Opinion of Mr Advocate General Alber delivered on 17 September 1998. - Skatteministeriet v Aktieselskabet Forsikrinsselskabet Codan. - Reference for a preliminary ruling: Østre Landsret - Denmark. - Directive 69/335/EEC - Indirect taxes on the raising of capital - Tax on transfer of shares not listed on a Stock Exchange. - Case C-236/97.



European Court reports 1998 Page I-08679



Opinion of the Advocate-General

A - Introduction

1 In the present case, the Østre Landsret has referred to the Court for a preliminary ruling a question on the interpretation of Council Directive 69/335/EEC of 17 July 1969 concerning indirect taxes on the raising of capital (1) (hereinafter `Directive 69/335'). In particular, it concerns the compatibility with that directive of the duty on the transfer of shares charged under Danish law at the time of the dispute. In the present case, the shares were not disposed of on the Stock Exchange. The defendant in the main proceedings therefore disputes the liability for duty because, according to the wording of the Danish version of the directive, the duty is a tax on Stock Exchange disposals.

2 The question has been raised in proceedings between Skatteministeriet (the Danish Ministry of Fiscal Affairs) and Aktieselskabet Forsikringsselskabet Codan (hereinafter `the defendant'). In June 1990, the defendant entered into an agreement with three British companies, which owned the entire share capital of Fjerde Sø A/S, concerning the acquisition of the entire share capital of Fjerde Sø. It is common ground that the value of the transferred shares came to DKR 850 004 134.

3 According to the national court, the defendant had taken a decision, at an extraordinary general meeting, to increase its share capital. The market value of the capital increase thus effected corresponded to the value of the transferred shares of Fjerde Sø. As the national court further states, that capital increase was used to pay for the share capital of Fjerde Sø, which had been acquired directly from the three British companies.

4 As a result of the defendant's having increased its share capital, the capital duty payable pursuant to Danish Law No 284 became due. The defendant paid that duty, but pointed out that it was not appropriate to pay, at the same time and on the same amount, duty under the Law concerning duty on the transfer of shares. The Customs and Tax Board nevertheless also demanded payment of the duty on the transfer of shares. In the defendant's opinion that is contrary to Directive 69/335.

5 That directive, which was transposed into Danish law by Law No 284, is intended to harmonise the duty on the raising of capital, with regard both to its structures and to its rates. (2) The sixth recital in the preamble to the directive states that it is inherent in the concept of a common market the characteristics of which are those of a domestic market that duty on the raising of capital within the common market by a company or firm should be charged only once and that the level of that duty should be the same in all Member States so as not to interfere with the movement of capital. The preamble to the directive also refers to the risk that the retention of other indirect taxes with the same characteristics as the capital duty or the stamp duty on securities might frustrate the objectives being pursued by the measures provided for in the directive. It concludes that those taxes should therefore be abolished (3)

6 The transactions which are to be subject to capital duty under the directive are specified in Article 4. They include, inter alia, the formation of a capital company and an increase in the capital of a capital company by contribution of assets of any kind.

7 Article 10 provides that, apart from capital duty, no other taxes whatsoever may be charged in respect of certain transactions. The latter include, for example, the abovementioned transactions specified in Article 4.

8 Finally, Article 11 provides as follows:

`Member States shall not subject to any form of taxation whatsoever:

(a) the creation, issue, admission to quotation on a stock exchange, making available on the market or dealing in stocks, shares ...

...'

9 Article 12 provides for a derogation from the abovementioned prohibitions on taxation. In this context, Article 12(1)(a) in particular is relevant. It reads:

`Nothwithstanding Articles 10 and 11, Member States may charge:

(a) duties on the transfer of securities, whether charged at a flat rate or not;

...

(c) transfer duties on assets of any kind transferred to a company, firm, association or legal person operating for profit, in so far as such property is transferred for a consideration other than shares in the company;

...'

10 Since the Danish version of the directive, like the German version, speaks in Article 12(1)(a) of `taxes on Stock Exchange disposals' (`børsomsoetningsskatter'), in the defendant's opinion it is not lawful to charge duty on the transfer of shares in the present case since the share transfer was not effected through the Stock Exchange.

11 It should however be noted that the French, English, Dutch, Spanish, Portuguese and Greek versions of the directive, in any event, do not contain the additional words `Stock Exchange' in Article 12(1)(a).

12 The defendant is nevertheless of the opinion that the Danish version of the directive must be taken as the basis in the present case. The other parties to the proceedings before the Court, that is, the plaintiff, the Commission and the French, Finnish and Austrian Governments, are of a different opinion.

13 Since the national court was in doubt as to whether Article 12(1)(a) of the directive is applicable regardless of whether the share transfer is effected through the Stock Exchange or not, it referred the following question to the Court for a preliminary ruling:

Must Article 12(1)(a) of Council Directive 69/335/EEC of 17 July 1969 concerning indirect taxes on the raising of capital be construed as authorising duty to be charged on the transfer of shares, irrespective of whether the company which issued those shares is admitted to trade on a Stock Exchange and irrespective of whether the share transfer is effected through the stock exchange or directly between the transferor and the acquiring party?

B - Opinion

14 In the defendant's submission, under Article 12(1)(a), apart from capital duty, only a tax on Stock Exchange disposals in the literal sense of the term may be charged, that is, only a duty on transactions in securities which are effected through the Stock Exchange or concern companies admitted to trade on a Stock Exchange. However, according to the defendant, Member States are no longer authorised to charge a general duty on the transfer of shares.

15 Even if one were to concur in this case with the defendant's submission that Article 12(1)(a) prohibits the charging of a general duty on the transfer of shares, the scope of such a prohibition would still be debatable.

16 The Commission refers in this connection to the Court's case-law. Thus, the Court held as follows in its judgment in the Bautiaa case (4): `In order to classify the duty at issue for the purposes of Directive 69/335, and to assess its compatibility with that directive ..., it is necessary, first of all, to determine whether transactions such as those which gave rise to the levying of capital duty ... fall within the scope of Directive 69/335, and to classify them in the light of that directive'. (5)

17 That means that an examination in the light of Article 12 is possible only in the case of transactions which fall within the scope of the directive. Thus the Court also held as follows in the Dansk Sparinvest case: `Article 12 of the directive must therefore be interpreted as meaning that, as a reading of the combined provisions of Articles 10,11, and 12 confirms, it establishes an exhaustive list of taxes and duties other than capital duty which effect capital companies in connection with the transactions referred to in Article 10 and 11'. (6) The Court took as its basis in that regard the last recital in the preamble to the directive, according to which the retention of other indirect taxes with the same characteristics as the capital duty or the stamp duty on securities might frustrate the purpose of the measures provided for in the directive and those taxes should therefore be abolished.

18 That would mean that, irrespective of the interpretation of Article 12, the charging of a duty on the transfer of shares would not be prohibited in all cases. The prohibition would instead apply only to the charging of that duty on transactions which fall within the scope of the directive.

19 The Finnish Government argues along similar lines. It points out that, in its proposals for directives, the Commission has always distinguished between indirect taxes on the raising of capital and indirect taxes on the transfer of securities. The present case relates to a directive concerning indirect taxes on the raising of capital, which is not aimed at the harmonisation of duties on the transfer of shares. If that directive also prohibited the charging of a duty on the transfer of shares, it would not have been necessary for the Commission to draw up proposals intended to exclude that type of tax.

20 Furthermore, a general prohibition on the taxation of transfers of securities in Community legislation would constitute a wide-ranging legislative measure which could not be achieved without a clearly justified provision expressly forbidding that category of taxation.

21 The Commission's proposal for a Council directive concerning indirect taxes on transactions in securities (7) would moreover be pointless if such taxes were already generally prohibited under the directive concerning indirect taxes on the raising of capital, which is at issue in this case.

22 Consequently, taxing the transfer of shares would be possible in cases concerning activities falling outside the scope of the directive. Whether that applies to the activity at issue in this case is a matter of dispute. That is mainly due to the fact that the transaction connected with the share transfer, which is described by the national court, is interpreted in different ways. The answer to be given to the abovementioned question also depends on that interpretation.

23 The order making the reference states that in order to finance the purchase of shares the defendant increased its capital. It should therefore be assumed in this case that there were two different transactions:

- the acquisition of shares, which did not lead to an increase in the capital, and

- the financing of that purchase of shares by the increase in the company's capital.

France likewise bases its submissions on the existence of two different transactions which are independent of one another.

24 On the other hand, the Danish ministry has argued that the share transfer was the basis for the capital increase. It infers from that that this case is about one transaction consisting of three components. First, there is the transfer of the Fjerde Sø shares to Codan. That is the prerequisite for and basis of the second transaction, the increase in Codan's capital. The third component is the transfer of the newly-issued shares by Codan to the British sellers of the Fjerde Sø shares. That is the payment for the shares originally transferred. In the defendant's submission, the present case is primarily about a capital increase. It nevertheless regards the whole transaction as a single transaction which should therefore not be taxed twice.

25 Since the available information is therefore insufficient for the purpose of determining precisely how the share transfer took place, and since that is not a matter which is common ground, it is advisable to examine two alternatives, as the Commission has done in its written observations. (8)

26 If it is assumed that the capital increase was effected only in order to finance the purchase of shares, those are two transactions carried out independently of one another. The capital increase falls within the scope of the directive and is subject to capital duty. That is common ground. What is disputed is whether the transfer of the Fjerde Sø shares to Codan may also be subject to a tax.

27 In the Commission's submission, that is possible since the transfer of shares, which must be considered completely independently, does not fall within the scope of the directive. It does not lead to an increase in the capital and does not contribute towards strengthening the economic potential of the company.

28 As the Court has held, the decisive test to be satisfied in order for a capital-raising transaction to attract capital duty is the strengthening of the economic potential of the company benefiting from it. It bases its reasoning on the preamble to Council Directive 74/553/EEC of 7 November 1974 amending Article 5(2) of Directive 69/335/EEC concerning indirect taxes on the raising of capital(9). (10)Since the acquisition of shares by a company does not, by itself, lead to an increase in the company's capital or to a strengthening of its economic potential, such a transaction does not fall within the scope of Directive 69/335. As has already been discussed, examination in the light of Article 12 is necessary only for transactions which fall within the scope of the directive.

29 France also demonstrates that the two transactions involved in this case are completely independent of one another by pointing out that there were various ways in which the purchase of the shares could have been financed. Thus, Codan could also have paid for the parcel of shares in cash. The capital increase therefore represents only one of several possible ways of financing the purchase of shares. The two transactions should therefore be regarded as completely independent of one another.

30 It is therefore clear from the foregoing that, if the capital increase was intended to finance the purchase of shares, the purchase of shares can be subject to a duty on the transfer of shares. The fact that, at the same time, the capital increase is subject to capital duty is irrelevant in that regard.

31 According to Skatteministeriet and the defendant, the share transfer was however the basis for the increase in Codan's capital. Codan therefore starts from the premiss that this was a single transaction which may not be taxed twice.

32 However, such `double' taxation cannot be regarded a priori as unlawful. Article 12 of the directive specifically provides that, despite the prohibition on further indirect taxes in Articles 10 and 11, Member States may charge certain duties `notwithstanding Articles 10 and 11'. The question in this case is merely whether the duty on the transfer of shares claimed by Skatteministeriet constitutes such a duty within the meaning of Article 12.

33 In the defendant's submission that is not the case. It contends that only the Danish version of the directive, according to which only a tax on Stock Exchange disposals in the strict sense of the term may be charged, can be taken as the basis in this case. However, since, as is common ground, the transaction at issue in this case was not effected through the Stock Exchange, no tax on Stock Exchange disposals may be charged either. According to it, Article 12(1)(a) does not authorise a general tax on the transfer of shares.

34 However, it should be noted in this connection that the different language versions of the directive diverge from one another. The defendant nevertheless submits, as has already been mentioned, that only the Danish version can be taken as the basis in this case. It maintains that that version is so specific that individuals can rely on it. In such a case, it argues, the individual cannot be expected to compare the Danish version with the other language versions.

35 On the other hand, reference must be made to Court's case-law. Thus, in the CILFIT case, the Court held that it must be borne in mind that community legislation is drafted in several languages and that the different language versions are all equally authentic. An interpretation of a provision of community law thus involves a comparison of the different language versions. (11) The Court also dealt with the question of how to proceed in the case of linguistic divergences in its judgment in the Rockfon case, in which it held that the different language versions of a Community text must be given a uniform interpretation; `in the case of divergence between the versions the provision in question must therefore be interpreted by reference to the purpose and general scheme of the rules of which it forms part.' (12) Since in the case at issue here there are several language versions which diverge from one another, the solution cannot be based solely on the Danish version. The Community provision must instead be given a uniform interpretation by reference, in particular, to the purpose of the rules in question.

36 The Court has described the purpose of Directive 69/335 as follows: `As its preamble shows, Directive 69/335 is intended to promote the free movement of capital, which is regarded as essential for the creation of an economic union whose characteristics are similar to those of a domestic market. As regards taxes on the raising of capital, the pursuit of such an objective presupposes the abolition of indirect taxes already in force in Member States and their replacement by a tax levied only once throughout the common market and at the same rate in all Member States.' (13)

37 It is now argued that it would lead to unequal treatment or to distortions of competition if, in certain Member States, only a tax on Stock Exchange disposals could be charged, whilst in others the transfer of shares in general were taxed.

38 That is an argument in favour of a uniform interpretation of the directive. However, it does not explain what that interpretation should be. Moreover, it should be pointed out that the directive itself provides for various possible rules. Article 12(1) states that Member States `may' charge, inter alia, duties on the transfer of securities, transfer duties on the transfer of businesses, immovable property and other assets, etc. Since the Member States are therefore free to decide whether to make use of that option, it must be assumed that this question is not regulated uniformly in the Community.

39 On the other hand, an interpretation such as that advocated by the defendant would lead to unequal treatment between undertakings which are listed on the Stock Exchange and those which are not listed, and would thus give rise to distortions of competition. Since only activity on the Stock Exchange would be subject to a tax, that would also deter many firms from seeking a listing on the Stock Exchange. It could be inferred from that that it would be contrary to the purpose of the directive for Article 12(1)(a) to be construed as allowing Member States to charge a tax on Stock Exchange disposals (in the strict sense of the term) but not a general tax on the transfer of shares.

40 The defendant disputes that, pointing out that Article 12 is a derogating provision which must be narrowly construed. However, as has already been discussed, this case involves divergence between language versions, for which reason a common interpretation by reference to the purpose of the rules in question must be found.

41 The defendant further submits that the text of the Danish version must be decisive, a fortiori because this case concerns the charging of duties by the State. According to it, the Court's case-law cited above is not applicable in this case. Since a sufficient degree of clarity must exist in such a case, a common interpretation by reference to the purpose of the rules is out of the question. It considers that undertakings cannot be expected to make comparisons between different versions.

42 It is sufficient in this connection to refer to the judgment in the Henriksen case, in which, likewise in a case of taxation, the Court did not use exclusively the particular language version of the rules concerned, but also took account of the other language versions by way of a common interpretation. (14)

43 Finally, the defendant contends that it is not clear why not only a tax on Stock Exchange disposals but also a general duty on the transfer of shares should be charged. The tax on Stock Exchange disposals provided for in Article 12(1)(a) merely constitutes payment for the activity of the Stock Exchange. It is not clear why, over and above that, all transfers of shares should be taxed.

44 However, it is necessary in this connection to refer to the Commission's draft directives on the harmonisation of indirect taxes on the transfer of shares, which are mentioned by Finland and the Commission. While it is true that the drafts were not adopted, they nevertheless make it clear that the Commission regards charging of duties on the transfer of shares as separate from taxation of the raising of capital. Moreover, the abovementioned proposal for a directive concerning indirect taxes on transactions in securities (15) provides that, in addition to the tax provided for in that directive, capital duty, as defined by Directive 69/335, may be charged. (16) It follows that taxation of the transfer of shares, as provided for by Article 12, should not be prohibited, but that the two types of tax coexist. For that reason, it is also not clear why, in the present case, taxation of the transfer of shares should not likewise be possible under Article 12.

45 The fact that the vast majority of the language versions of the directive do not contain the additional words `Stock Exchange' could lackeys indicate that it was intended to provide for the taxation of share transfers not involving the Stock Exchange.

46 It should also be mentioned that the Austrian Government submits that, in German taxation practice also, notwithstanding the express wording to the contrary in the German version of the directive, share transfers are taxed regardless of whether they are effected through the Stock Exchange or not.

47 It must therefore be concluded that neither of the alternatives precludes taxation of the transfer of shares.

C - Conclusion

48 The question referred for a preliminary ruling should therefore be answered as follows:

Article 12(1)(a) of Council Directive 69/335/EEC concerning indirect taxes on the raising of capital must be construed as authorising duty to be charged on the transfer of shares, irrespective of whether the company which issued those shares is admitted to trade on a Stock Exchange and irrespective of whether the share transfer is effected through the Stock Exchange or directly between the transferor and the acquiring party.

(1) - OJ, English Special Edition 1969 (II), p. 412, 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).

(2) - Seventh recital in the preamble to Directive 69/335.

(3) - Eighth recital in the preamble to Directive 69/335.

(4) - Judgment in Joined Cases C-197/94 and C-252/94 [1996] ECR I-505.

(5) - Judgment in Joined Cases C-197/94 and C-252/94, cited in footnote 4, at paragraph 31.

(6) - Judgment in Case 36/86 [1988] ECR 409, at paragraph 9; see also judgment in Joined Cases C-71/91 and C-178/91 Ponente Carni [1993] ECR I-1915, at paragraph 24.

(7) - OJ 1976 C 133, p. 1.

(8) - During the oral procedure, the Commission based its submissions only on the view of Skatteministeriet.

(9) - OJ 1974 L 303, p. 9.

(10) - Judgment in Case C-15/89 Deltakabel [1991] ECR-I-241, at paragraphs 13 and 14.

(11) - Judgment in Case 283/81 [1982] ECR 3415, at paragraph 18.

(12) - Judgment in Case C-449/93 [1995] ECR I-4291, at paragraph 28, with reference to the judgment in Case 30/77 Bouchereau [1977] ECR 1999, at paragraph 14.

(13) - Judgment in Case C-2/94 Denkavit [1996] ECR I-2827, at paragraph 16, and judgment in Joined Cases C-71/91 and C-178/91, cited in footnote 6, at paragraph 19.

(14) - Judgment in Case 173/88 [1989] ECR 2763, at paragraph 10 et seq.

(15) - See footnote 7.

(16) - Article 10(2)(a) of the proposal for a directive.