Judgment;Summary — ECLI:EU:C:2021:137
Date: 2021-02-25
Language of the case: Spanish
Court formation: Seventh Chamber
Subject matter: Right of establishment;Taxation;Free movement of capital;Freedom to provide services;Value added tax
Procedure: Reference for a preliminary ruling
Origin: Spain

Summary  C-712/19 — 1 
Case C-712/19 
Summary of the request for a preliminary ruling pursuant to Article 98(1) of 
the Rules of Procedure of the Court of Justice 
Date lodged:  
24 September 2019 
Referring court:  
Tribunal Supremo (Spain) 
Date of the decision to refer:  
16 July 2019 
Appellant:  
Novo Banco S.A. 
Respondent:  
Junta de Andalucía 
  
Subject matter of the main proceedings 
Appeal on a point of law lodged by NOVO BANCO, S.A. (formerly known as 
Banco Espirito Santo, S.A., sucursal en España) against the judgment given on 
27 February 2017 by the Sala de lo Contencioso-Administrativo (Chamber for 
Contentious Administrative Proceedings) of the Tribunal Superior de Justicia de 
Andalucía (High Court of Justice of Andalusia, Spain) concerning the 
compatibility of Article 6 of Law 11/2010 on fiscal measures for the reduction of 
the government deficit and for sustainability (Ley 11/2010 de medidas fiscales 
para la reducción del déficit público y para la sostenibilidad) of 3 December 
2010 — which governs the tax on customer deposits in Andalusian credit 
institutions (impuesto sobre los depósitos de clientes en las entitdades de crédito 
de Andalucía; ‘IDECA’) — with Articles 49, 56 and 63 of the Treaty on the 
Functioning of the European Union (‘TFEU’) and Articles 401 and 135(1)(d) of 
Council Directive 2006/112/EC of 28 November 2006 on the common system of 
value added tax (‘the VAT Directive’). 
EN 
SUMMARY OF THE REQUEST FOR A PRELIMINARY RULING — CASE C-712/19 
 
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Subject matter and legal basis of the request for a preliminary ruling 
The referring court has referred two questions for a preliminary ruling under 
Article 267 TFEU. By the first question, it asks for a determination of whether the 
IDECA is contrary to Articles 49, 56 and 63 TFEU, on the freedom of 
establishment, the freedom to provide services and the free movement of capital, 
in view of the fact that it offers tax advantages for the banks to which it applies if 
their head offices are situated in the Autonomous Community of Andalusia or on 
the basis of the number of branches which such banks have in that autonomous 
community or the loans and investments that those banks allocate to projects 
there. By the second question, the referring court seeks clarification of whether, 
despite the fact that Law 11/2010 categorises it as a direct tax, the IDECA can be 
classified as an indirect tax and whether, in that case, it is compatible with the 
VAT Directive, in the light of the provisions of Articles 401 and 135(1)(d) 
thereof. 
Questions referred for a preliminary ruling 
1. Must Articles 49, 56 and 63 TFEU, which guarantee the freedom of 
establishment, the freedom to provide services and the free movement of 
capital, respectively, be interpreted as precluding, inter alia, a system of 
deductions like that laid down for the IDECA in points 2 and 3 of 
Article 6(7) of Andalusian Law 11/2010 of 3 December on fiscal measures 
for the reduction of the government deficit and for sustainability? 
2. Must the tax on customer deposits in credit institutions in Andalusia 
(IDECA) be categorised as an indirect tax despite the fact that Article 6(2) 
of Andalusian Law 11/2010 classifies it as a direct tax, and, in that case, are 
its existence and chargeability compatible with VAT, in the light of the 
provisions of Articles 401 and 135(1)(d) of the VAT Directive. 
Provisions of EU law relied on 
European Union law 
Treaty on the Functioning of the European Union (OJ 2016 C 202, p. 1), 
Articles 49, 56, 63 and 267 
Council Directive 88/361/EEC of 24 June 1988 for the implementation of 
Article 67 of the Treaty (OJ 1988 L 178, p. 5) 
Council Directive 2006/112/EC of 28 November 2006 on the common system of 
value added tax (OJ 2006 L 347, p. 1), Articles 401 and 135(1)(d) 
NOVO BANCO 
 
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Case-law of the Court of Justice of the European Union 
Judgment of 18 July 2007, Oy AA (C-231/05, EU:C:2007:439) 
Judgment of 17 November 2009, Presidente del Consiglio dei Ministri (C-169/08, 
EU:C:2009:709) 
Judgment of 1 July 2010, Dijkman and Dijkman-Lavaleije (C-233/09, 
EU:C:2010:397) 
Judgment of 6 June 2000, Verkooijen (C-35/98, EU:C:2000:294) 
Judgment of 7 September 2004, Manninen (C-319/02, EU:C:2004:484, 
paragraph 22) et seq. 
Judgment of 25 October 2012, Commission v Belgium (C-387/11, 
EU:C:2012:670) 
Provisions of national law relied on 
Law 11/2010 of 3 December on fiscal measures for the reduction of the 
government deficit and for sustainability (BOE No 314 of 27 December 2010), 
Article 6 
Succinct presentation of the facts and the procedure in the main proceedings 
1 See the section relating to the subject matter of the main proceedings. 
Essential arguments of the parties to the main proceedings 
2 The appellant, Novo Banco S.A., alleges that the following provisions of 
European Union law have been infringed: 
– Articles 49 and 56 TFEU, as regards the freedom of establishment and the 
freedom to provide services. 
The appellant argues that the rules governing the tax on customer deposits in 
Andalusian credit institutions (IDECA), laid down in Article 6 of Andalusian Law 
11/2010 on fiscal measures for the reduction of the government deficit and for 
sustainability, which provide for general and specific deductions from the amount 
of tax (points 2 and 3 of paragraph 7), could breach those fundamental rights: 
i) since the way the general deductions are applied creates a difference in 
treatment between institutions which are resident in Andalusia and those 
which are not, placing the latter at a disadvantage because a tax deduction is 
provided for on the basis that the head office or general operations are 
SUMMARY OF THE REQUEST FOR A PRELIMINARY RULING — CASE C-712/19 
 
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situated in Andalusia, which has an effect on the freedom of establishment, 
and 
ii) since it includes specific deductions related to regional interests and 
associated with the specific features of entities like savings banks and credit 
unions, established almost exclusively at regional level, which creates de 
facto discrimination between credit institutions according to whether they 
have a connection to the regional interests of Andalusia. In support of its 
position, the appellant cites the judgments of the Court of Justice of the 
European Union of 18 July 2007, Oy AA (C-231/05, EU:C:2007:439) and of 
17 November 2009, Presidente del Consiglio dei Ministri (C-169/08, 
EU:C:2009:709). Such differences in treatment constitute restrictions on the 
exercise of freedom of establishment by companies established in other 
Member States of the European Union or in other autonomous communities 
of the Kingdom of Spain, and, at the same time, constitute a barrier to the 
freedom to provide services. 
– The appellant further contends that identical conclusions follow from the 
European Commission’s letter of formal notice 2011/4057, served on Spain on 
28 February 2012, concerning the tax on deposits in the autonomous communities 
of Extremadura and Andalusia, which reads: ‘… Spain may be in breach of the 
obligations incumbent on it under Articles 49, 56 and 63 TFEU and Articles 31, 
36 and 40 of the EEA Agreement, because the legislation of some of its regions 
(Autonomous Community of Andalusia and Autonomous Community of 
Extremadura) offers tax advantages for the banks to which it applies if their 
headquarters are situated in the autonomous community or on the basis of the 
number of branches of such banks situated in that autonomous community or the 
loans and investments those banks allocate to that autonomous community’s 
projects. 
– Article 1 of Council Directive 88/361/EEC of 24 June 1988 for the 
implementation of Article 67 of the Treaty (free movement of capital) and 
Article 63 TFEU on the free movement of capital. 
The appellant submits that the rules governing the IDECA may affect the freedom 
of credit institutions to take decisions relating to the allocation of deposits 
collected in Andalusia and the decisions of investors regarding the placement of 
their savings. The appellant points out that providing for a difference in taxation 
based on the place of residence of the financial institution or the place of 
investment hinders the free movement of capital and it cites in that connection the 
judgment of the Court of Justice of 1 July 2010, Dijkman and Dijkman-Lavaleije 
(C-233/09, EU:C:2010:397). The appellant observes that the statement of reasons 
for the law governing the IDECA refers expressly to the fact that that tax is 
intended to address the chronic problem of the flight of savings affecting 
Andalusia. In the appellant’s submission, the effective application of the IDECA 
distorts the management decisions of financial institutions which tend to transfer 
NOVO BANCO 
 
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their businesses to territories not subject to that tax or to base their businesses on 
products on which the tax is not levied. 
– Articles 401 and 135(1)(d) of the VAT Directive. 
The appellant claims that the judgment under appeal classifies the IDECA as a 
direct tax, whereas it cannot be a direct tax because, like VAT, it is based on 
business transactions; specifically, in this case, the provision of financial services. 
The appellant submits that the two taxes are levied on the same transactions and 
complains that the judgment under appeal takes the view that what is taxed is 
economic capacity derived from a transaction in liabilities (collection of deposits) 
in order to define the IDECA in such a way as to prevent it from being identical to 
VAT, especially where the IDECA is levied on a transaction which, literally, is 
subject to but exempt from VAT. The appellant further claims that, in its opinion, 
the assertion made in that judgment to the effect that the IDECA is levied on the 
potential return which may be assumed on deposits collected, as a revenue 
generating element, is contradictory in view of the fact that the economic capacity 
resulting from the financial activity using funds collected through deposits is 
taxed by means of corporation tax or the tax on economic activities. 
3 For its part, the Junta de Andalucía contends that the IDECA is a direct tax which 
is not levied on the financial transactions of credit institutions and which, 
therefore, does not take into account the nationality of depositors. In its 
submission, the IDECA is a tax which is levied on the potential return which may 
be assumed on deposits collected by credit institutions physically established in 
the territory of the autonomous community, on the grounds that they have their 
head office or simply bank branches on that territory, regardless of whether those 
credit institutions are Andalusian, Spanish from another autonomous community, 
or even from another Member State. In support of its reasoning, the Junta de 
Andalucía cites the judgments of the Court of Justice of 7 September 2004, 
Manninen (C-319/02, EU:C:2004:484, paragraph 22) et seq., and of 25 October 
2012, Commission v Belgium (C-387/11, EU:C:2012:670). 
The Junta de Andalucía argues that, in accordance with the case-law of the Court 
of Justice of the European Union, the ultimate aim of the principle of free 
movement is the protection of the internal market, which, in matters relating to 
taxation, precludes, inter alia, the adoption of measures which fragment that 
market by creating differences between residents and non-residents without proper 
justification. The Junta de Andalucía contends that, therefore, the autonomous 
communities are entitled to create taxes or tax measures provided that these are 
not contrary to the freedom of movement, which will occur where, in addition to 
amounting to an obstacle to free movement, such taxes or tax measures cannot be 
justified or can be justified but are disproportionate in relation to their aim.  
The Junta de Andalucía submits that, therefore, the first point to be determined is 
whether a measure like that laid down in Article 6(7)(2) and (3) of the Andalusian 
Law on the tax on deposits in credit institutions, pursuant to which it is possible to 
SUMMARY OF THE REQUEST FOR A PRELIMINARY RULING — CASE C-712/19 
 
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reduce the amount payable in respect of a regional tax by making certain 
investments in the autonomous community, constitutes a barrier to the free 
movement of, in this case, capital, or has a genuine impact on the location of 
undertakings, thereby infringing the freedom of establishment. If that barrier or 
restriction is confirmed, it will then be necessary to examine whether any 
justification exists which would render the measure lawful and, moreover, 
whether that measure is proportionate. 
The Junta de Andalucía submits that, on that basis, it can be concluded that the tax 
on the deposits of credit institutions does not constitute a barrier to freedom of 
movement, essentially because it is not levied on transactions but rather on the 
volume of deposits collected by taxable persons liable to the tax, meaning that it is 
not a measure liable to affect the movement of capital. The Junta de Andalucía 
adds that, in any event, the deductions referred to in Article 6(7)(2) and (3) do not 
create any difference in treatment between residents and non-residents in the 
autonomous community and, therefore, between Spaniards and nationals of other 
EU Member States, since its application is not dependent on the location of the 
registered office of the bank and instead it applies on an equal basis to all 
branches which are situated in Andalusia and are therefore subject to the tax. 
The Junta de Andalucía contends that it must also be ruled out that the high 
amount of the deduction laid down in the provision concerned of Law 11/2010 
means, de facto, that banks are required to make investments in certain socially 
useful projects, thereby limiting the free movement of capital. The Junta de 
Andalucía submits that this is an incentive or measure which is intended to 
encourage the reinvestment of profits in the autonomous community without, 
therefore, impeding other alternative investments. 
In particular, as regards the deduction of EUR 200 000, the Junta de Andalucía 
maintains that this fulfils the requirements relating to the existence of a 
justification for the different treatment and the proportionality of the measure to 
the aim pursued, in view of the fact that the IDECA has a fiscal and also a non-
fiscal basis because not only does it have the ultimate purpose of raising revenue 
but it also has the primary objective of encouraging investment in the autonomous 
community and promoting regional saving. 
Succinct presentation of the reasoning in the request for a preliminary ruling 
4 As regards the first question referred for a preliminary ruling, the referring court, 
partially allowing the appellant’s arguments, sets out its uncertainties relating to 
the compatibility of the IDECA with the freedoms referred to and, accordingly, 
with Articles 49, 56 and 63 TFEU which guarantee those freedoms, because an 
examination of the tax and its essential elements, especially the rate of tax in 
relation to the scope of the deductions, in particular the general deduction of 
EUR 200 000 for banks with their headquarters in Andalusia, leads to the 
conclusion that it is a tax intended de facto to be levied on banks which do not 
NOVO BANCO 
 
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have their headquarters in that autonomous community, including those which 
have their headquarters in other Member States of the European Union, to the 
extent that the provision itself stipulates that the deductions are to exceed the full 
amount of tax (Article 6(7)(4)). The referring court observes that the general 
deduction is so significant in relation to the amounts of tax provided for that it in 
fact transforms the nature of the tax, converting it into a tax on non-resident 
banks. That court expresses the same view in relation to the specific deductions 
intended to encourage investments in the autonomous community, in some cases 
targeted exclusively at a type of entity — savings banks or cooperative banks; it 
takes the view that there is de facto discrimination between credit institutions 
depending on whether they have a connection to the regional interests of 
Andalusia. 
5 By the second question, the referring court asks the Court of Justice about the 
nature of the IDECA. In particular, it asks for clarification of whether the IDECA 
must be categorised as an indirect tax even though it is classified as a direct tax 
under Article 6(2) of Andalusian Law 11/2010, and whether, in that case, it is 
compatible with VAT, in the light of the provisions of Articles 401 and 135(1)(d) 
of the VAT Directive, regard being had to the fact that that tax is levied on the 
holding of deposits and these are subject to VAT, although exempt.