CELEX: 51974PC0255
Language: en
Date: 1974-03-14
Title: Proposal for a Directive of the Council amending Article 5(2) of the Directive of 17 July 1969 concerning indirect taxes on the raising of capital (submitted to the Council by the Commission)

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COM (74) 255
Vol. 1974/0050
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 ---pagebreak--- COMMISSION OF THE EUROPEAN COMMUNITIES
                                                    COM (74 ) 255 Final
                                                    Brussels . 14 March 1974
           Propose ! for a Directive of the Council amending Article 5(2 )
               of the Directive of 17 July 1969 concerning indirect
                          •♦ axes on the raising of capital
                    ( submitted to the Council by the Commission )
   COM(74 ) 255 Final
 ---pagebreak---                              EXPLANATORY II^/IORAUJUTl
1 . Article 5 ( l ) (a ) and (b ) of the Directive of 17 July I9.691 concerning
      indirect taxes on the raising of capital provides, that capital duty
      shall be charged on the actual value of the assets -"being contributed,
      ( in the case of formation of a capital company , of an increase in its
     capital or assets ) or on the actual value of the assets belonging to
     the company ( in the case of conversion of a company into a capital
     company or of the transfer of the effective centre of management or
     of the registered office of a capital company ).
     Moreover , paragraph ( l)(c ) provides that in case of .an increase in the
     capital of a company by capitalization of profits , reserves or
     provisions , the duty shall be charged on the nominal amount of such
     increase .                               ■
     However , paragraph 2 of the same Article stipulates that in the cases
     referred to above the amount on which the. duty is charged shall not be
     less than the actual . value of the shares in the company allotted or
   , belonging to each member or the nominal amount of such shares if the
     latter exceeds their actual value . -
2.   When this Directive was implemented by the Member States it was found
     that strict application of Article 5(2 ) could , in some of the
     aforementioned cases , lead to too high a tax being levied , in view of
     the principles on which the harmonized capital cLuty is based and which
     are aimed at the introduction of a system whereby capital duty is to
                  ;            "                .    .    (
     be charged only on operations which , from the legal point of view ,
     constitute a raising of capital and only insofar as such operations
     help to increase the economic potential of the company .
 OJ Ho L 249 , 3 October 1969 .
 ---pagebreak--- Such a situation could arise especially in cases of an increase in
the capital of a company "by means of an issue of new shares for cash
to the existing shareholders#   In this case the contribution in cash
ma.de by the existing shareholders is often considerably lower than
the actual value of the new shares issued to those shareholders .   To
charge 'capital duty on the basis of the latter value would lead to too
high a tax being levied , taking into account the fact that after this
operation the economic potential of the company hats been increased
only by the amount of the contribution in cash and that the share­
holder 's assets in shares have been increased only by a value which
is equal to the price paid for the shares .
This situation may be explained by the following example :
Company A has been formed with a capital of 10 000 000 F , represented
by 1 000 shares , each of 10 000 P , subscribed in cash .
Seven years later the company 's net assets increase to 20 000 P , as
a result of the profits retained .
The company then decides to increase its capital by 10 000 000 F ( to •
bring it up to 20 000 000 P ) by issuing to the existing shareholders
1 000 shares Of a nominal value of 10 000 P each , payable *in cash at
par .
The holder of an existing share (worth 20 000 000 F » 20 000 P ), who
                                           1 000
purchases a new share at 10 000 P , becomes the owner of 2 shares , each
worth 30 000 000 F. i.e. 15 000 P. totalling 30 000 F ( or 20 000 +
         2 000
10 000 => 30 000 ). Ey his contribution of 10 000 F his assots in
shares thus increase in value by 10 000 P , i.e. the amount of his
contribution .  When he receives his second share worth 15 000 P , that
share represents as to 5 000" P merely a redistribution of value which
formerly attached to his first share , and as to 10 000 P his
contribution in cash .                                       "       """"
 ---pagebreak--- TH.lS 6XaiDpl6 ShOWS "fcllQ,"fc   ~tll© sllcl3?^ilJD3j'3j©3?. pha -W^ "VqIhq
for his contribution in cash corresponds to the amount contributed;
this sum i3 at the same tine the amount "by which the economic
potential of the company increases after this contribution has been
wade . It is therefore clear that to charge capital duty on the basis
Cx tho actual value of the share , i.e. 15 000 F , as provided for in
Article 5(2 ) of the Directive of 17 July I969 if this Article is
interpreted literally , instead of on the basis of the actual value
of the contribution , i.e. 10 000 F , would lead to a tax being levied,
which is not justifiable in any way within the framework of the
harmonized capital duty . Furthermore , such a high tax would not be
desirable from, the economic point of View as it would be liable to
create serious obstacles to increases in the capital of companies
and thus to their development .
For these reasons , the Commission considers it desirable that the
Member States should not regard the actual value of the company shares
allotted to or belonging to each shareholder as the minimum basis for
the application of the capital duty in the cases mentioned in
Article 5(l ) ( a)> (b ) and ( c ). However , it appears necessary to
leave to Member States the possibility of resort to the actual value
of these shares as the criterion for fixing the actual value of the
contribution , in those cases in which the contribution is made in any
forra other than cash .
This is the purpose of the present proposal .
 ---pagebreak---               Proposal for a Directive of the Council amending •
               Article 5(2 ) of the Directive of 17 July 1909
            concerning indirect taxes on the raising of capital
TElJ OCUITCIL OP THE EUROPEAN COMMUNITIES ,
Having regard to the Treaty establishing the Euxoperm Economic Comuunii-.y ,
and in particular Articles 99           100 thereof ;
Having regard to the proposal from the Commission ;
Having regard to the Opinion of the European Parliament ;
Having regard to the Opinion of the "Economic and Social Committee ;
Whereas Article 5(2 ) of the Council Directive of 17 July 1969^ concerning
indirect taxes on the raising of capital provides , in the cases referred
to in paragraph 1 ( a ), ("b ) and ( c ) of that article , that the value on
t;hich the capital duty shall "be charged cannot be less than the actual
value of the shares allotted or belonging to each member , or the nominal
value of these shares , if the latter is greater than their actual value ;
VJhereas in some of these cases the adoption of the actual value of the
shares as a minimum basis of taxation , does not conform to the principles
on which the harmonized capital duty is based and which are aimed at the
introduction of a system whereby capital dirty is to be charged only on
operations which , from the legal point of view , constitute a raising of
capital and only insofar as such operations help to increase the economic
potential of the company ;
HAS ADOPTED THIS DIRECTIVE :
  0J Ko L 249 , 3 October 1969
 ---pagebreak---                                  Article 1
Article 5(2 ) of the Directive of 17 July 19^9 is replaced by the following
"2 . In the cases referred to in paragraph l(a) and (b ), the amount on
     which the duty is charged shall not be less than the nominal amount
     of the shares in the company allotted to or belonging to each member .
     In the case of contributions in any form other than cash , the Member
     States may use the actual value of the shares allotted to or
     belonging to each member in order to determine the actual value of
     these assets ."
                                 Article 2
This Directive is addressed to the Member States .