Case C-219/03: Action brought on 19 May 2003 by the Commission of the European Communities against the Kingdom of Spain
Date: 2003-08-02
Institutions: Court of Justice
Subjects: European Commission, Spain, action for failure to fulfil an obligation, capital transfer tax, free movement of capital, freedom to provide services, share, tax system

C 184/20

EN

Official Journal of the European Union

2.8.2003

Action brought on 19 May 2003 by the Commission of the
European Communities against the Kingdom of Spain

(Case C-219/03)

(2003/C 184/35)

An action against the Kingdom of Spain was brought before
the Court of Justice of the European Communities on 19 May
2003 by the Commission of
the European Communities,
represented by M. Díaz-Llanos La Roche and L. Escobar Guer-
rero, with an address for service in Luxembourg.

The applicant claims that the Court should:

1. Declare that, with regard to the tax on capital gains made
on transfers since 1 January 1997 of shares purchased
prior to 31 December 1994, the Kingdom of Spain has
failed to fulfil its obligations under Articles 49 and 56 of
the EC Treaty and the corresponding Articles 36 and 40
of the EEA Agreement inasmuch as it established a tax
regime which is
favourable to shares quoted in
markets other than Spanish regulated markets; and

less

2. Order the Kingdom of Spain to pay the costs.

Pleas in law and main arguments

The Commission is of
the view that Spanish legislation
concerning income tax on natural persons is incompatible
with Community law and constitutes an obstacle to the free
movement of capital and the freedom to provide services so
far as concerns tax on capital gains made on transfers since
1 January 1997 of shares purchased prior to 31 December
1994. Such legislation establishes for Spanish regulated markets
a more favourable tax regime than that applicable to shares
quoted on other markets:

when determining the reduction of the amount of the taxable
capital gain, a higher weighting is applied to shares quoted on
Spanish regulated markets than to shares quoted on other
markets (25 % as compared to 14,28 %). The latter are there-
fore subjected to a more onerous tax burden.

— in order not to be liable to tax, shares quoted on markets
other than Spanish regulated markets must have been
owned by their proprietor for longer (eight years instead
of five).

— The Spanish legislation is thus contrary to Article 56 EC
the Agreement on the European
and Article 40 of
Economic Area (EEA)
it constitutes an
obstacle to the free movement of capital. By establishing
the Spanish legislation
a less-favourable tax treatment,
appears to deter natural persons liable to income tax

inasmuch as

it

from investing their capital in shares quoted on markets
other
is
than Spanish regulated markets; moreover,
probably the case that such legislation prevents those
undertakings whose shares are quoted in such markets
from raising capital
in Spain. Furthermore, the differen-
tiated treatment affects the conduct of undertakings which
issue shares,
in particular because Spanish undertakings,
which are more likely to have shareholders who are liable
to Spanish income tax, are encouraged to see to it that
their shares are quoted on a Spanish regulated market so
that their shareholders may benefit from a more favour-
able tax regime.

Moreover, the Spanish legislation in issue also constitutes an
obstacle to the freedom to provide services, guaranteed under
Article 49 EC and Article 36 of the EEA Agreement, inasmuch
as it hinders markets other than Spanish regulated markets
from providing services to Spanish undertakings by creating a
split in the European market in services provided by the stock
markets and exchanges, creating a captive market which
favours Spanish regulated markets. Under those circumstances,
such undertakings are not free to choose another European
market from among those which offer a better service.

Action brought on 22 May 2003 by the Italian Republic
against the Commission of the European Communities

(Case C-224/03)

(2003/C 184/36)

An action against the Commission of the European Commu-
nities was brought before the Court of Justice of the European
Communities on 22 May 2003, by the Italian Republic,
represented by Ivo Maria Braguglia, acting as Agent, assisted
by State Advocate, Maurizio Fiorilli.

The applicant claims that the Court should:

and competence of

— Declare that, under Article 97 of the Treaty establishing
the European Coal and Steel Community, with effect from
24 July 2002 the powers
the
Commission of
the European Communities established
by Article 9 of the Treaty of 8 April 1965 (Merger Treaty)
— in the sectors assigned under the ECSC Treaty to the
the ECSC — have lapsed, with the
High Authority of
result that any measure adopted or to be adopted by it in
those sectors which have not formed the subject-matter of
a new agreement by the signatory states, is to be deemed
null and void and of no effect.