Opinion of the Advocate General — ECLI:EU:C:2008:608
Date: 2008-11-06
Language of the case: German
Based on: Treaty establishing the European Economic Community (1957)
Subject matter: Taxation;Approximation of laws
Procedure: Reference for a preliminary ruling
Origin: Germany

Summary of the Judgment Approximation of laws – Common system of taxation applicable to mergers, divisions, transfers of assets and exchanges of shares concerning companies of different Member States – Directive 90/434 (Council Directive 90/434, Art. 8(1) and (2)) Article 8(1) and (2) of Directive 90/434 on the common system of taxation applicable to mergers, divisions, transfers of assets and exchanges of shares concerning companies of different Member States precludes legislation of a Member State under which, in consequence of an exchange of shares, the shareholders of the acquired company are taxed on the capital gains arising from the transfer and the capital gain is deemed to correspond to the difference between the initial cost of acquiring the shares transferred and their market value, unless the acquiring company carries over the historical book value of the shares transferred in its own tax balance sheet. The mandatory and clear wording of Article 8(1) and (2) of Directive 90/434 offers no indication whatsoever that the Community legislature intended to leave Member States discretion with regard to implementation which would permit them to make the fiscal neutrality provided for in favour of the shareholders of the acquired company subject to conditions going beyond those provided for in paragraph 2 of that article. To leave the Member States such discretion would be contrary to the very objective of the directive which is to set up a common tax system instead of extending to the Community level the systems currently in force in the Member States, since differences between those systems tend to produce distortions. Furthermore, such tax legislation, which aims to prevent taxation of an exchange of shares operation – even at a stage later than that exchange – from being circumvented once and for all and which refuses in a general way to grant the tax advantages provided for under Directive 90/434 in respect of the exchange of shares operations covered by that directive solely on the ground that the acquiring company has not, in its fiscal balance sheet, valued the shares transferred at their historical book value, cannot be based on Article 11(1)(a) of Directive 90/434 and, on that basis, considered to be compatible with it. The Member States must grant the tax advantages provided for under Directive 90/434 in respect of the exchanges of shares referred to in Article 2(d) thereof, unless those operations have as their principal objective or as one of their principal objectives tax evasion or tax avoidance within the meaning of Article 11(1)(a) of the directive. It is, however, only by way of exception and in specific cases that Member States may, pursuant to that article, refuse to apply or withdraw the benefit of all or any part of the provisions of the directive. Therefore, in order to determine whether the planned operation has such an objective, the competent national authorities cannot confine themselves to applying predetermined general criteria but must carry out a general examination of each particular case. In that regard, although such tax legislation also aims to make taxation possible in cases in which it becomes apparent that there is a gap in the system of taxation, a Member State may not be authorised unilaterally to fill such gaps, supposing they exist, as that would risk undermining the achievement of the objective of Directive 90/434, which is to set up a common tax system. Thus, the fact that the applicable law requires the shareholder of the acquired company subsequently to dispose of the shares received in exchange and that the stock exchange price of the shares of the receiving company has fallen significantly, do not justify treating the exchange of shares alone as a chargeable event for tax purposes, since at the time of the exchange the hidden reserves remained as yet unrealised. (see paras 26-27, 30-32, 34, 36, 39, operative part)