e Alta, Auto Estradas das Beiras Litoral e Alta, C‐377/13, EU:C:2014:1754, paragraph 49).

| 25 | The Court has previously held that the reference to the date of 1 July 1984, made in the first subparagraph of Article 7(1) of Directive 69/335, cannot constitute for Member States which, at that date, made the transactions in question subject to capital duty, at a rate higher than 0.50%, an authorisation to reintroduce such a duty after waiving it. The intention of the EU legislature was in fact to abolish capital duty, the possibility of maintaining it only being an exception motivated by the fear of loss of revenue by Member States. Therefore, even if the loss of budget revenue could justify maintaining capital duty beyond 1 July 1984, within the limits set in Article 7(2) of the directive, it could not justify reintroducing such duty (judgment of 12 June 2014, Ascendi Beiras Litoral e Alta, Auto Estradas das Beiras Litoral e Alta (C‐377/13, EU:C:2014:1754), paragraph 50, and the case-law cited). |
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25

The Court has previously held that the reference to the date of 1 July 1984, made in the first subparagraph of Article 7(1) of Directive 69/335, cannot constitute for Member States which, at that date, made the transactions in question subject to capital duty, at a rate higher than 0.50%, an authorisation to reintroduce such a duty after waiving it. The intention of the EU legislature was in fact to abolish capital duty, the possibility of maintaining it only being an exception motivated by the fear of loss of revenue by Member States. Therefore, even if the loss of budget revenue could justify maintaining capital duty beyond 1 July 1984, within the limits set in Article 7(2) of the directive, it could not justify reintroducing such duty (judgment of 12 June 2014, Ascendi Beiras Litoral e Alta, Auto Estradas das Beiras Litoral e Alta (C‐377/13, EU:C:2014:1754), paragraph 50, and the case-law cited).

| 26 | In the present case the question referred differs from that which the Court answered in the judgment of 12 June 2014, Ascendi Beiras Litoral e Alta, Auto Estradas das Beiras Litoral e Alta (C‐377/13, EU:C:2014:1754) in that the capital duty in question applies not to an increase in the share capital of a capital company but to the incorporation of such a company, which are transactions referred to, respectively, in Article 4(1)(c) and (a) of Directive 69/335. However, such a difference is not such as to lead the Court to depart from the interpretation which it gave in that judgment. |
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26

In the present case the question referred differs from that which the Court answered in the judgment of 12 June 2014, Ascendi Beiras Litoral e Alta, Auto Estradas das Beiras Litoral e Alta (C‐377/13, EU:C:2014:1754) in that the capital duty in question applies not to an increase in the share capital of a capital company but to the incorporation of such a company, which are transactions referred to, respectively, in Article 4(1)(c) and (a) of Directive 69/335. However, such a difference is not such as to lead the Court to depart from the interpretation which it gave in that judgment.

| 27 | The obligations arising for the Member States from Article 7 of Directive 69/335, in particular that referred to in paragraph 25 above, concern every transaction falling within the scope of that directive and, consequently, every transaction falling within Article 4 of that directive (see judgment of 12 June 2014, Ascendi Beiras Litoral e Alta, Auto Estradas das Beiras Litoral e Alta, C‐377/13, EU:C:2014:1754, paragraph 51). |
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27

The obligations arising for the Member States from Article 7 of Directive 69/335, in particular that referred to in paragraph 25 above, concern every transaction falling within the scope of that directive and, consequently, every transaction falling within Article 4 of that directive (see judgment of 12 June 2014, Ascendi Beiras Litoral e Alta, Auto Estradas das Beiras Litoral e Alta, C‐377/13, EU:C:2014:1754, paragraph 51).

| 28 | Accordingly, the answer to the question referred is that Article 4(1)(a) and Article 7(1) of Directive 69/335 must be interpreted as precluding national legislation by which a Member State has reintroduced capital duty on the incorporation of a capital company falling within the first of those provisions, which were subject to such duty on 1 July 1984, but which were subsequently exempted from it. |
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28

Accordingly, the answer to the question referred is that Article 4(1)(a) and Article 7(1) of Directive 69/335 must be interpreted as precluding national legislation by which a Member State has reintroduced capital duty on the incorporation of a capital company falling within the first of those provisions, which were subject to such duty on 1 July 1984, but which were subsequently exempted from it.

Costs

Costs

| 29 | 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. |
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29

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.

| | On those grounds, the Court (First Chamber) hereby rules: |
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On those grounds, the Court (First Chamber) hereby rules:

| | Article 4(1)(a) and Article 7(1) 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, must be interpreted as precluding national legislation by which a Member State has reintroduced capital duty on the incorporation of a capital company falling within the first of those provisions, which were subject to such duty on 1 July 1984, but which were subsequently exempted from it. |
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Article 4(1)(a) and Article 7(1) 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, must be interpreted as precluding national legislation by which a Member State has reintroduced capital duty on the incorporation of a capital company falling within the first of those provisions, which were subject to such duty on 1 July 1984, but which were subsequently exempted from it.

Article 4(1)(a) and Article 7(1) 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, must be interpreted as precluding national legislation by which a Member State has reintroduced capital duty on the incorporation of a capital company falling within the first of those provisions, which were subject to such duty on 1 July 1984, but which were subsequently exempted from it.

| | [Signatures] |
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[Signatures]

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(
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  )	Language of the case: Portuguese.

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