Opinion of the Advocate General — ECLI:EU:C:2009:483
Date: 2009-07-16
Language of the case: Dutch
Subject matter: Taxation;Approximation of laws
Procedure: Reference for a preliminary ruling
Origin: Netherlands

summary, as follows: The mere fact that in order to achieve a legitimate economic aim a taxpayer chooses, out of several lawful options, the one that is most favourable to it for tax purposes is not by itself sufficient grounds for a charge of tax avoidance within the meaning of Article 11(1)(a) of Directive 90/434. b) Can Article 11(1)(a) of Directive 90/434 apply to the avoidance of transaction tax? 48. Following these introductory remarks on the concept of avoidance it must now be examined whether Article 11(1)(a) of Directive 90/434 can apply to the avoidance of transaction tax such as that in the Netherlands. 49. If one just takes the wording of Article 11(1)(a) of Directive 90/434 on its own, the advantages of merger taxation can be denied whenever tax avoidance is the principal objective, or at least one of the principal objectives, of a merger. No express limitation of the scope of application of Article 11(1)(a) to certain types of tax, such as corporation tax for instance, can be concluded from the wording of the provision. 50. The Member States that participated in the proceedings conclude from this that any tax avoidance whatsoever gives the national authorities the right to refuse the benefits under Directive 90/434 – even the avoidance of a transaction tax such as that in the Netherlands. 51. However, as the Court has ruled in previous decisions, in interpreting a provision of Community law it is necessary to consider not only its wording but also the context in which it occurs and the objects of the rules of which it is part. (23) 52. The essential characteristic of Directive 90/434 is that – despite the use of the expression ‘common system of taxation’ (24) – it does not lead to a comprehensive harmonisation of taxation and levies that can be charged on a merger. (25) It provides only for individual benefits by which tax disadvantages on the cross-border restructuring of undertakings are to be overcome. (26) 53. With regard to these very tax benefits, Article 11(1)(a) of Directive 90/434 serves to safeguard the financial interests of the Member States. (27) Recourse to Article 11(1)(a) is therefore justified only if in a particular individual case a tax is avoided to which the benefits in Directive 90/434 could relate. That narrow interpretation is in line with the exceptional nature of Article 11(1)(a): the Member States may, by way of exception and in specific cases only, on the basis of that provision, refuse to apply or withdraw the benefit of all or any part of the provisions of that directive. (28) 54. It will therefore be necessary to consider below whether one of the benefits under Directive 90/434 applies to a tax such as Netherlands transaction tax. If that should be the case, measures may be taken under Article 11(1)(a) of Directive 90/434 in the event of that duty being avoided. 55. The benefit to be taken into consideration in the present case would possibly be that under Article 4(1) in conjunction with Article 9 of Directive 90/434, according to which a merger is not to give rise to any taxation of capital gains calculated by reference to the difference between the real values of the assets and liabilities transferred (market value) and their values for tax purposes (book value). 56. Although that benefit is couched in wide terms and the wording not confined to a specific type of tax, (29) it principally applies to corporation tax. The purpose of the benefit is to ensure that restructurings do not result in the taxation of undisclosed reserves of undertakings. On the occasion of a merger, therefore, the taxation of any increases in the value of assets is deferred until their actual disposal. (30) 57. Generally speaking, a transaction tax, which is in the nature of a tax on the acquisition of real property, is based on the value of the property concerned but is not normally imposed specifically on the difference between the book value and market value of the property, so that no hidden reserves are disclosed. It is simply based on a certain value, which might often be the market value, but it can also be assessed according to different criteria, such as the uniformly-assessed land registry value. 58. In this case the Court has no reason to suppose that Netherlands transaction tax specifically relates to the difference between the book value and the market value of real properties. In those circumstances it does not come within the scope of application of the tax benefit under Article 4(1) in conjunction with Article 9, which means that the rule on abuse in Article 11(1)(a) of Directive 90/434 does not apply to it either. 59. It must therefore be held that: Article 11(1)(a) of Directive 90/434 applies only to the avoidance of taxes to which the benefits provided for in that directive relate. This is not the case with a transaction tax unless the difference between the real value of the assets transferred and their value for tax purposes would specifically be taxed. c) Is it possible to have recourse to the general provision on the abuse of rights? 60. In order to be able to give the Hoge Raad a useful reply to its question it is also necessary to consider whether the tax benefits in Directive 90/434 can be denied to a taxpayer in reliance upon the general prohibition of abuse of rights, as argued by some of the Governments that participated in the proceedings. 61. It is true that Article 11(1)(a) of Directive 90/434 reflects the general Community law principle that abuse of rights is prohibited. (31) 62. This also means, however, that Article 11(1)(a) of Directive 90/434 exhaustively determines the circumstances in which the tax benefits provided for in the directive can be refused in the event of abuse. If it were to be permitted, in addition, to have recourse to a general principle whose content is much less clear and precise, there would be a danger that the harmonisation objective of Directive 90/434 would be undermined and the legal certainty upon the restructuring of companies which it seeks to achieve would be jeopardised. (32) 63. However, even if one were to consider the general prohibition of abuse of rights to be applicable, it could not, according to the motto ‘fraus omnia corrumpit’, (33) serve as the basis for simply withholding all benefits under Directive 90/434 from the taxpayer in the event of avoidance of transaction tax, including those benefits that – particularly with regard to corporation tax – save it from having to disclose hidden reserves. 64. The applicant in the main proceedings rightly argues that such a solution would be disproportionate. 65. As already mentioned, (34) the facility for the refusal of tax benefits in the context of merger taxation specifically serves to safeguard the financial interests of the Member States in connection with the tax benefits provided for in Directive 90/434. 66. If the principal objective or one of the principal objectives of a merger is the avoidance of a transaction tax, the financial interests of the Member State concerned that are to be protected are confined to the levying of that very transaction tax. As the Commission also rightly states, those interests are served by the taxpayer being liable to pay the transaction tax and not by it being obliged to pay a quite different tax, namely corporation tax. It would exceed what is required to safeguard the financial interests of a Member State if the national tax authorities were to sweepingly refuse the taxpayer the benefits under Directive 90/434 even in relation to all other kinds of tax and were to compel him to disclose hidden reserves in this connection. 67. In other words, the principle of proportionality requires that tax advantages in the context of merger taxation be denied to the taxpayer only insofar as necessary in order to prevent a threat of tax avoidance or to redress tax avoidance that has already occurred. 68. Further, this interpretation also accords with the principle that exceptions are to be interpreted narrowly. (35) Exceptions to the basic principle that restructuring procedures are not to bring about taxation of the undisclosed reserves of undertakings (36) must not have a scope that is wider than is needed to protect the financial interests of the Member States in the specific individual case. 69. To summarise, therefore: Where the avoidance of a transaction tax is threatened or has already taken place, the tax benefits in Directive 90/434 that relate to other types of tax may not be refused or withdrawn. VI – Conclusion 70. In the light of the foregoing I propose that the Court answer the question referred by the Hoge Raad der Nederlanden as follows: – Article 11(1)(a) of Directive 90/434 applies only to the avoidance of taxes to which the benefits provided for in that directive relate. This is not the case with a transaction tax, unless the difference between the real value of the assets transferred and their value for tax purposes would specifically be taxed by it. – Where the avoidance of a transaction tax is threatened or has already taken place, the tax benefits in Directive 90/434 that relate to other types of tax may not be refused or withdrawn. – The mere fact that in order to achieve a legitimate economic aim a taxpayer chooses, out of several lawful options, the one that is most favourable to it for tax purposes is not by itself sufficient grounds for a charge of tax avoidance under Article 11(1)(a) of Directive 90/434. 1 – Original language: German. 2 – Council Directive of 23 July 1990 on the common system of taxation applicable to mergers, divisions, transfers of assets and exchanges of shares concerning companies of different Member States (OJ 1990 L 225, p. 1). 3 – As well as mergers, some other company-law transactions enjoy tax benefits under Directive 90/434, that is to say, divisions, transfers of assets and exchanges of shares. For simplification purposes, these transactions will also be included where I use the term ‘merger’ in this Opinion. 4 – This is a kind of tax on the acquisition of real estate. 5 – Although Directive 90/434 was amended by Council Directive 2005/19/EC of 17 February 2005 (OJ 2005 L 58, p. 19) this is of no relevance in the present case because the decision by the Netherlands tax authority challenged in the main proceedings was made before the expiry of the deadline for transposing the amendments (1 January 2006 and 1 January 2007). 6 – Uitvoeringsbesluit BVR. 7 – According to the referring court, the version of the Wet Vpb in force up to 11 July 2005 is the version of relevance to the main proceedings. 8 – Inspecteur van de belastingsdienst. 9 – The claim by Mode-BV was dismissed by a judgment of the Gerechtshof te ’s-Gravenhage of 28 February 2006. 10 – See the Opinion delivered by Advocate General Wattel of 22 December 2006 in the main proceedings before the Hoge Raad der Nederlanden (sections 1.1 and 2.7) and the Gerechtshof judgment at first instance (section 3.7). 11 – Judgments in Case C‑321/05 Kofoed [2007] ECR I‑5795, paragraph 32, and Case C‑285/07 A.T. [2008] ECR I‑0000, paragraph 28; see also point 36 in my Opinion of 8 February 2007 in Kofoed and the first, second and third recitals in the preamble to Directive 90/434. 12 – See Article 1 as well as the title and first recital in the preamble to Directive 90/434. 13 – See the Opinion by Advocate General Wattel (cited in footnote 10, section 5.4). 14 – Established case-law since Joined Cases C-297/88 and C‑197/89 Dzodzi [1990] ECR I‑3763, paragraphs 36 and 37; see, specifically with regard to Directive 90/434, Case C‑28/95 Leur-Bloem [1997] ECR I‑4161, paragraphs 32 and 34, and Case C‑43/00 Andersen og Jensen [2002] ECR I‑379, paragraphs 18 and 19; see also Case C‑280/06 ETI and Others [2007] ECR I‑10893, paragraphs 21 and 22. 15 – According to the information provided by the referring court, if Beheer-BV had made a profit on the sale of the property at Tolstraat 17 corporation tax would also have been payable. 16 – It is apparent from the court files that the shares in a property company such as Beheer-BV are treated as real property for the purposes of the charge to stamp duty under Article 4(a) of the Wet BVR. 17 – See, on the exemption of mergers from stamp duty, Article 15(1)(h) of the Wet BVR in conjunction with Article 5a(1) of the Wet BVR implementing decree. 18 – Kofoed (cited in footnote 11, paragraphs 40 to 47) and points 61 to 67 of my Opinion in that case. 19 – Established case-law; see, for example, Case C‑142/05 Mickelsson and Roos [2009] ECR I‑0000, paragraph 41, and Case C‑22/08 Vatsouras [2009] ECR I‑0000, paragraph 23. 20 – Case C‑336/07 Kabel Deutschland Vertrieb und Service [2008] ECR I‑0000, paragraph 47. 21 – Kofoed (cited in footnote 11, paragraph 38); see also point 57 of my Opinion in that case. 22 – See, in this respect, my Opinion in Kofoed (cited in footnote 11, point 58); in the same vein, the case-law on fundamental freedoms, particularly Case C‑364/01 Barbier [2003] ECR I‑15013, paragraph 71, and Case C‑196/04 Cadbury Schweppes and Schweppes Overseas [2006] ECR I‑7995, paragraphs 36 and 37. 23 – Case 292/82 Merck [1983] ECR 3781, paragraph 12; Case C‑17/03 VEMW and Others [2005] ECR I‑4983, paragraph 41; and Case C‑76/06 P Britannia Alloys & Chemicals v Commission [2007] ECR I‑4405, paragraph 21; see, in similar vein, specifically referring to the interpretation of Directive 90/434, Kofoed (cited in footnote 11, paragraphs 29 and 32). 24 – See the title and third recital in the preamble to Directive 90/434. 25 – This can also be seen from Council Directive 69/335/EEC of 17 July 1969 concerning indirect taxes on the raising of capital (OJ 1969 L 249, p. 25), which continues to apply alongside Directive 90/434. 26 – See, as to the purpose of avoiding tax disadvantages, the references stated in footnote 11. 27 – Fourth recital in the preamble to Directive 90/434. 28 – Kofoed (paragraph 37) and A.T. (paragraph 31), both cited in footnote 11; generally, as to the narrow interpretation of exceptions, see Case C‑476/01 Kapper [2004] ECR I‑5202, paragraph 72; Case C‑36/05 Commission v Spain [2006] ECR I‑10313, paragraph 31; and Case C‑102/08 SALIX Grundstücks-Vermietungsgesellschaft [2009] ECR I‑0000, paragraph 54. 29 – Article 3 of Directive 90/434 does admittedly refer to liability to corporation tax in its definition of the term ‘company’. However, this only means that mergers within the meaning of Article 2 of Directive 90/434 cannot be carried out by companies other than those that are subject to corporation tax or any tax replacing it. On the other hand, the tax benefits granted under Directive 90/434 with regard to such mergers are in no way restricted to corporation tax. This is apparent, not least of all, from Article 8(1) and the eighth recital in the preamble to Directive 90/434, which deal with the personal taxation of shareholders, which necessarily includes income tax (see also in that respect Kofoed, cited in footnote 11, especially paragraph 20). 30 – Kofoed (paragraph 36) and A.T. (paragraphs 28 and 36), both cited in footnote 11. 31 – Kofoed (cited in footnote 11, paragraph 38); see also point 57 of my Opinion in that case. 32 – See my Opinion in Kofoed (cited in footnote 11, point 67). 33 – In the event of the Portuguese Government wishing to allude by ‘fraus’ (fraud) to tax evasion or tax fraud, it should be noted that there is no question of such offences in the main proceedings. The parties involved notified their proposal to the tax authorities before carrying it out and requested a finding that it was tax exempt. 34 – See above, point 53 of this Opinion. 35 – See, in that respect, the case-law cited in point 28 of this Opinion. 36 – For this principle see above, point 56 of this Opinion.