Opinion of the Advocate General — ECLI:EU:C:2007:97
Date: 2007-02-15
Language of the case: Greek
Based on: Treaty establishing the European Economic Community (1957)
Subject matter: Taxation;Indirect taxation
Procedure: Action for failure to fulfil obligations - successful;Action for failure to fulfil obligations - unfounded
Origin: Greece

summary, it is to be held that the abolition by the State of origin of capital duty pursuant to Article 7(2) does not mean that the transfer of the seat of a company falling within the directive’s definition of a capital company is subject to capital duty. 47. On the other hand, if the criterion under Greek law – that of the company in question being subject to tax in its State of origin – is applied, a different result is reached in the scenario under consideration. If, under the law of its State of origin, a capital company is no longer liable to capital duty in respect of any transaction, then for the purposes of Greek law – as the Greek Government has itself conceded in the proceedings before the Court – it is not subject to capital duty. In this scenario, therefore, on application of the criterion used in Greek law, in contrast to application of the criterion of classification as a capital company, a transfer of seat would always be subject to capital duty. 48. It follows that, contrary to the submissions of the Greek Government, the criterion used in Greek law does not in all cases lead to the same result as the criterion laid down by the directive, namely classification as a capital company. Thus, by choosing the criterion of being subject to duty the Hellenic Republic has failed to transpose the directive properly. 49. The Kingdom of Spain, which is participating in the present proceedings as an intervener, refers to its own provisions, which are similar to Greek law. In its submission, the arrangements chosen by Spanish and Greek law are necessary to prevent fraud and tax avoidance. 50. The Court has consistently recognised that Community law cannot be relied upon for abusive or fraudulent ends. This means that the application of a provision of Community law cannot be extended to cover abusive practices by economic operators, that is to say transactions which do not take place in the context of normal commercial operations but have the sole purpose of wrongfully obtaining advantages provided for by Community legislation. (13) However, making use of a possibility created by Community law cannot in itself justify a suspicion of abuse. (14) 51. Article 4 of Directive 69/335 enables a capital company whose State of origin does not subject it to capital duty to transfer its seat to another Member State without the transfer of seat being subject to capital duty. A Member State cannot generally abolish this advantage which the directive confers on companies. 52. It is only if there are specific circumstances which render reliance on this Community provision abusive that a Member State could refuse to allow reliance on the provision. However, the Greek provisions are not restricted to preventing abuse in particular cases, but generally impose capital duty on a transfer of seat by companies which are lawfully not subject to capital duty in their State of origin. Thus, they in any event go beyond what is necessary to prevent tax avoidance. Accordingly, even taking into account the prevention of tax avoidance, the Greek provisions do not properly transpose Directive 69/335. 2. Exemption from capital duty for particular kinds of companies a) Exemption for agricultural cooperative organisations 53. Under Greek law, agricultural cooperative organisations of whatever level and associations and consortia thereof are exempt from capital duty. The Commission’s view is that this exemption is not compatible with Directive 69/335. 54. Article 1 of Directive 69/335 provides that Member States are to charge capital companies a capital duty harmonised in accordance with the directive. Accordingly, it is necessary to consider below whether agricultural cooperative organisations established under Greek law are capital companies with the consequence that in principle they are to be charged capital duty. If agricultural cooperative organisations are capital companies for the purposes of the directive, it must then be considered in a second stage whether and to what extent the directive permits exceptions from the charging of capital duty. 55. Article 3(1)(a) lists as capital companies certain forms of company recognised by the laws of the Member States, whereas Article 3(1)(b) and (c) identifies characteristics which likewise make a company, firm, association or legal person a capital company for the purposes of the directive. Agricultural cooperative organisations under Greek law are not mentioned in the list in Article 3(1)(a); nor do they exhibit the characteristics identified in Article 3(1)(b) and (c) as preconditions for classification as a capital company. 56. Article 3(1)(b) provides that a company the shares in whose capital or assets can be dealt in on a stock exchange is a capital company. As the Commission has itself submitted, shares in agricultural cooperative organisations cannot be dealt in on a stock exchange. 57. Article 3(1)(c) provides that any company, firm, association or legal person operating for profit whose members have the right to dispose of their shares to third parties without prior authorisation and are only responsible for the debts of the company, firm, association or legal person to the extent of their shares is a capital company for the purposes of the directive. The Commission has stated that under Greek law shares in an agricultural cooperative organisation can be disposed of only if the statutes of the particular cooperative organisation so provide and if the board of the cooperative organisation consents to the disposal. Thus, the shares of an agricultural cooperative organisation under Greek law cannot be disposed of to third parties without prior authorisation. It is unnecessary to consider whether agricultural cooperative organisations satisfy the second criterion specified in Article 3(1)(c), namely that members are only responsible for the debts of the company to the extent of their shares, because in order to be a capital company under Article 3(1)(c) a company has to satisfy both the criteria identified there. Given that agricultural cooperative organisations under Greek law do not satisfy the first criterion, they are not capital companies as referred to in Article 3(1)(c). 58. However, Article 3(2) provides that, for the purposes of the application of Directive 69/335, any other company, firm, association or legal person operating for profit is to be deemed to be a capital company. The Court has held that the object of that provision is to prevent the choice of a particular legal form from leading to a different fiscal treatment of activities which, from the economic point of view, are equivalent. (15) 59. Therefore, agricultural cooperative organisations under Greek law would have to operate for profit if they are to be capital companies under Article 3(2). 60. The Commission rightly points out that the criterion of operating for profit must be interpreted broadly. It is not only if the purpose of its economic activities is to make an investment return that a company operates for profit within the meaning of the first sentence of Article 3(2) of the directive. It also operates for profit if, as in the case of an agricultural cooperative organisation, the economic results of its activity directly benefit its members and economically strengthen the company as a joint enterprise, even though this does not lead to payment of a direct return on investment. Moreover, the Greek Government too accepts that agricultural cooperative organisations of at least one kind, namely ‘farming cooperatives’, (16) operate for profit within the meaning of the directive and are accordingly deemed capital companies. 61. However, the second sentence of Article 3(2) of Directive 69/335 allows Member States not to regard companies, firms, associations or legal persons deemed by the first sentence to be capital companies as capital companies for the purpose of charging capital duty. It must therefore now be considered whether the exemption granted to agricultural cooperative organisations is covered by this exception. 62. It is necessary for this purpose to define what is meant by ‘shall have the right not to consider it as such for the purpose of charging capital duty’. 63. On the basis of the wording, a number of interpretations are possible. 64. First, it might be understood that the second sentence allows Members States to disapply the deeming provision only in its entirety, that is they can either exempt all forms of association deemed to be capital companies or none of them. However, this interpretation would not correspond to the spirit and purpose of Directive 69/335. Since the amending Directive 85/303, (17) one of its purposes is the abolition of capital duty. If Article 3(2) permitted exemption only either of all or of none of the companies, firms, associations and legal persons deemed to be capital companies, this would be a very large obstacle to the abolition of capital duty. By contrast, the abolition of capital duty would be facilitated if it could be done in stages. Accordingly, Article 3(2) is not to be interpreted as meaning that only all deemed capital companies together may be exempted from capital duty. (18) 65. Second, the second sentence of Article 3(2) might also be interpreted as meaning that the Member States are entirely free to exempt individual companies or groups of companies from the deeming provision. However, the purpose of the directive is to put all capital companies, and forms of association deemed to be capital companies, in principle in the same position as regards capital duty. The directive permits sectoral exemptions under Article 8 for particular areas only. It would not correspond to the scheme of the directive if Member States could introduce further sectoral exemptions pursuant to Article 3(2). Besides, the possibility of exempting individual branches of production from capital duty would risk contradicting the prohibition in Article 87 EC on State aid. Thus, the second sentence of Article 3(2) is not to be interpreted as meaning that individual companies or branches of the economy can be exempted from capital duty without restriction. 66. The exception permitted by the second sentence of Article 3(2) is instead to be interpreted as meaning that a Member State may exempt individual forms of company deemed to be capital companies as defined in Article 3(1), that is to say autonomous legal forms, from the application of the directive. 67. This is also supported by the judgment in Amro Aandelen Fonds, in which the Court stated that Article 3(2) permits ‘the raising of certain capital’ to be exempted from the charge to capital duty. (19) This interpretation of the provision promotes in particular the directive’s objective of abolishing capital duty, because the Member States may proceed in stages and thus by manageable steps. 68. Under Greek law not all cooperative organisations are exempt from capital duty, but only agricultural cooperative organisations. Prima facie, it appears that a sector of the economy has hereby been exempted from capital duty. However, under Greek law agricultural cooperative organisations are governed by a separate law, which provides comprehensively for their establishment, structure and organisation. 69. The Commission has itself accepted that agricultural cooperative organisations are subject to a special statutory regime. It follows that they are an autonomous form of association, which the second sentence of Article 3(2) permits to be exempted from capital duty. In the present case it so happens that an autonomous form of association relates to a single sector of the economy. In that regard, it need only be made clear that a Member State should not, with a view to circumventing the prohibition on sectoral exemptions, create autonomous forms of association for particular sectors of the economy so as then validly to exempt those forms of association from capital duty. However, in the present proceedings the Commission has not adduced any evidence of this type of abusive arrangement in Greek law. 70. If the exemption from capital duty is valid for agricultural cooperative organisations, it must also be valid for associations and consortia of agricultural cooperative organisations. 71. It follows that the Hellenic Republic was able, by Article 22(1)(a) of Greek Law No 1676/86, to exempt agricultural cooperative organisations and associations and consortia thereof from being deemed capital companies, and thus to exempt them from capital duty. This does not constitute an infringement of Directive 69/335. b) Exemption for shipping companies 72. Finally it must be considered whether the exemption from capital duty of co-ownership of vessels, shipping consortia and any form of shipping company is compatible with Directive 69/335. 73. Under Directive 69/335, all capital companies (pursuant to Article 3(1)) and deemed capital companies, that is companies, firms, associations and legal persons operating for profit (pursuant to Article 3(2)), are in principle subject to capital duty. Co-ownership of vessels, shipping consortia and any form of shipping company constitute either capital companies within the meaning of Article 3(1) or, in any event, given that they operate for profit, deemed capital companies under Article 3(2), with the consequence that in principle they are subject to capital duty. 74. Capital companies within the meaning of Article 3(1) of Directive 69/335 may be exempted from capital duty only on the strict conditions laid down by Articles 8 and 9 of the directive. However, their requirements are not satisfied in the present case. First, shipping is not one of the sectors of the economy which Article 8 permits to be the subject of a sectoral exemption. Second, the requirements for exemption under Article 9 are not satisfied. If a Member State is considering enacting a measure pursuant to Article 9, it must refer the matter to the Commission in good time, having regard to the application of Article 97 EC. However, Greece did not initiate this procedure in relation to the exemptions at issue here. Given that Greece did not initiate the procedure provided for in Article 9, it is unnecessary to consider whether Article 9 can apply at all to sectoral exemptions. 75. Nor can the exemption for co-ownership of vessels, shipping consortia and any form of shipping company be justified by reference to Article 7(1) and Article 4(2) of Directive 69/335, given that, simply on the basis of their wording, those provisions provide merely the possibility for Greece to exempt specific transactions from capital duty. However, in the present case the Greek provisions do not exempt only specific transactions from capital duty, but companies in a specific sector of the economy. 76. In addition, the fact that, as the Greek Government submits, shipping companies have always been exempt from capital duty likewise does not constitute justification for an exemption from capital duty. Directive 69/335 does not provide for the possibility of such an exemption. 77. The only other possibility which Directive 69/335 envisages for exemption from capital duty concerns deemed capital companies under Article 3(2). 78. Since this provision constitutes an exception, a Member State which relies on it bears the burden of proving that its conditions are satisfied. Thus, it was for Greece to submit that the co-ownership of vessels, shipping consortia and shipping companies exempted from capital duty do not constitute capital companies within the meaning of Article 3(1), but instead merely deemed capital companies falling within Article 3(2), with the consequence that a further possibility for exempting them is available. If the exempted companies were deemed capital companies, they could, as explained above, be exempted from capital duty if they amounted to an autonomous form of company. However, since the Greek Government has not demonstrated this, it is also not possible here for the exemption from capital duty to be justified under the second sentence of Article 3(2). 79. Accordingly, the tax exemption conferred by Greek law on co-ownership of vessels, shipping consortia and shipping companies breaches Directive 69/335. 80. This result also does not contradict Commission communication C(2004) 43 – Community guidelines on State aid to maritime transport. (20) It is true that in this communication the Commission describes fiscal advantages conferred by individual Member States as measures which can constitute a means of improving the competitiveness of the Community fleet vis-à-vis ships registered in third countries. (21) 81. However, no statement as to the lawfulness of tax exemptions within the framework of Directive 69/335 can be inferred from this Commission communication. First, it pursues a different legislative purpose: it is intended only to set the parameters within which State aid to maritime transport will be approved, pursuant to Community State aid rules and procedures, by the Commission under Article 87(3)(c) and/or Article 86(2) EC. (22) Second, it is merely a communication, therefore ranking below Directive 69/335 in the hierarchy of norms, and accordingly cannot determine the directive’s field of application and content. 82. Nor does a different result follow from Article 80(2) EC, to which the Greek Government refers. Article 80(2) EC constitutes an independent legal basis for provisions relating to maritime transport. The Greek Government submits that Directive 69/335 therefore does not apply to maritime transport and instead this sector requires separate legislation adopted under Article 80(2). However, this line of argument is not convincing. It cannot be inferred from Article 80(2) EC that in overlapping areas separate rules should be adopted in each case for maritime transport. C – Limitation on the temporal effects of the judgment 83. In its statement in intervention the Kingdom of Spain applied for the temporal effects of the judgment to be limited. The reasons it gave were, first, the fact that 18 years elapsed between notification of the disputed Greek Law to the Commission and initiation of the infringement procedure, and that Greece acted in good faith throughout that period. Second, claims for tax repayments to which the judgment might give rise would entail serious economic detriment for Greece. In its observations on the statement in intervention, the Greek Government adopted, in the alternative, the submissions of the Kingdom of Spain as regards limiting the effects of the judgment. 84. Limitation of the temporal effects of a judgment is expressly provided for only in respect of actions for annulment, in the second paragraph of Article 231 EC. In addition, the Court has in exceptional cases, on the basis of the general principle of legal certainty, limited the temporal effects of a judgment on a reference for a preliminary ruling. It has also considered limiting the temporal effects of judgments in actions for failure to fulfil obligations. (23) In so far as, because of the interpretation of Community law which it contains, a judgment in an action for failure to fulfil obligations has effects beyond the simple finding of an infringement of the Treaty, there may in certain circumstances be cause to limit the temporal effects of the judgment. 85. However, in the present case the general conditions for such a limitation are not met. According to the case-law of the Court, such a limitation is possible only by way of exception, where two conditions are fulfilled: (24) first, there must be a risk of serious economic repercussions owing in particular to the large number of legal relationships entered into in good faith on the basis of rules considered to be validly in force, and second, both individuals and national authorities must have been led into adopting practices which did not comply with Community legislation by reason of objective, significant uncertainty regarding the implications of Community provisions, to which the conduct of other Member States or the Commission may even have contributed. 86. In the present case the first condition is in any event not satisfied. The Hellenic Republic has not put forward specific submissions as to what serious economic repercussions a judgment upholding the action might have for it. In this regard it has merely adopted the submissions of the Spanish Government. The Spanish Government, however, has merely referred generally to serious economic detriment for Greece. Nor has the Spanish Government referred to any economic detriment that it might suffer itself. V – Costs 87. Under Article 69(2) of the Rules of Procedure the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since the Commission has applied for costs and the Hellenic Republic is unsuccessful in relation to two of the three parts of its complaint, each part being of substantially the same importance, the Hellenic Republic should be ordered to pay two thirds of the costs. Since the Hellenic Republic has not applied for costs, the parties are, as to the remainder, to bear their own costs, pursuant to Article 69(5) of the Rules of Procedure. 88. Pursuant to Article 69(4) of the Rules of Procedure, the Kingdom of Spain shall pay the costs it has incurred by reason of its intervention. VI – Conclusion 89. Accordingly, I propose that the Court should: (1) declare that, as a result of its legislative provisions concerning the imposition of duty on the transfer of registered offices and the transfer of effective centres of management and concerning the exemption from capital duty of co-ownership of vessels, shipping consortia and any form of shipping company, the Hellenic Republic has failed to fulfil its obligations under Council Directive 69/335/EEC of 17 July 1969 concerning indirect taxes on the raising of capital; (2) dismiss the action as to the remainder; (3) order the Hellenic Republic to pay two thirds of the costs and, as to the remainder, order the parties to bear their own costs; (4) order the Kingdom of Spain to bear its own costs. 1 – Original language: German. 2 – Council Directive of 17 July 1969 (OJ, English Special Edition 1969 (II), p. 412), as amended by Council Directive 85/303/EEC of 10 June 1985 amending Directive 69/335/EEC concerning indirect taxes on the raising of capital (OJ 1985 L 156, p. 23) (‘Directive 69/335’). 3 – Cited in footnote 2. 4 – See, inter alia, Case C-422/92 Commission v Germany [1995] ECR I-1097, paragraph 18, where the action was brought more than six years after the disputed provisions came into force; Case C-96/89 Commission v Netherlands [1991] ECR I-2461, paragraph 15; and Case C-317/92 Commission v Germany [1994] ECR I-2039, paragraph 4. 5 – Commission v Netherlands (cited in footnote 4), paragraph 16. 6 – See Commission v Netherlands (cited in footnote 4), paragraphs 14 to 16; Case C-207/97 Commission v Belgium [1999] ECR I-275, paragraphs 24 and 25; and Case C-33/04 Commission v Luxembourg [2005] ECR I-10629, paragraph 76. 7 – See, inter alia, Case C-508/03 Commission v United Kingdom [2006] ECR I-3969, paragraph 67. 8 – The fact that the Greek Government first relied on this distinction in its defence is irrelevant, because a Member State is not precluded from raising material arguments only after receipt of the reasoned opinion: see Case C-414/97 Commission v Spain [1999] ECR I-5585, paragraph 19. 9 – The provisions regarding transfers of seat were not amended when Article 7(2) was inserted by the amending Directive 85/303 (cited in footnote 2). 10 – Case C-494/03 [2006] ECR I-525, paragraph 43. 11 – Senior Engineering (cited in footnote 10), paragraph 43. 12 – See the third recital in the preamble to the amending Directive 85/303 (cited in footnote 2). Originally, Directive 69/335 sought to abolish discrimination and double taxation (see the second and sixth recitals in its preamble). 13 – See Case C-212/97 Centros [1999] ECR I-1459, paragraph 24, with further references; Case C‑456/04 Agip Petroli [2006] ECR I-3395, paragraph 20; Case C-255/02 Halifax and Others [2006] ECR I-1609, paragraphs 68 and 69; and Case C-196/04 Cadbury Schweppes [2007] ECR I-0000, paragraph 35; see also my Opinion in Case C-321/05 Kofoed [2007] ECR I-0000, point 57 et seq. 14 – To that effect, see Centros (cited in footnote 13), paragraph 27, and Cadbury Schweppes (cited in footnote 13), paragraph 36 et seq. 15 – Case 112/86 Amro Aandelen Fonds [1987] ECR 4453, paragraph 10. 16 – In Greek, ‘γεωργικοί συνεταιρισμοί’. 17 – See footnote 2 for the citation. 18 – This interpretation is clearer from the French language version, which [like the English language version] uses the singular in relation to companies which may be exempted: ‘Toutefois, un État membre peut ne pas la considérer comme telle pour la perception du droit d’apport.’ By contrast, the Greek language version, like the German language version, uses the plural: ‘Εν τούτοις, ένα Κράτος μέλος δύναται να μη τις θεωρεί ως κεφαλαιουχικές εταιρίες για την είσπραξη του φόρου εισφοράς.’ 19 – Amro Aandelen Fonds (cited in footnote 15), paragraph 12. 20 – OJ 2004 C 13, p. 3. 21 – Commission communication (cited in footnote 20), p. 6. 22 – Commission communication (cited in footnote 20), p. 5. 23 – See Case C-426/98 Commission v Greece [2002] ECR I-2793, paragraph 40 et seq.; Case C‑35/97 Commission v France [1998] ECR I-5325, paragraph 49 et seq.; and, considering only hypothetically the possibility of restricting the effect of a judgment in an action for failure to fulfil obligations, Case C-359/97 Commission v United Kingdom [2000] ECR I-6355, paragraph 92. 24 – In addition to the cases cited in footnote 23, see Case C-209/03 Bidar [2005] ECR I-2119, paragraph 69, and Case C-184/99 Grzelczyk [2001] ECR I-6193, paragraph 53.