Opinion of the Advocate General — ECLI:EU:C:2019:1022
Date: 2019-11-27
Language of the case: French
Subject matter: Right of establishment
Procedure: Reference for a preliminary ruling
Origin: Belgium

summary of the national proceedings] 
******************************* 
I. Admissibility of the appeal 
The appeal [...] [procedural matters] is admissible [...].[procedural matters] 
II. Facts and background of the case 
[...].[procedural matters] 
EN 
REQUEST FOR A PRELIMINARY RULING OF 21. 9. 2018 — CASE C-640/18 
 
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[...] [introduction to the summary of the facts] by an agreement of 10 January 
1997, the public limited company WAGRAM INVEST [name of the party] 
purchased from its manager [...] [name of the manager] shares in the public 
limited company IENA for BEF 24 000 000, now EUR 594 944.45, payable in 16 
six-monthly payments of BEF 1 500 000, interest free, of which the last six 
monthly payment was due on 10 July 2004.  
By a second agreement of 10 March 1999, WAGRAM INVEST purchased from 
its manager other shares in IENA for BEF 31 760 400, now EUR 787 319.75, 
payable in 12 six-monthly payments of BEF 2 646 700, interest free, of which the 
last six-monthly payment coincided with the last payment under the original 
agreement. [Or. 4] 
The price on which both agreements transferring IENA shares were based was the 
price that the shareholders of that company paid when they had subscribed for an 
increase in capital a short time earlier. 
The transferee company made the following entries in order to record those 
purchase operations in its accounts: 
– It entered the debt to the manager as a debt becoming due after one year in its 
balance sheet liabilities at its nominal value, that is to say, BEF 24 000 000 
(EUR 594 944.45) plus BEF 31 760 400 (EUR 787 319.75);  
– It entered the 2 005 shares purchased on 10 January 1997 as an asset at their 
present value of BEF 18 233 827 (EUR 452 004.76) and entered the 1 993 
shares purchased on 10 March 1999 at their present value of BEF 25 871 302 
(EUR [641 332.82]); 
– It posted the discount consisting of the difference between the nominal value of 
the debt and the present value of the fixed asset, that is to say, BEF 5 766 173 
(EUR 142 939.69) plus BEF 5 889 098 (EUR 145 986.93) in the prepayments 
and accrued income account (account 4901); 
– At the end of each financial year, it recorded as a finance cost a percentage of 
deferred charges corresponding to the discount on the debt. 
At the end of the 2000 tax year (balance sheet as at 31 December 1999), 
WAGRAM INVEST posted BEF 1 970 339 (EUR 48 843.41) as a percentage of 
charges, that is to say, BEF 1 000 506 for the shares acquired in 1997 and BEF 
969 833 for the shares acquired in 1999. 
At the end of the 2001 tax year (balance sheet as at 31 December 2000), 
WAGRAM INVEST posted BEF 2 676 318 (EUR 66 344.17) as a percentage of 
charges, that is to say, BEF 843 090 for the shares acquired in 1997 and BEF 
1 833 228 for the shares acquired in 1999. 
WAGRAM INVEST 
 
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The discount rate used to index the amounts was the market rate applicable to 
debts of that kind at the time when they were first entered in the balance sheet, 
that is to say, 8%. [Or. 5] 
Following an inspection [...] [administrative matters], the administration found 
itself obliged to reject the discount charges recorded and deducted for the 2000 
and 2001 tax years and, although the taxpayer disagreed, on 28 October 2002 sent 
it a tax assessment giving the following reasons for its position: 
‘... 
– the agreements governing the securities acquisitions provide that the cost of the 
securities is payable in interest-free six monthly payments; 
– Article 27bis(4) of the Royal Decree of 8 October 1976 and the corresponding 
article in the Royal Decree of 30 January 2001 (Article 67(2)(c)) do not apply 
in this particular case because the company purchased shares from its 
manager […] [name of the manager] at the subscription price in the capital 
increases of 5 December 1996 and 25 February 1999; 
– the price paid therefore does not take account of the time for payment afforded 
to the company or the fact that no interest was payable; 
– the contractual value of the shares corresponds to their real value; the nominal 
value of the debt does not, even implicitly, include any interest; 
– the shares should therefore appear in account “20 030 IENA Shares” at their 
real value, that is to say BEF 24 000 000 and BEF 31 760 400; 
– recording a fictitious discount by reducing the acquisition price of the fixed 
asset therefore has the effect of expressing a decrease in value of the securities 
that is not economically justified and that for tax purposes cannot be accounted 
for progressively (Article 198(7) of the CIR 92 (1992 Income Tax Code)); 
– this means therefore that a fictitious charge has been deducted and also has tax 
implications as regards any subsequent increase or decrease in value in the 
event of the shares being sold; 
– the company pays off its debt progressively, which is for it a benefit that cannot 
be turned into a charge in its accounting system; 
– the benefit was given by the manager; 
– Article 27 bis(4) of the Royal Decree of 8 October 1976 (and the corresponding 
article (Article 67(2)(c)) of the Royal Decree of 30 January 2001) do not apply 
to financial debts becoming due after one year derived from advances granted 
by third parties (shareholders, group companies and so forth); 
REQUEST FOR A PRELIMINARY RULING OF 21. 9. 2018 — CASE C-640/18 
 
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– the discount at issue was therefore correctly taxed under Article 49 of the CIR 
92 ...’. 
On the basis of the foregoing the administration assessed WAGRAM INVEST for 
two additional corporation tax contributions for the 2000 and 2001 tax years, [...]. 
[administrative matters] [Or. 6] 
No administrative decision was made on the objection filed by WAGRAM 
INVEST on 18 February 2003 within the six-month period under Article 1385 
undecies of the Code judiciaire (Judicial Code), and on 10 March 2005 that 
company brought proceedings by an inter partes application filed with the office 
of the tribunal de première instance de Namur (Court of First Instance, Namur, 
Belgium).  
By a judgment of 29 March 2007 [...] [administrative matters] the tribunal de 
première instance de Namur admitted the action and, before ruling on the 
substance, invited the parties to review how the operations at issue had been 
accounted for in the tax years 1998 to 2001 and, in case they remained in 
disagreement on the matter, appointed an auditor charged with examining the 
annual accounts and determining whether or not the accounting entries for the 
operations as made by the company corresponded to the entries required in order 
correctly to apply Article 67(2)(c) and Article 77 of the Royal Decree of 
30 January 2001 implementing the Code des sociétés (Companies Code). 
The parties then jointly found that appointing an expert was not appropriate in so 
far as the Belgian State had confirmed that the accounting entries did satisfy the 
requirements of Belgian accounting law, specifically Article 77 of the Royal 
Decree of 30 January 2001, and the only point at issue related, for tax purposes, to 
application of Article 198(7) of the CIR 92. 
By a judgment of 20 December 2007, [...] [administrative matters] the tribunal de 
première instance de Namur […] [procedural matters] confirmed the contributions 
at issue for the 2000 and 2001 tax years [...] [administrative and procedural 
matters]. 
Following an appeal brought by WAGRAM INVEST on 24 July 2008, [...] 
[administrative matters] the Cour d’appel de Liège (Court of Appeal, Liège, 
Belgium) delivered a first judgment on 21 April 2010 which declared the appeal 
admissible and, before ruling on the remainder, ordered the oral procedure to be 
reopened [...] [procedural matters]. 
By a judgment of 3 November 2010, […] the Cour d’appel de Liège ordered a 
fresh reopening of the oral procedure so that […] [procedural matters] the parties 
could expand on their arguments [...] [procedural matters] as to how EU law 
affects implementation in the present case of the principle that a true and fair view 
must be given, and the question that the Belgian State sought to refer to the Court 
of Justice for a preliminary ruling. [Or. 7] 
WAGRAM INVEST 
 
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By a subsequent judgment of 14 October 2011, the [...] Cour d’appel de Liège 
[…] [procedural matters] upheld the judgment [...] [procedural matters]. 
Following the appeal brought by WAGRAM INVEST on 2 July 2014 [...] 
[procedural matters] against that judgment of 14 October 2011, by a judgment of 
11 March 2016 [...] [administrative matters], the Cour de cassation (Court of 
Cassation, Belgium) set aside the contested judgment, [...] [procedural matters] 
and referred the case back to the Cour d’appel de Mons (Court of Appeal, Mons). 
[...] [procedural matters] […] 
III. Basis of the appeal — Discussion 
1. Whether the accounting treatment of the charges at issue complies 
with accounting law 
Article 24 of the Royal Decree of 30 January 2001 implementing the Companies 
Code provides in the first paragraph that the annual accounts are to give a true and 
fair view of the company’s assets, liabilities, financial position and profit or loss 
and, in the second paragraph, that, if the application of the provisions of that 
decree would not be sufficient to satisfy that requirement, additional information 
must be given in the annex. 
The first paragraph of Article 29 of that royal decree further states that, in 
exceptional cases where, as a result of the application of the valuation rules laid 
down in the chapter containing that provision, it is not possible to comply with the 
first paragraph of Article 24, those rules must be departed from and that article 
must be applied. 
Article 35 of that royal decree provides that, without prejudice to the application 
of Articles 29, 67 and 77, assets are to be valued at their acquisition value and 
entered in the balance sheet as having that value, after deduction of any related 
depreciation and reductions in value. 
‘Acquisition value’ means either the acquisition price defined in Article 36, the 
production cost defined in Article 37, or the value at which the asset is transferred 
defined in Article 39. [Or. 8] 
Under Article 67(2)(c) of that royal decree, where amounts receivable are entered 
in the balance sheet at their nominal value, there is an accompanying entry of the 
liability in prepayments and accrued income accounts, and the discount on non-
interest-bearing receivables or receivables with abnormally low interest is 
included in the profit or loss prorata temporis on the basis of compound interest, 
where those receivables: (1) are repayable by a date more than one year from the 
date on which they were first entered in the company’s balance sheet, and (2) 
relate either to amounts recorded as income in the profit and loss account, or to the 
transfer price of fixed assets or branches of activity. 
REQUEST FOR A PRELIMINARY RULING OF 21. 9. 2018 — CASE C-640/18 
 
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Under Article 77 of that royal decree, Article 67 applies similarly to debts of 
corresponding types and maturities. 
As the Belgian State acknowledged in its letter of 17 July 2007, the accounting 
entries made when the balance sheets were prepared for the periods from 1997 to 
2000 inclusive satisfy the requirements of Belgian accounting law, specifically 
Article 77 of the Royal Decree of 30 January 2001 [...]. 
In its judgment of 21 April 2010, against which no appeal was lodged, the Cour 
d’appel de Liège held that Article 67(2) and Article 77 of the Royal Decree ‘in 
principle allow a discount to be recorded on non-interest-bearing debts payable 
by a date more than one year from the date on which they were first entered in the 
company’s balance sheet and this is indeed the situation in the present case in so 
far as the aforementioned (share transfer) agreements expressly provide that the 
price is paid interest-free and they are indeed debts becoming due after one year’. 
2. The principle that a true and fair view must be given 
Articles 24 and 29 of the Royal Decree of 30 January 2001 transpose into internal 
law Article 2(3), (4) and (5) of Fourth Council Directive 78/660/EEC of 25 July 
1978 based on Article 54(3)(g) of the Treaty on the annual accounts of certain 
types of companies. 
Section 7 of that directive, ‘valuation rules’, provides in Article 32 that the items 
shown in the annual accounts are to be valued in accordance with Articles 34 to 
42, which are based on the principle of purchase price or production cost. [Or. 9] 
In its judgment of 12 October 2013 the Court of Justice held that ‘the principle 
that a true and fair view must be given, set out in Article 2(3) to (5) of Fourth 
Council Directive 78/660/EEC of 25 July 1978 based on Article [44(2)(g) EC] on 
the annual accounts of certain types of companies, does not permit the principle of 
valuation of assets on the basis of their acquisition price or their production cost, 
contained in Article 32 of that directive, to be departed from in favour of a 
valuation on the basis of their real value, where the acquisition price or the 
production cost of those assets is manifestly lower than their real value’ (judgment 
of 3 October 2013, GIMLE, C-322/12, EU:C:2013:632). 
Relying on that judgment, the Belgian State argues that in the present case the 
principle that assets must be valued at their acquisition price (Article 32 of Fourth 
Council Directive 78/660/EEC of 25 July 1978) has been departed from by 
applying a provision of internal law (Article 77 of the Royal Decree of 30 January 
2001) which itself departs from the principle that a true and fair view must be 
given as the EU directive envisages in Article 2(3) and (5) and the Royal Decree 
of 30 January 2001 in Articles 24 and 29.  
The Belgian State adds that the principle that a true and fair view must be given 
cannot justify cutting the value of the asset by the value of a fictitious discount 
WAGRAM INVEST 
 
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and, automatically and in all cases, treating that discount as a charge even though 
it does not correspond to any loss whatsoever. That discount cannot, in any event, 
constitute an exceptional circumstance permitting a derogation from Article 32 of 
the directive. 
The Belgian State infers from the foregoing that Article 77 of the royal decree 
cannot be applied since that article is incompatible with, in casu, Article 32 and 
Article 2(3) and (5) of the directive. 
WAGRAM INVEST, for its part, submits that, in contradistinction to what the 
administration claims, the provisions of Belgian law applicable in the present case 
do comply with the EU accounting directive, as interpreted by the Court of Justice 
in the aforementioned judgment of 3 October 2013 and that those provisions fairly 
apply the principle that valuation must be made on a prudent basis that is 
enshrined in the directive and that must guide preparation of annual accounts. 
In light of the parties’ divergent interpretations of the directive, the cour [d’appel] 
(Court of Appeal, Mons) finds it necessary, in order to resolve this dispute, to 
refer the following questions set out in the operative part of this judgment to the 
Court of Justice of the European Union for a preliminary ruling. [Or. 10] 
ON THOSE GROUNDS; 
The cour [d’appel] (Court of Appeal, Mons, Belgium) 
Ruling inter partes; 
[...] [procedural matters]; 
[...] [admissibility of the appeal] 
Before ruling on the merits of the case, refers the following questions to the Court 
of Justice of the European Union for a preliminary ruling: 
‘ 
– Does the notion of a true and fair view under Article 2(3) of Fourth 
Council Directive 78/660/EEC of 25 July 1978 on the annual accounts 
of certain types of companies, where a public limited company 
purchases a financial fixed asset, authorise a discount relating to a non-
interest-bearing debt becoming due after one year to be entered as a 
charge in the profit and loss account, and the acquisition price of the 
fixed asset to be entered as an asset in the balance sheet after deduction 
of that discount, in the light of the valuation principles set out in 
Article 32 of that directive? 
– Must the expression ‘in exceptional cases’ that is a proviso for 
application of Article 2(5) of the Council Directive of 25 July 1978 
REQUEST FOR A PRELIMINARY RULING OF 21. 9. 2018 — CASE C-640/18 
 
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based on Article 54(3)(g) of the [EEC] Treaty [now Article 50(2)(g) 
TFEU] on the annual accounts of certain types of companies and that 
allows application of a (different) provision of that directive to be 
excluded be interpreted as meaning that the provision in question can 
apply only on condition that it is found that compliance with the 
provisions of the directive, together with, where applicable, additional 
disclosure in the notes on the accounts in accordance with Article 2(4) 
of that directive, cannot adversely affect compliance with the principle 
that a true and fair view must be given? 
– Must Article 2(4) of the aforementioned directive be applied as a 
priority with the effect that the possibility, under Article 2(5) of that 
directive, of excluding application of a provision of the directive can 
be utilised only if additional disclosure cannot ensure effective 
implementation of the principle that a true and fair view must be given 
enshrined in Article 2(3) of that directive and, even then, only in 
exceptional cases?’; [Or. 11] 
[...] [proceedings stayed] 
[…] [procedural matters: composition of the referring court and signature] 
[…] [procedural matters]