CELEX: 62006CC0360
Language: en
Date: 2008-01-10 00:00:00
Title: Opinion of Advocate General Trstenjak delivered on 10 January 2008. # Heinrich Bauer Verlag BeteiligungsGmbH v Finanzamt für Großunternehmen in Hamburg. # Reference for a preliminary ruling: Finanzgericht Hamburg - Germany. # Freedom of establishment - Tax legislation - Corporation tax - Valuation of unlisted shares in limited companies. # Case C-360/06.

OPINION OF ADVOCATE GENERAL
       TRSTENJAK
      delivered on 10 January 2008 1(1)
      
      Case C‑360/06
      Heinrich Bauer Verlag BeteiligungsGmbH
      v
      Finanzamt für Großunternehmen in Hamburg
      (Reference for a preliminary ruling from the Finanzgericht Hamburg (Germany))
      (Freedom of establishment – Tax legislation – Corporation tax – Valuation of unlisted shares in companies – Lower value attributed to a holding in a national partnership than a holding in a partnership established in another Member
         State – Compatibility with Articles 52 and 58 of the EC Treaty (now Articles 43 and 48 EC))
      I –  Introduction
      1.        In proceedings between Heinrich Bauer Verlag Beteiligungs GmbH (‘HBV’) and Finanzamt für Groβunternehmen in Hamburg (‘the
         Finanzamt’) in connection with the determination of the value of HBV’s holdings in two partnerships, one established in Spain
         and the other in Austria, during the financial year 1988, the Finanzgericht Hamburg (Finance Court, Hamburg) (Germany) asks
         the Court of Justice whether national provisions under which a holding in a partnership in another Member State is given a
         higher value that a holding in a partnership established in Germany are compatible with the freedom of establishment. 
      
      II –  Legal background
      A –    Community legislation
      2.        Article 52 of the EEC Treaty (which became, after amendment, Article 43 EC) provided:
      
      ‘Within the framework of the provisions set out below, restrictions on the freedom of establishment of nationals of a Member
         State in the territory of another Member State shall be abolished by progressive stages … Such progressive abolition shall
         also apply to restrictions on the setting up of agencies, branches or subsidiaries by nationals of any Member State established
         in the territory of any Member State.
      
      Freedom of establishment shall include the right to take up and pursue activities as self‑employed persons and to set up and
         manage undertakings, in particular companies or firms within the meaning of the second paragraph of Article 58, under the
         conditions laid down for its own nationals by the law of the country where such establishment is effected, subject to the
         provisions of the chapter relating to capital.’
      
      3.         Article 58 of the EEC Treaty (which became, after amendment, Article 48 EC) provided:
      
      ‘Companies or firms formed in accordance with the law of a Member State and having their registered office, central administration
         or principal place of business within the Community shall, for the purposes of this Chapter, be treated in the same way as
         natural persons who are nationals of Member States.
      
      “Companies or firms” means companies or firms constituted under civil or commercial law, including cooperative societies,
         and other legal persons governed by public or private law, save for those which are non-profit-making.’
      
      B –    National legislation
      4.        It is apparent from the order for reference that, in a valuation of the shares of unquoted companies for the purpose of assessing
         wealth tax liability, the holdings of those companies in national partnerships are simply given their net asset value, whereas
         interests in foreign partnerships are given their market value. If the market value cannot be ascertained from sales which
         have occurred less than one year beforehand, it is estimated on the basis of the net asset value and prospective earnings
         of the partnership concerned. 
      
      5.        More specifically, the referring court explains that Paragraph 11(2) of the Bewertungsgesetz (Law on valuation) (‘the BewG’) (2) provides that shares in unlisted companies are to be valued at market value (‘gemeiner Wert’). If the market value cannot
         be taken from sales which have occurred less than one year before, it is to be estimated having regard to the company’s assets
         and earnings prospects (second sentence of paragraph 11(2) of the BewG). 
      
      6.        When valuing holdings in national companies, the tax authorities assess the market value of holdings in unlisted companies
         according to the principles of the ‘Stuttgart procedure’. (3) The starting point for the assessment of the net asset value is the uniformly-assessed value of the business assets (Paragraph
         109(2) of the BewG). This provides that holdings in partnerships which form part of an undertaking’s assets are to be given
         the uniformly-assessed value fixed in accordance with Paragraph 19(3)(2) of the BewG. 
      
      7.        With regard, specifically, to the valuation of holdings in foreign undertakings, Paragraph 31 of the BewG provides that the
         provisions of Part One of the BewG, in particular Paragraph 9 (market value) are to apply to the valuation of foreign business
         assets. Under Paragraph 9(2) of the BewG, market value is to be determined by reference to the price which would be achieved
         on disposal, that is, the commercial value. 
      
      III –  The main proceedings and the question referred for a preliminary ruling
      8.        HBV is an unlisted limited company (Gesellschaft mit beschränkter Haftung) (a ‘GmbH’), which has its registered office in
         Germany. All of its shares are held by its parent company, the limited partnership Heinrich Bauer Verlag KG, which has been
         granted leave to intervene in the main proceedings (‘the intervener’). 
      
      9.        In the course of a valuation of shares in HBV in order to assess the wealth tax for which the intervener is liable as holder
         of those shares, a dispute has arisen between HBV and the Finanzamt Hamburg as to the value of the applicant’s holdings in
         two limited partnerships: the Spanish Bauer Ediciones Sociedad en Comandita (‘HBE’), in which HBV is a partner and which is
         regarded under German tax law as a partnership, and the Austrian partnership Basar Zeitungs- und Verlagsgesellschaft GmbH
         und Co. KG (‘WBC’), in which HBV holds all the shares. 
      
      10.      More specifically, the parties to the main proceedings are in dispute as to the determination of the value of HBV’s holdings
         in HBE and WBC during the year at issue, that is to say, 1988. The Finanzamt had determined the value of HBV’s holding in
         HBE at DEM 17 101 512 and of its holding in WBC at DEM 5 565 955. The applicant values its holding in HBE at DEM 920 275.45
         and in WBC at DEM 5 251 345.42. 
      
      11.      That difference is due to the fact that each of the parties uses a different basis for assessing the value of interests in
         foreign partnerships. Whereas the Finanzamt takes account, for the purposes of the valuation, not only of the net asset value,
         that is, the intrinsic value of those partnerships, but also of their prospective earnings, the applicant considers that only
         their net asset value should be taken into account
      
      12.      Since the applicant’s challenge to the Finanzamt’s valuation was rejected, the applicant contested the decision of the Finanzamt
         before the Finanzgericht Hamburg (Finance Court Hamburg), which has referred a question to the Court of Justice for a preliminary
         ruling. 
      
      13.      As regards HBV’s holding in HBE, the national court states that the different methods of valuing a holding in a national partnership
         and a foreign partnership lead to different values being determined. The amount at which the holdings are valued has a direct
         effect on HBV’s wealth tax liability. The right to freedom of establishment might be restricted owing to the fact that the
         foreign holding is given a higher value than a holding in a national partnership. Such a restriction is permissible only if
         it pursues a legitimate objective compatible with the EC Treaty. The national court sees no justification for a possible restriction
         of that freedom, either on the basis of ‘difficulties in ascertaining the facts’ or on the basis of cohesion. 
      
      14.      As regards HBV’s holding in WBC, the national court considers that neither the right to freedom of establishment under Article
         52 of the Treaty nor the corresponding provisions of the Agreement on the European Economic Area of 2 May 1992 (4) (‘the EEA Agreement’) are applicable in relation to 1988, since the Republic of Austria acceded to the European Union only
         on 1 January 1995 and the EEA Agreement did not come into force until 1 January 1994.
      
      15.      Finally, the national court rules out, a priori, an infringement of the free movement of capital, since the provisions in
         force at the material time did not preclude differences of valuation between a holding in a national partnership and one resident
         in another Member State or in a third country. 
      
      16.      The Finanzgericht Hamburg therefore decided to stay the proceedings until the Court of Justice gave a ruling on the following
         question: 
      
      ‘Is it compatible with Article 52 in conjunction with Article 58 of the EEC Treaty (now Article 43 in conjunction with Article
         48 EC) that, when unlisted shares in a company are valued, a holding in a German partnership is given a lower value than a
         holding in a partnership established in another Member State? 
      
      IV –  Observations submitted to the Court
      17.      HBV states that it is the sole owner of holdings in a number of partnerships established in other Member States. Those holdings
         enable it to control and manage the partnership and, accordingly, allow it to exercise its right of establishment. 
      
      18.      The German legislation which provides that, for the purposes of wealth tax, foreign assets are given a higher value than comparable
         national assets, constitutes a restriction on freedom of establishment. Such a restriction is permissible only if it pursues
         a legitimate objective compatible with the Treaty and is justified by overriding reasons in the public interest, which are
         not present in this case.
      
      19.      As regards the maintenance of effective control in taxation matters, the competent authorities may, in accordance with Council
         Directive 77/799/EEC, (5) approach the competent authorities of another Member State in order to obtain any information that may enable them to effect
         a correct assessment of the tax payable by a taxpayer. Furthermore, the applicable tax conventions concluded for the avoidance
         of double taxation contain provisions concerning the exchange of information regarding wealth tax.
      
      20.      Moreover, the legislation at issue, under which, for the purposes of wealth tax, foreign assets are given a higher value than
         comparable national assets, constitutes an unjustified restriction on the free movement of capital. 
      
      21.      HBV proposes that the Court should reply as follows to the question referred for a preliminary ruling: 
      
      ‘Articles 52 and 58 of the EC Treaty (now, after amendment, Articles 43 EC and Article 48 EC) preclude tax legislation which,
         when unlisted shares in a capital company are valued gives, in the absence of any other relevant factors, a holding in a foreign
         partnership a higher value than a holding in a national partnership. 
      
      Moreover, Articles 73B and 73D of the EC Treaty (now Articles 56 EC and 58 EC) also preclude a higher valuation and, consequently,
         a higher taxation assessment, on holdings in foreign partnerships than on holdings in national partnerships.’
      
      22.       The Finanzamt maintains that the tax treatment afforded to the applicant does not place it at a disadvantage vis-à-vis comparable
         undertakings with holdings in national partnerships. On the contrary, the result obtained for valuation purposes is the same
         in both groups. 
      
      23.      As regards the valuation of the Spanish partnership, effected, in accordance with Paragraph 11(2) of the BewG, on the basis
         of the Stuttgart procedure, it is true that its prospective earnings were included in the determination of its net asset value,
         but, technically, the valuation of holdings in national partnerships is not fundamentally different. Where a company has a
         holding in a national partnership, the income of the partnership is treated as income of the company and therefore has a direct
         effect on the earnings value. 
      
      24.      The difference between the value determined by the defendant of DEM 17.1 million, and the value assessed by the applicant
         of DEM 0.9 million, does not lie in the different methods used for the purpose of assessing a value. On the contrary, it is
         explained by the depreciation for the applicant’s losses on the acquisition costs of the partnership during the first three
         years following its constitution. Such losses (which are atypical and are linked to the starting-up of the firm) cannot properly
         be taken into account in assessing the market value without distorting it unjustifiably. The founder of a company therefore
         attributes to its holdings, for a certain time, a value equivalent to the costs of setting up the firm.
      
      25.      If the Court were to decide that a restriction exists on the freedom of establishment or the free movement of capital, such
         a restriction is justified. Under the tax system, it is necessary to determine HBE’s net asset value by including its prospective
         earnings in order to ensure that situations which are factually comparable are taxed in the same way. If prospective earnings
         are not included in the valuation of the applicant’s holdings, holdings in foreign partnerships would be favoured. When a
         valuation is made, the income of national partnerships is always taken into account, being directly attributed to the income
         of the company which has a holding in it. 
      
      26.      The Finanzamt requests that the question referred be worded differently, since the question referred by the Finanzgericht
         Hamburg is based on the assumption that a holding in a German partnership will be determined at a lower value than a holding
         in a foreign partnership established in another Member State. The question should be worded as follows: 
      
      ‘Is it incompatible with Article 52 in conjunction with Article 58 of the EEC Treaty/EC Treaty, now Article 43 in conjunction
         with Article 48 EC, when unlisted shares in a company are valued, to include in the valuation of a holding in a foreign partnership
         established in another Member State the prospective earnings of that partnership?’
      
      27.       The Finanzamt suggests the following reply:
      
      ‘The reply to the question referred to the Court is that it is not incompatible with Article 52 in conjunction with Article
         58 of the EEC Treaty/EC Treaty, now Article 43 in conjunction with Article 48 EC, for unlisted shares in a company to be valued
         so as to include in the valuation of a holding in a foreign partnership established in another Member State the prospective
         earnings of that partnership.’
      
      28.      The German Government also maintains that, although different provisions govern the valuation of holdings in national and
         foreign partnerships, overall the uniformly assessed value which has to be determined in the valuation of a national partnership
         is broadly the same to the market value for a holding in foreign partnerships. Ultimately, the procedure for valuing holdings
         in national partnerships tends, by means of specific adjustments to the different balance sheet positions, to produce a value
         which is comparable to the market value. 
      
      29.      As regards the holding in WBC, the fundamental freedoms cannot be invoked because the Republic of Austria did not become a
         Member of the European Communities until 1995 and the EEA Agreement did not come into force until 1994. 
      
      30.      As regards the holding in HBE, the freedom of establishment does not enter into consideration in this case, since the applicant’s
         investments in Spain should not be seen as representing the exercise of that freedom, but rather as being a pure investment
         of capital in the context of the free movement of capital. By participating in HBE as a limited partner, the applicant does
         not have a definite influence on the activities of the Spanish firm but, on the contrary, is excluded from its decision-making
         process and has no right to hold itself out as representing the firm as regards third parties. The German Government contends
         that, in accordance with the case-law of the Court, freedom of establishment cannot be at issue unless nationals of the Member
         State concerned have holdings in the capital of a company or firm established in another Member State, giving them definite
         influence on the company’s decisions and allowing them to determine its activities.
      
      31.      The German Government, after stating that, in its view, there is no actual discrimination since the rules for assessing the
         value of holdings in national and foreign partnerships do not differ fundamentally, adds, in the alternative, that in any
         event such discrimination would be justified. In assessing the value of holdings in foreign partnerships, the specific provisions
         applicable to national business assets cannot be applied, because the corresponding methods of evaluation, such as going concern
         values or uniformly-assessed values, are not available. The market value of the holdings is taken instead. 
      
      32.      The German Government considers that the answer to be given to the question referred for a preliminary ruling must be:
      
      ‘It is not incompatible with Article 52 in conjunction with Article 58 of the EEC Treaty or with Article 67 of the EEC Treaty,
         when unlisted shares in a company are valued, to give a lower value to a holding in a national partnership than to a holding
         in a partnership established in another Member State.’ 
      
      33.      The Commission of the European Communities states, with regard to HBV’s holding in HBE, that, in accordance with the case-law,
         freedom of establishment applies only where the economic operator concerned holds an interest which gives it a definite influence
         over the decisions of the other company or firm and accordingly allows it to determine its activities. The order for reference
         merely states that HBV is a ‘limited partner’ in HBE and does not make it possible to know with certainty whether the applicant
         is able to determine HBE’s activities. However, the Commission submits that there are factors which support that hypothesis,
         on which it bases its arguments, in the absence of evidence to the contrary. 
      
      34.      The Commission refers, as regards the nature of the German legislative provisions falling within the scope of Article 52 of
         the Treaty, to the case-law according to which that provision is not only directed to ensuring that foreign nationals and
         companies are treated in the host Member State in the same way as nationals of that State, but also prohibits the Member State
         of origin from hindering the establishment in another Member State of one of its nationals or of a company incorporated under
         its legislation. The exercise of that freedom is hindered where an establishment in another Member State is subject to less
         favourable tax conditions than a similar establishment in Germany, since that is likely to discourage the economic operator
         concerned from creating an establishment in another Member State. That is in fact the situation in this case. The shares held
         in the applicant’s capital are treated differently for the purposes of wealth tax according to whether the applicant itself
         has a holding in a partnership in Germany or in another Member State, since the tax burden is higher in the latter case than
         in the former.
      
      35.      Moreover, the restriction of freedom of establishment is not justified by a legitimate objective compatible with the Treaty.
         It is necessary to confirm to the national court that the two grounds which it has itself examined, namely the cohesion of
         the tax system and practical difficulties of an administrative nature, are not valid. 
      
      36.      As regards the question of the compatibility of the legislation at issue with the free movement of capital, the Commission
         considers that it was compatible, at the relevant time, with the applicable provisions of Community law.
      
      37.       As regards HBV’s holding in WBC, the Commission states that since, during the financial year 1988, the Republic of Austria
         was not yet a member of the Community, and the EEA Agreement had not yet been signed, neither the freedom of establishment
         under Article 52 of the EEC Treaty nor the corresponding provision of Article 31 of the EEA Agreement were applicable to the
         valuation of the holding in WBC. 
      
      38.      The Commission proposes that the Court should give the following ruling:
      
      ‘Article 52 in conjunction with Article 58 of the Treaty preclude, when unlisted shares in a company are valued for the purposes
         of wealth tax, that the company’s holding in a partnership established in another Member State is given a higher value than
         its holding in a national partnership.’ 
      
      V –  Analysis
      39.      The description of the German legislation relevant to the present case gives rise to disagreements between the parties. In
         particular, the Finanzamt states in paragraph 3.2 of its observations that the national court is mistaken about the repercussions
         of the German system for valuing the applicant’s shares, and that there is no discrimination, either direct or indirect, because,
         from a fiscal point of view, earnings factors are taken into account both for national holdings and for foreign holdings.
         
      
      40.      It must be pointed out that it is not for the Court of Justice to rule on the interpretation and applicability of provisions
         of national law or to establish the facts relevant to a decision in the main proceedings. The Court must take account, under
         the division of jurisdiction between the Community courts and the national courts, of the factual and legislative context,
         as described in the order for reference, in which the question put to it is set. The same applies if the description of national
         law given by the referring court is incorrect. (6) It is therefore necessary to examine the question referred for a preliminary ruling against the factual and legislative background
         described by the Finanzgericht in its order for reference,
      
      41.      According to that description, when unlisted shares in a company are valued for the purposes of determining wealth tax liability,
         the valuation of holdings in national partnerships is effected on the basis of their asset value, whereas the valuation of
         holdings in foreign partnerships is effected on the basis of their market value, that is to say that, in the latter case,
         the prospective earnings of the partnership concerned are added to the asset value. 
      
      42.      Freedom of establishment, which Article 43 EC grants to Community nationals and which includes the right to take up and pursue
         activities as self-employed persons and to set up and manage undertakings, under the conditions laid down for its own nationals
         by the law of the Member State where such establishment is effected, entails, in accordance with Article 48 EC, for companies
         or firms formed in accordance with the law of a Member State and having their registered office, central administration or
         principal place of business within the Community, the right to exercise their activity in the Member State concerned through
         a subsidiary, branch or agency. (7)
      
      43.      According to settled case-law, that provision is not only directed to ensuring that foreign nationals and companies are treated
         in the host Member State in the same way as nationals of that State, but also prohibits the Member State of origin from hindering
         the establishment in another Member State of one of its nationals or of a company incorporated under its legislation. (8)
      
      44.       The exercise of that freedom is hindered in particular where an establishment in another Member State is subject to less
         favourable tax conditions than a similar establishment in Germany, since that is likely to discourage the economic operator
         concerned from creating an establishment in another Member State. (9)
      
      45.      Article 43 EC requires the elimination of restrictions on the freedom of establishment and provides that all measures which
         prohibit, impede or render less attractive the exercise of that freedom must be regarded as such restrictions. (10)
      
      46.      Moreover, although, as Community law stands at present, direct taxation does not as such fall within the scope of the Community’s
         competence, Member States must nevertheless exercise their retained powers consistently with Community law. (11)
      
      47.      In the present case, the shares held in the applicant’s capital are treated differently for the purposes of wealth tax according
         to whether the applicant itself has a holding in a partnership in Germany or in another Member State. The tax burden is higher
         in the latter case than in the former. 
      
      48.      Since it has also consistently been held (12) that freedom of establishment applies only where the national of the Member State concerned holds shares which give it a
         definite influence over the decisions of the other company and allow it to determine its activities, (13) it is necessary to consider whether freedom of establishment is intended to apply to the two companies concerned.
      
      49.      So far as concerns WBC, there is – as the national court, the German Government and the Commission point out – no potential
         infringement of the right to freedom of establishment in respect of 1988, because the Republic of Austria acceded to the European
         Union only on 1 January 1995, and the Agreement on the European Economic Area, which was concluded between the Republic of
         Austria and the European Community, did not come into force until 1 January 1994. (14) It follows that neither freedom of establishment under Article 43 EC nor the corresponding provisions of the EEA Agreement
         were applicable to the valuation of the holding in WBC.
      
      50.      Although the national court states that HBV acquired all the shares in WBC, it does not provide any information as regards
         the shares in HBE. However, the applicant maintains that the same is true in respect of that partnership. The Court held,
         in its judgment in Baars, that a 100% holding by a taxpayer in the capital of a company having its seat in another Member State undoubtedly brings
         such a taxpayer within the scope of application of the provisions of the Treaty relating to the right of establishment. (15)
      
      51.      In accordance with the abovementioned condition that, for the principle of freedom of establishment to apply, a company holding
         shares in another company must be able to have a definite influence over the decisions of the other company and to determine
         the activities in which it holds the shares, it is necessary to consider whether, in the present case, the limited partner
         is able to determine the activities of the partnership. To that end, reference must be made to the national law relating to
         limited partnerships. (16) A specific feature of this case is that, while the limited partner is established in Germany, the limited partnership is
         established in Spain. 
      
      52.      Under Paragraph 164 of the Handelsgesetzbuch (German Commercial Code) (‘the HGB’), limited partners are excluded from managing
         the business of the firm; (17) they may not challenge an action taken by partners who are personally liable, unless it exceeds the limits of the usual conduct
         of the firm’s business activities. (18) Article 170 HGB states that limited partners are not entitled to represent the firm. (19)
      
      53.      Since the partnership is established in Spain, it is necessary, above all, to look to Spanish law. The Spanish legislation
         concerning limited partnerships (20) is contained inter alia in Articles 145 to 150 of the Spanish Commercial Code. (21) Under Article 127 of the Commercial Code, general partners are jointly and severally liable for any obligations arising from
         the activities of the firm. Whereas the liability of the general partners is unlimited, the liability of limited partners
         is limited to the contribution provided for in the partnership agreement, which constitutes one of their primary obligations. (22) Article 148 of the Commercial Code states that limited partners may not undertake any acts to administer the interests of
         the firm, even as mandatories of the partners responsible for the management of the firm. (23) Limited partners are therefore excluded from the management of the firm; if a limited partner carries out administrative
         acts, he may be expelled from the firm. (24) Similarly, under Article 147 of the Commercial Code, the names of the partners are to constitute the firm name, which cannot
         include the names of the limited partners. (25) Thus, if the name of a limited partner is included in the firm name, that partner will be liable to third parties without,
         however, acquiring rights beyond those appertaining to it in its capacity as limited partner. (26)
      
      54.      Notwithstanding that prohibition, the fact remains that the name ‘Bauer’ appears both in the name of the limited partner,
         ‘Heinrich Bauer Verlag Beteiligungs GmbH’ and in the name of the limited partnership, ‘Bauer Ediciones Sociedad en Comandita’.
         No doubt, in order to comply with Article 147 of the Commercial Code, the same natural person, ‘Bauer’ is not involved. However,
         it is possible to envisage the two persons bearing that name being related, (27) and to consider that HBV exercises at least a de facto management role in HBE. HBV therefore does indeed appear able to have a definite influence on HBE’s decisions and to determine
         its activities. Moreover, at the hearing, the applicant stated that HBV owns 100% of the shares in HBE, and clearly indicated
         that, in point of fact, Mr Bauer manages HBE. 
      
      55.      Whatever the disagreements between the parties regarding the interpretation of the German legislation on wealth tax, the fact
         remains that the holdings in the applicant’s capital are treated differently for the purposes of wealth tax according to whether
         the applicant itself has a holding in a partnership in Germany or in another Member State. The tax burden is higher in the
         latter case than in the former. Moreover, at the hearing, the Finanzamt conceded that it was only possible to give an affirmative
         answer to the question, as posed by the referring court. (28)
      
      56.       The Finanzamt maintains that the tax treatment afforded to the applicant does not place it at a disadvantage vis-à-vis comparable
         undertakings with holdings in national partnerships. On the contrary, the result obtained for valuation purposes is the same
         in both cases. 
      
      57.      Nevertheless, there is a significant difference between the two methods of calculation; in the case of HBV’s holding in HBE,
         the calculation method used by the Finanzamt almost doubles the result. Whether or not that difference is to be regarded as
         significant, it should be pointed out that, according to the case-law of the Court, even a restriction on freedom of establishment
         of limited scope or minor importance is prohibited by Article 43 EC. (29)
      
      58.       Such a restriction is permissible only if it pursues a legitimate objective compatible with the Treaty and is justified by
         overriding reasons in the public interest. Furthermore, that restriction must be appropriate for securing the attainment of
         the objective pursued and must not go beyond what is necessary in order to attain it. (30)
      
      59.      As the referring court considered, and as the Commission maintains, the possible justifications relating to the cohesion of
         the tax system and to practical difficulties of an administrative nature, should be ignored. 
      
      60.       The Court has held that the need to safeguard the cohesion of the tax system may justify a restriction of the exercise of
         fundamental rights conferred by the Treaty, (31) provided, however, that there is a direct link between the grant of the tax advantage concerned and the offsetting of that
         advantage by a tax levy in relation to the same taxpayer. (32) However, in the present case, there is no tax advantage directly linked to an offsetting of that advantage by a tax levy. (33)
      
      61.      As regards the question of practical difficulties of an administrative nature in calculating the value of holdings in partnerships
         established in other Member States, it is appropriate to have regard, as HBV and the Commission have pointed out, to Directive
         77/799 which, by virtue of Article 1(1) also applies to wealth tax. (34) It provides that the competent authorities of a Member State may ask the competent authorities of another Member State to
         supply them with any information that may enable them to effect a correct assessment of the tax payable. (35)
      
      62.      Finally, as to the question whether the national legislation in question is compatible with the free movement of capital,
         a matter on which the national court has not referred a question to the Court but on which most of the parties consider it
         necessary to express a view, it need merely be stated that that freedom does not apply, ratione temporis, to this case. 
      
      63.      The case in the main proceedings is concerned with the 1988 tax year, that is to say, a factual and legal situation predating
         both the insertion of Article 73B in the EC Treaty by the EU Treaty and the adoption and entry into force of Council Directive
         88/361/EEC of 24 June 1988 for the implementation of Article 67 of the Treaty, (36) which brought about complete liberalisation of capital movements.
      
      64.      Article 67(1) of the EEC Treaty (subsequently Article 67(1) of the EC Treaty, itself repealed by the Treaty of Amsterdam)
         did not have the effect of abolishing restrictions on movements of capital by the end of the transitional period. (37) Their abolition was a matter for Council directives adopted on the basis of Article 69 of the EEC Treaty (subsequently Article
         69 EC, itself repealed by the Treaty of Amsterdam). (38)
      
      65.      The relevant directive for the 1988 tax year was First Council Directive of 11 May 1960 for the implementation of Article
         67 of the Treaty, (39) as amended and supplemented most recently by Council Directive 86/566/EEC of 17 November 1986. (40) The First Directive for the implementation of Article 67 of the Treaty merely provided in Article 1(1) that Member States
         were to grant foreign exchange authorisations required for the conclusion or performance of transactions or for transfers
         between residents of the Member States in respect of the capital movements set out in the annexes to that directive.
      
      66.      It would therefore appear that the rules on the free movement of capital applicable at the date of the facts in the main proceedings,
         that is to say, in 1988, did not preclude national legislation, such as the legislation in this case, under which a higher
         value is given to the assets of partnerships situated in other Member States than to those of partnerships of the same kind
         situated in the Member State concerned. The legislation at issue in the present case was therefore compatible, at the time,
         with the relevant provisions of Community law relating to the movement of capital. (41)
      
      VI –  Conclusion
      67.      In view of the foregoing considerations, I propose that the Court give the following answer to the question referred to it
         by the Finanzgericht Hamburg: 
      
      Articles 52 and 58 of the EEC Treaty (now, after amendment, Articles 43 EC and 48 EC) preclude tax legislation of a Member
         State, such as the legislation at issue in the main proceedings, under which, when unlisted shares in a company are valued,
         a holding of that company in a partnership established in another Member State is given a higher value than its holding in
         a partnership established in the Member State concerned.
      
      1 –	Original language:  French.
      
      2 –	Bewertungsgesetz of 30 May 1985 (Bundesgesetzblatt, Teil I, p. 845).
      
      3 –	In accordance with Article 76 et seq. of the VStR (Vermögenssteuerrichtlinie) 1986.
      
      4 –	Agreement on the European Economic Area – Final Act – Joint Declarations – Declarations by the Governments of the Member
         States of the Community and the EFTA States – Arrangements – Agreed Minutes – Declarations by one or several of the Contracting
         Parties of the Agreement on the European Economic Area (OJ 1994 L 1, p. 3)
      
      5 –	Council Directive 77/799/EEC of 19 December 1977 concerning mutual assistance by the competent authorities of the Member
         States in the field of direct taxation (OJ 1977 L 336, p. 15), in force in 1988.
      
      6 –	Case C-475/99 Ambulanz Glöckner [2001] ECR I-8089, paragraph 10, and Case C‑153/02 Neri [2003] ECR I-13555, paragraphs 34 to 36.
      
      7 –	See, inter alia, Case C-307/97 Saint-Gobain ZN [1999] ECR I-6161, paragraph 35; Case C‑446/03 Marks & Spencer [2005] ECR I-10837, paragraph 30; Case C-471/04 Keller Holding [2006] ECR I-2107, paragraph 29; and Case C-196/04 Cadbury Schweppes and Cadbury Schweppes Overseas [2006] ECR I-7995, paragraph 41.
      
      8 –	See, inter alia, Case C-264/96 ICI [1998] ECR I-4695, paragraph 21; Case C-251/98 Baars [2000] ECR I-2787, paragraph 28; Case C-141/99 AMID [2000] ECR I‑11619, paragraph 21; Case C-436/00 X and Y [2002] ECR I-10829, paragraph 26; Marks & Spencer, paragraph 31; Keller Holding, paragraph 30; and Cadbury Schweppes and Cadbury Schweppes Overseas, paragraph 42.
      
      9 –	See the references cited in the previous footnote.
      
      10 –	See, inter alia, Case C-439/99 Commission v Italy [2002] ECR I-305, paragraph 22, and Case C-79/01 Payroll and Others [2002] ECR I-8923, paragraph 26.
      
      11 –	Case C-279/93 Schumacker [1995] ECR I-225, paragraph 21; Case C-311/97 Royal Bank of Scotland [1999] ECR I-2651, paragraph 19; Case C-294/97 Eurowings Luftverkehr [1999] ECR I-7447, paragraph 32; Case C-319/02 Manninen [2004] ECR I-7477, paragraph 19; Marks & Spencer, paragraph 29; and Cadbury Schweppes and Cadbury Schweppes Overseas, paragraph 40.
      
      12 –	See, inter alia, Baars, paragraph 22; Case C-208/00 Überseering [2002] ECR I-9919, paragraph 77; X and Y, paragraph 37; Case C-268/03 De Baeck [2004] ECR I-5961, paragraphs 25 and 26; Cadbury Schweppes and Cadbury Schweppes Overseas, paragraph 31; Case C-524/04 Test Claimants in the Thin Cap Group Litigation [2007] ECR I-2107, paragraph 27; and Case C-112/05 Commission v Germany [2007] ECR I-8995, paragraph 13.
      
      13 –	Indeed, it is clear from the second paragraph of Article 52 of the Treaty that freedom of establishment includes the right
         to set up and manage undertakings, in particular companies or firms, in a Member State by a national of another Member State
         (Baars, paragraph 22).
      
      14 –	See references to the Agreement in footnote 4.
      
      15 –	Baars, paragraph 21. That reference for a preliminary ruling concerned the Dutch law on wealth tax; under that legislation a substantial
         holding in an undertaking is, to a certain degree, exempt from wealth tax if the undertaking is established in the Netherlands.
         The applicant in the main action was a Dutch national resident in the Netherlands and was the sole shareholder in a company
         established in Ireland.
      
      16 –	See to that effect the Opinion of Advocate General Alber in Baars, point 33.
      
      17 –	The same applies, for example, in French law; the first paragraph of Article 28 of the Code des sociétés (Company Law Code)
         states: ‘limited partners may not take any part in the management of the external business of the firm, even under a power
         of attorney’. The following paragraph states: ‘in the event of an infringement of the prohibition laid down in the previous
         paragraph, the limited partner shall be held jointly and severally liable with general partners for all the debts and obligations
         of the partnership which result from such prohibited actions ...’.
      
      18 –	Article 164 of the HGB: ‘Limited partners may not take part in the management of the business of the firm; they may not
         challenge an action taken by partners who are personally liable, unless it exceeds the limits of the usual conduct of the
         company’s business activities ...’.
      
      19 –	Article 170 of the HGB: ‘Limited partners are not entitled to represent the firm’.
      
      20 –	See, for example, Paz-Ares, C., ‘La sociedad en comandita’, in Curso de derecho mercantil (Uría, R. and Menéndez, A.) 1999, pp. 703 to 734 (see particularly p. 712 on the reasons for the exclusion of the limited
         partner from management of the firm provided for in Article 148 of the Commercial Code) and the bibliography cited by the
         author; ‘Sociedad comanditaria simple’, in Memento Práctico Lefebvre, Sociedades Mercantiles, 2000-2001, pp. 359 to 362.
      
      21 –	Also in Articles 209 to 221 of Rules governing the Commercial Register approved by Royal Decree No 1784/1996 of 19 July
         1996 (Boletín Oficial del Estado of 31 July 1996).
      
      22 –	Articles 170 and 218 of the Commercial Code. If the limited partner does not fulfil that obligation, the firm may either
         bring proceedings to recover the amount provided for or effect a partial cancellation of the partnership agreement as regards
         that partner.
      
      23 –	Article 148, in fine, of the Commercial Code: ‘Los socios comanditarios no podrán hacer acto alguno de administración de los intereses de la compañía,
         ni aun en calidad de apoderados de los socios gestores’. 
      
      24 –	Article 148 of the Commercial Code: ‘Habrá lugar a la rescisión parcial del contrato de compañía mercantil colectiva o
         en comandita por cualquiera de los motivos siguientes: ... Por injerirse en funciones administrativas de la compañía el socio
         a quien no compete desempeñarlas, según las condiciones del contrato de sociedad’.
      
      25 –	Article 147 of the Commercial Code: ‘Este nombre colectivo constituirá la razón social, en la que nunca podrán incluirse
         los nombres de los socios comanditarios’. See Paz-Ares, C., Uría, R. and Menéndez, A., Curso de derecho mercantil, Madrid 1999, p. 718.
      
      26 –	See Paz-Ares, C., Uría, R. and Menéndez, A., Curso de derecho mercantil, Madrid 1999, p. 718.
      
      27 –	It is for the national court to verify that point, if necessary, for example, by requesting sight of the partnership agreement
         relating to HBV and HBE. In proceedings under Article 234 EC, which is based on a clear separation of functions between the
         national courts and the Court of Justice, any assessment of the facts in the case is a matter for the national court (see,
         inter alia, Case C‑326/00 IKA [2003] ECR I-1703, paragraph 27, and Case C-9/02 DeLasteyrie du Saillant [2004] ECR I-2409, paragraph 41). Thus, it was stated in paragraph 37 of the judgment in X and Y, that ‘it is for the referring court to ascertain whether that condition [regarding definite influence] is fulfilled in the
         case in the main proceedings’. See to the same effect the Opinion of Advocate General Léger in Cadbury Schweppes and Cadbury Schweppes Overseas, point 50.
      
      28 –	See point 22 above.
      
      29 –	Case 270/83 Commission v France [1986] ECR 273, paragraph 21; Case C-34/98 Commission v France [2000] ECR I-995, paragraph 49; and De Lasteyrie du Saillant, paragraph 43.
      
      30 –	Case C-250/95 Futura Participations and Singer [1997] ECR I-2471, paragraph 26; De Lasteyrie du Saillant, paragraph 49; Marks & Spencer, paragraph 35; Case C-386/04 Centro di Musicologia Walter Stauffer [2006] ECR I-8203, paragraph 32; and Cadbury Schweppes and Cadbury Schweppes Overseas, paragraph 47.
      
      31 –	Case C-204/90 Bachmann [1992] ECR I-249, paragraph 28; Case C-300/90 Commission v Belgium [1992] ECR I-305, paragraph 21; and Baars, paragraph 37.
      
      32 –	Centro di Musicologia Walter Stauffer, paragraphs 53 and 54.
      
      33 –	In Bachmann and Commission v Belgium, there was a direct link between the deductibility of contributions paid under pension and life insurance policies and the
         taxation of payments received under those policies, a link which there was justification for preserving in order to safeguard
         the cohesion of the tax system in question; however, there was no direct link of that nature in Baars, in which two different taxes affected different taxpayers.
      
      34 –	‘In accordance with the provisions of this Directive the competent authorities of the Member States shall exchange any
         information that may enable them to effect a correct assessment of taxes on income and on capital’.
      
      35 –	Schumacker, paragraph 45, and Future Participations and Singer, paragraph 41.
      
      36 –	OJ 1988 L 178, p. 5.
      
      37 –	Article 67 of the EEC Treaty provided: 
      
                ‘1. During the transitional period and to the extent necessary to ensure the proper functioning of the common market,
         Member States shall progressively abolish between themselves all restrictions on the movement of capital belonging to persons
         resident in Member States and any discrimination based on the nationality or on the place of residence of the parties are
         on the place where such capital is invested.
      
      	2. Current payments connected with the movement of capital between Member States shall be freed from all restrictions by
         the end of the first stage at the latest.’ 
      
      	Article 69 of the EEC Treaty stated:
      	‘The Council shall, on a proposal from the Commission, which for this purpose shall consult the Monetary Committee provided
         for in Article 105, issue the necessary directives for the progressive implementation of the provisions of Article 67, acting
         unanimously during the first two stages and by a qualified majority of thereafter.’
      
      38 –	See Case 203/80 Casati [1981] ECR 2595, paragraphs 8 to 13, and Case C-484/93 Svensson and Gustavsson [1995] ECR I-3955, paragraph 5.
      
      39 –	OJ 1960 L 43, p. 921.
      
      40 –	OJ 1986 L 332, p. 22.
      
      41 –	See Case C-152/03 Ritter-Coulais [2006] ECR I-1711, paragraphs 22 to 27.