OPINION OF ADVOCATE GENERAL
BOT
delivered on 5July 20071(1)
Case C‑240/06
Fortum Project Finance SA
(Reference for a preliminary ruling from the Korkein hallinto‑oikeus (Finland))
(Directive 69/335/EEC – Indirect taxes on the raising of capital – Capital duty – Tax on the transfer of shares)
1.In this reference for a preliminary ruling, the Korkein hallinto-oikeus (Finnish Supreme Administrative Court) asks the Court to give a ruling on whether Article56 EC and Article12(1)(c) of Council Directive 69/335/EEC of 17July 1969 concerning indirect taxes on the raising of capital(2) are to be interpreted as meaning that they preclude the charging of a Finnish tax on the transfer of shares.
2.This reference forms part of proceedings between Fortum Project Finance SA (‘Fortum Project Finance’), established in Luxembourg, and the Finnish tax authority concerning the levying on that company of capital transfer tax in respect of an exchange of shares with Fortum Oyj, a company established in Finland.
3.This case will, in particular, enable the Court to explain, for the first time as far as I am aware, how Article12(1)(a) of Directive 69/335 is to be reconciled with Article12(1)(c) of that directive.
4.In the following submissions, I will show why, in my opinion, Article12(1)(c) of Directive 69/335 is to be interpreted as meaning that it does not preclude the charging of a duty, such as Finnish capital transfer tax, where securities are transferred as a contribution to a capital company which gives new shares of its own as consideration.
I–Relevant legislation
A–Community law
5.Under Article56(1) EC:
‘Within the framework of the provisions set out in this Chapter, all restrictions on the movement of capital between the Member States and between Member States and third countries shall be prohibited’.
6.The explanatory memorandum of the Proposal for a Council Directive concerning indirect taxes on the raising of capital, submitted by the Commission on 14 December 1964,(3) states that ‘[indirect taxes on capital movements] include, first, those on the raising of capital and, second, those on transactions in securities. This draft directive concerns indirect taxes on the raising of capital, a category which includes capital duty on companies’ own capital, stamp duty on national securities, stamp duty charged on the introduction or issue on the national market of securities of foreign origin, and other indirect taxes with similar characteristics. As regards indirect taxes on transactions in securities, such as taxes on stock exchange transactions, they will form the subject-matter of another draft directive. This proposal therefore does not affect them’.(4)
7.Whereas that proposal led to the adoption of Directive 69/335, the Proposal for a Council Directive concerning indirect taxes on transactions in securities, submitted by the Commission on 2April 1976,(5) and the amended proposal of 9April 1987,(6) did not result in the adoption of a directive by the Council.
8.As is clear from the first recital in its preamble, Directive 69/335 is intended to promote the free movement of capital, which is considered to be an essential condition for the creation of an economic union whose characteristics are similar to those of a domestic market.
9.On the basis of the finding that indirect taxes on the raising of capital, namely the duty chargeable on contributions of capital to companies and firms and the stamp duty on securities, give rise to discrimination, double taxation and disparities which interfere with the free movement of capital, the Community legislature wished to abolish them by means of harmonisation.(7)
10.To that end, the Community legislature decided, firstly, to abolish the stamp duty on securities.(8) Secondly, it established the rule 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 this duty should be the same in all Member States so as not to interfere with the movement of capital.(9) Directive 69/335 therefore harmonised the structure and rates of duty on contributions to capital companies, known as ‘capital duty’.(10)
11.Under Article4(1) of that directive, a number of transactions are to be subject to capital duty, including, under subparagraph (c), an increase in the capital of a capital company by contribution of assets of any kind.
12.Under Article7(2) of that directive, such a transaction may be subject to capital duty at a single rate not exceeding 1%.
13.In so far as they might frustrate the purpose of the measures provided for in Directive 69/335, other indirect taxes with the same characteristics as the capital duty or the stamp duty on securities must be abolished.(11)
14.Article10 of that directive provides:
‘Apart from capital duty, Member States shall not charge, with regard to companies, firms, associations or legal persons operating for profit, any taxes whatsoever:
(a)in respect of the transactions referred to in Article4;
(b)in respect of contributions, loans or the provision of services, occurring as part of the transactions referred to in Article4;
…’.
15.Furthermore, Article11 of that directive requires Member States not to subject to any form of taxation whatsoever a number of other transactions, such as the creation, issue, admission to quotation on a stock exchange, making available on the market or dealing in stocks, shares or other securities of the same type.
16.Lastly, Article12(1) of Directive 69/335 lays down an exhaustive list of taxes and duties which, notwithstanding Articles10 and 11 of that directive, Member States may charge, in particular:
‘(a)duties on the transfer of securities, whether charged at a flat rate or not;
(b)transfer duties, including land registration taxes, on the transfer, to a company, firm, association or legal person operating for profit, of businesses or immovable property situated within their territory;
(c)transfer duties on assets of any kind transferred to a company, firm or legal person operating for profit, in so far as such property is transferred for a consideration other than shares in the company;
…’.
B–National law
17.The relevant provisions of the Finnish Law on capital transfer tax (varainsiirtolaki (931/1996), ‘Law on capital transfer tax’) are as follows.
18.Article1 of that law provides that capital transfer tax is payable to the State on transfers of immovable property and securities, in accordance with the rules laid down by that law.
19.With regard to the purpose of that tax and the persons liable to it, Article4(4) of the Law on capital transfer tax provides, in particular, that that tax is payable on the transfer of immovable property to a general partnership, limited partnership, share company or other legal person in return for stocks or shares or in another form of investment.
20.Under Article15(1) of that law, the tax is payable by the transferee on the transfer of property in securities. In this regard, Article15(3) of that law states that the provisions of Article4(4) and (5) of that law, concerning the transfer of immovable property and other contributions of such property, are also to apply to the transfer of securities and to other contributions of such securities.
21.The charging of the capital transfer tax presupposes that one of the parties to the transfer has general liability to tax in Finland under the Law on income tax (tuloverolaki (1535/1992)) of 30December 1992. Under Article9(1)(1) of that law, any natural or legal person, joint venture or estate of a deceased person who resided or whose estate arose in Finland during the tax year at issue has general liability to tax on income obtained in Finland and abroad.
22.As regards the rate of and event giving rise to the tax, Article20(1) of the Law on capital transfer tax provides that, on the transfer of securities, the tax is to be 1.6% of the purchase price or value of the consideration. Furthermore, under Article20(2) of that law, the tax on a transfer or other form of contribution made in accordance with the rules laid down in Article4(4) of that law, is to be calculated on the basis of market value at the time of the transfer.
23.Lastly, it should be noted that capital duty within the meaning of Directive 69/335 is not payable in Finland.
II–Facts and procedure in the main proceedings
24.As is clear from the order for reference, the Republic of Finland decided to divide the energy production business carried on by the Fortum group into two independent parts, one dedicated to purchasing and refining oil, and the other to the production of electricity and gas. The division took place on 1May 2004 and resulted in the formation, from Fortum Oil and Gas Oy, of two new companies entirely controlled by Fortum Oyj, namely Fortum Oil Oy and Fortum Heat and Gas Oy. Assets and debts not connected with the oil business were transferred to Fortum Heat and Gas Oy.
25.The transaction giving rise to the dispute in the main proceedings was the transfer, by an exchange of shares, of the assets of Fortum Heat and Gas Oy to another company in the group, namely the appellant in the main proceedings, Fortum Project Finance, to strengthen the latter’s own capital. In return for the contribution consisting of the shares in Fortum Heat and Gas Oy and after increasing its share capital by an amount equal to the value of the shares acquired, Fortum Project Finance issued new shares which it gave to Fortum Oyj.
26.The capital acquired by Fortum Project Finance through the exchange of shares is subject in Luxembourg to capital duty at 1%.
27.Fortum Project Finance asked the Uudenmaan verovirasto (Uusimaa Tax Office) to inform it whether it was also liable to capital transfer tax on the shares in Fortum Heat and Gas Oy which it had received from Fortum Oyj in the exchange of shares with Fortum Oyj. In its preliminary decision of 29October 2004, the Uudenmaan verovirasto took the view that Fortum Project Finance was liable to that tax and stated that the amount payable was determined by the market value of the shares received by that company as a contribution.
28.Fortum Project Finance brought before the Helsingin hallinto-oikeus (Helsinki Administrative Court) an action seeking the annulment of the preliminary decision by the Uudenmaan verovirasto and asking the court to rule, by way of a new preliminary decision, that the company was not liable to capital transfer tax on the shares received in Fortum Heat and Gas Oy as part of the exchange. In its action, Fortum Project Finance submitted, inter alia, that that tax was contrary to Article56(1)EC and Article12(1)(c) of Directive 69/335.
29.The Hallinto-oikeus dismissed that action. It held that the capital transfer tax was not contrary to those provisions, and relied in particular on Immobiliare SIF(12) and Codan.(13) Furthermore, it held that a reference for a preliminary ruling on the interpretation of Article12(1)(c) of Directive 69/335 was not necessary, in view, in particular, of the abovementioned case-law of the Court.
30.Fortum Project Finance then lodged an appeal before the Korkein hallinto-oikeus against the decision by the Hallinto-oikeus. Again it submitted that the capital transfer tax which is charged in Finland on a company which raises capital is, in its view, contrary to Directive 69/335 where the company acquiring shares provides its own shares as consideration.
III–The reference for a preliminary ruling
31.In its order for reference, the Korkein hallinto-oikeus states that it must now decide whether, under Finnish law, capital transfer tax can be charged on the shares in Fortum Heat and Gas Oy transferred as a contribution by Fortum Oyj in return for the new shares issued by Fortum Project Finance.
32.Taking the view that an interpretation of Community law is required to resolve the dispute in the main proceedings, the Korkein hallinto-oikeus decided to stay proceedings and refer the following question to the Court for a preliminary ruling:
‘Are Article56 EC and Article12(1)(c) of … Directive 69/335/EEC to be interpreted as precluding the charging of [the Finnish] capital transfer tax (varainsiirtovero) where securities are transferred, as described in the order for reference, as a contribution to a capital company which gives new shares of its own in return?’
33.The Finnish and United Kingdom Governments, and the Commission, submitted written and oral observations before the Court. Fortum Project Finance also expressed its views at the hearing held on 19April 2007.
IV–Analysis
34.The national court asks the Court, in essence, to give a ruling on whether Article56(1) EC and Article12(1)(c) of Directive 69/335 are to be interpreted as precluding the levying of a duty, such as the Finnish capital transfer tax, where securities are transferred as a contribution to a capital company which gives new shares of its own as consideration.
35.Firstly, I would point out that the adverse impact on the movement of capital which may result from the application of a system of taxation such as that at issue in the main proceedings stems from the parallel exercise by two Member States of their powers of taxation. On the one hand, the Grand Duchy of Luxembourg, as permitted by Directive 69/335, applies capital duty to a transaction whereby a capital company which has its registered office in Luxembourg increases its share capital through the contribution of assets of any kind. On the other hand, where that contribution consists of shares transferred by a company established in Finland in consideration for which the recipient company issues new shares, the latter company must also pay Finnish capital transfer tax.
36.The examination of whether such double taxation complies with Community law must, in my view, be carried out with reference only to Directive 69/335, which harmonised the structure and rates of indirect taxes on the raising of capital.
37.It must therefore be examined whether that directive, and in particular Article12(1)(c), is to be interpreted as precluding the application of the Finnish capital transfer tax in circumstances such as those in the main proceedings, in which securities are transferred as a contribution to a company which gives new shares of its own in consideration.
38.The United Kingdom Government takes the view that the transaction at issue in the main proceedings does not fall within the scope of Directive 69/335. It notes in this regard that a transaction can be regarded as the raising of capital for the purposes of Article4(1) of that directive only where it strengthens the economic potential of the companies affected by it. It takes the view that that is not the case here since the Fortum group’s capital, taken as a whole, did not change as a result of the transfer to Fortum Project Finance, by the parent company, of its shareholding in Fortum Heat and Gas Oy.
39.I take the view, however, that a transaction such as that at issue in the main proceedings does fall within the scope of Directive 69/335. It should be pointed out that, under Article4(1)(c) of that directive, harmonised capital duty is payable on a transaction consisting in an increase in the capital of a capital company by contribution of assets of any kind. That is the situation in this case in so far as the transaction at issue involves an increase in the capital of Fortum Project Finance through the contribution of shares in Fortum Heat and Gas Oy.
40.Furthermore, the Court has held that ‘the ‘increase in the capital’ referred to in Article4(1)(c) of Directive 69/335 entails a formal increase in a company’s capital by means of either an issue of new shares or an increase in the nominal value of the existing shares’.(14) It is apparent from the documents before the Court that, in return for the contribution it received, Fortum Project Finance issued new shares which it transferred to Fortum Oyj.
41.Under Article4(1)(c) of Directive 69/335, the transaction at issue in the main proceedings is to be subject to capital duty in Luxembourg.
42.Pursuant to Article10(a) and (b) of that directive, no other taxes whatsoever should be charged on that transaction by a Member State. Read in the light of the last recital in the preamble to that directive, that article lays down the principle that indirect taxes with the same characteristics as capital duty are prohibited.(15)
43.Under Article12(1) of Directive 69/335, there are, however, a number of derogations from the principle of the exclusive nature of capital duty, inasmuch as that article expressly authorises Member States to charge a number of taxes and duties. Furthermore, the Court has clearly stated on several occasions that ‘Article12(1) of [that] directive establishes an exhaustive list of the taxes and duties other than capital duty which may, notwithstanding Articles10 and 11 of [that] directive, be imposed on capital companies in connection with the transactions referred to in those latter articles’.(16)
44.It is therefore necessary to establish whether the Law on capital transfer tax, which provides for the charging of such a tax where securities are transferred as a contribution to a company which gives new shares of its own in return, is, from this point of view, consistent with what is permitted under Article12(1) of Directive 69/335.
45.In this regard, the Finnish and United Kingdom Governments take the view that Article12(1)(a) of that directive permits Member States to charge a tax on a transfer of securities carried out as a contribution to a capital company which gives new shares of its own in return, and that this is not precluded by Article12(1)(c) of that directive.
46.Both those governments take the view that only Article12(1)(a) of Directive 69/335 applies to the imposition of duties on the transfer of securities. In support of that view, they rely on Immobiliare SIF and Codan. In their submission, in so far as the situations at issue in those cases concerned contributions in return for shares and the Court none the less did not provide an interpretation of Article12(1)(c) of that directive, those judgments show that that provision is not relevant in a situation such as that in the main proceedings, that is to say in which the consideration for a contribution in kind consists in the issue of new shares by the company receiving the contribution. Article12(1)(c) of that directive is therefore to be construed as applying to residual categories of assets which are not covered by Article12(1)(a) or (b) of Directive 69/335.
47.Unlike the argument put forward by the Finnish and United Kingdom Governments, the Commission adopts an approach according to which Article12(1)(a) of that directive constitutes the basic rule in matters concerning the taxation of transfers of securities, while Article12(1)(c) of that directive establishes a more detailed rule on the taxation of transfers of securities and other assets to a company by way of a contribution. Article12(1)(c) should therefore take precedence in circumstances similar to those in this case. The Commission takes the view that a different interpretation would render Article12(1)(c) of Directive 69/335 irrelevant in the context of the transfer to a company of ownership of securities, even though that provision refers to the transfer of ‘assets of any kind’.
48.An examination of those provisions in conjunction with Article 10 of that directive confirms that analysis. The Commission takes the view that the prohibition referred to in Article10(a) and (b) of Directive 69/335 seeks not only to prevent the collection of other taxes of the same kind as capital duty, but also, more generally, to prevent capital contributions from being taxed more than once. By adopting that directive, the Community legislature sought to abolish taxes having the same effect as capital duty, namely those which place a financial burden on capital contributions to a company. Furthermore, the fact that Article12(1)(c) of that directive prohibits the taxation of contributions made by shareholders in return for shares in the company in receipt of the contributions confirms that the purpose of that provision is to prevent all taxation other than capital duty. The purpose of that provision is therefore to ensure that the contribution of an asset by a shareholder to a company is not regarded as an actual transfer, that is to say a transfer to a third party, but rather as the reallocation of control over one of the company’s assets.
49.Lastly, the Commission takes the view that, if Article12(1) of Directive 69/335 were to be regarded as a genuine derogation from Article10 of that directive, it would have to be interpreted strictly. In cases of doubt, the prohibition of any additional taxation must take precedence. Contrary to the submissions of the Finnish and United Kingdom Governments, Immobiliare SIF and Codan do not call into question the Commission’s analysis, since the Court was not asked, in those cases, to deal with the relationship between the various subparagraphs of Article12(1) of that directive.
50.Fortum Project Finance stated at the hearing that it agreed with the comments made by the Commission in its written observations.
51.It is clear from all of the foregoing observations that the key issue in this reference for a preliminary ruling is whether Article12(1)(a) of Directive 69/335 permits Member States to tax transfers of securities, including where a company in receipt of such securities gives new shares of its own in return, without infringing Article12(1)(c) of that directive. Consideration should therefore be given principally to the relationship between Article12(1)(a) and (c). For the sake of completeness, my analysis will also have to take into account Article12(1)(b).
52.It should first be pointed out that, in company law, a transaction such as that at issue in the main proceedings constitutes a contribution in kind. A contribution in kind consists of any asset awarded to a company, other than a sum of money, for which a pecuniary value can be ascertained and which is transferable. It may be immovable or movable property, tangible or intangible assets.
53.The consideration for such a contribution may take a number of forms. If the contribution is made in return solely for the grant of equity interests (stocks or shares), it may be classified as ‘simple’ (‘pur et simple’). However, if the contribution is made in return for other kinds of benefits which are protected from the risks of the company, it is said to be ‘for value’ (‘à titre onéreux’). In the latter case, the benefits granted by way of consideration may consist, for example, in the taking-over by the company of debts contracted by the contributor or a cash payment from the company to the contributor. Lastly, the contribution is said to be ‘mixed’ (‘mixte’) when, in return for his contribution, the contributing member receives not only equity interests but also other interests which are not subject to the risks of the company.
54.In view of those definitions, the transaction at issue in the main proceedings corresponds to the traditional form of consideration for a contribution, that is to say the grant of equity interests, and is therefore a simple contribution.
55.Next, an examination of the wording of Article 12(1)(a), (b) and (c) of Directive 69/335 shows that that paragraph draws the following distinction. While subparagraphs (a) and (b) relate to specific categories of assets, that is to say, on the one hand, securities and, on the other, businesses and immovable property, subparagraph (c) differs in the generic nature of the assets to which it applies (‘assets of any kind’) and in the fact that it places a condition on the authorisation of transfer duties on assets which are are the subject of a contribution. Such assets must be ‘transferred for a consideration other than shares in the company’.
56.The Commission’s proposition, which is also supported by Fortum Project Finance, is that Article12(1)(c) of Directive 69/335 takes precedence, since the form of consideration employed in transactions to raise capital is a shareholding in the company. However, the Finnish and United Kingdom Governments emphasise the fact that Article12(1)(a) and (b) of that directive relate to specific assets and should therefore take precedence where a contribution involves such assets.
57.The Commission’s position has the advantage of satisfying one of the main objectives pursued by that directive, that is to say to abolish indirect taxes on the raising of capital other than capital duty and thus to promote the free movement of capital. From that point of view, any transaction capable of being classified as a simple contribution could not be charged to any tax other than harmonised capital duty.
58.By thus reading Article12(1)(a) and b) of Directive 69/335 in the light of Article12(1)(c), the Commission significantly restricts their scope, with the result that Article12(1)(a) and (b) would permit duties on the transfer of ownership of securities, businesses and immovable property only in the context of transactions involving contributions for value, that is to say transactions comparable to ordinary sales.
59.Despite the advantage which that proposition brings with it in terms of the purposes of Directive 69/335, I am not, however, of the view that the Community legislature intended to restrict to that extent the scope of the derogations from the exclusive nature of capital duty which it expressly allowed, for the following reasons.
60.Firstly, I would point out that Article12(1)(a) and (b) of that directive do not mention, either directly or by reference to Article12(1)(c), the condition requiring that assets must be transferred for a consideration other than shares.
61.Secondly, it is important to point out that, if Article12(1)(a) and (b) always had to be read in the light of Article12(1)(c), this would have the effect not only of adding to the content of Article12(1)(a) and (b) a condition not expressly set down by the Community legislature, but also, and above all, of divesting those subparagraphs of any effectiveness.
62.If we were to accept that Article12(1)(c) of Directive 69/335 takes precedence in the context of a transaction comparable to a simple contribution, and that Article12(1)(a) and (b) necessarily include, by implication, the condition relating to consideration in a form other than shares, there would be no logic in the drafting of the legislation and no advantage in law in retaining two provisions dealing with securities on the one hand and businesses and immovable property on the other.
63.Article12(1)(c) of Directive 69/335, in so far as it relates to ‘assets of any kind’, would in those circumstances totally absorb the content of Article12(1)(a) and (b), and, as a result, the existence of those two subparagraphs would have no meaning or purpose.
64.In other words, if we accept the approach advocated by the Commission, the Community legislature need only have included subparagraph (c) in the body of Article12(1) of that directive, since that subparagraph covers transfer duties applicable in the event of a transfer of securities or a transfer of businesses or immovable property, and authorises the charging of such duties only in the case of contributions for value.
65.However, that was not the choice made by the Community legislature, which sought to distinguish in three different subparagraphs the transfer duties falling within the scope of the derogation from the principle of the exclusive nature of capital duty. I cannot therefore subscribe to an interpretation which, however satisfying it may be from the point of view of the purpose of Directive 69/335, would have the effect of changing both the wording and the scheme of Article12(1) of that directive and divesting Article12(1)(a) and (b) of any effectiveness. Such an approach would run counter to the settled case-law of the Court to the effect that, ‘where a provision of Community law is open to several interpretations, preference must be given to that interpretation which ensures that the provision retains its effectiveness’.(17)
66.I take the view that the only interpretation which is compatible with retaining the effectiveness of Article12(1)(a) and (b) is therefore to regard those subparagraphs as special provisions, in the sense of provisions which apply to specific categories of assets, as opposed to Article12(1)(c) of Directive 69/335. On that interpretation, the ‘assets of any kind’ referred to in Article12(1)(c) can be construed only as meaning assets other than those forming the subject-matter of Article12(1)(a) and b) of that directive.
67.I would point out, thirdly, that the interpretation which I propose that the Court adopt is consistent with Immobiliare SIF and Codan. The Court’s findings in those two judgments should briefly be recalled.
68.In Codan, the Court ruled that Article12(1)(a) of Directive 69/335 must be interpreted as allowing a Member State to charge tax in the event of a transfer of shares irrespective, first, of whether the company issuing the shares is listed on a stock exchange and, secondly, of whether the shares are transferred on the stock exchange or directly from the transferor to the transferee.(18)
69.It is interesting to note that the Court arrived at that interpretation of Article12(1)(a) of that directive on the basis of a factual context which is similar to that in this case. The company Aktieselskabet Forsikingsselskabet Codan (‘Codan’) had entered into a contract with three British companies, which owned the entire share capital in the Danish company Fjerde Sø A/S (‘Fjerde Sø’), relating to the acquisition of the entire share capital of Fjerde Sø. The shares in Fjerde Sø were transferred by the British companies to Codan and Codan increased its share capital by an amount equal to the value of the acquired shares. All the shares issued as a result of that increase were then transferred to the British companies in payment for the share capital in Fjerde Sø.
70.Under Danish law, Codan had had to pay capital duty at 1% on the increase in its capital. Furthermore, the Danish tax authorities had also sought payment of tax at 1% on the share transfer. The simple contribution at issue in that case was therefore the subject of double taxation. In interpreting Article12(1)(a) of Directive 69/335, however, the Court appeared to accept that, in such circumstances and in derogation from Articles10 and 11 of that directive,(19) the Danish tax on the transfer of shares was consistent with what is permitted under the directive.
71.Furthermore, in Immobiliare SIF, the Court ruled, in particular, that Article12 of Directive 69/335 is to be interpreted as authorising a Member State, in derogation from the prohibition contained in Article10 of that directive, to charge – in respect of an increase in the capital of a capital company brought about by the contribution of immovable property – taxes such as the registration charge, the mortgage registration fee and the Land Register fee, provided that such charges do not exceed those which are applicable to like transactions in the Member State charging them.
72.From the circumstances giving rise to that case I would point to the fact that the members of Società Immobiliare SpA had increased the capital of that company through a contribution of immovable property in return for the issue of new shares. That transaction too was therefore a simple contribution.
73.In order to provide an answer which would be of use to the national court, the Court decided to examine Article12 of Directive 69/335, even though that article was not mentioned in the questions referred. More specifically, the Court found that the relevant provision in that case was Article12(1)(b) of that directive. It stated in this regard that that provision ‘permits Member States, in general terms, to charge – separately from capital duty, but in relation to a contribution to a capital company – duties in respect of which the operative event is objectively linked to the transfer of businesses or immovable property’.(20)
74.However, at no point did the Court consider it necessary to interpret Article12(1)(c) of Directive 69/335, which strengthens my view that that provision cannot take precedence over either subparagraph (a) or subparagraph (b) of that article on the sole ground that assets are transferred in return for shares in the company.
75.It is therefore clear from those two judgments that Article12(1)(a) and (b) retain their effectiveness in the case of a transfer of securities, on the one hand, or a transfer of businesses or immovable property, on the other. To accept an interpretation to the effect that Article12(1)(c) becomes applicable where the transaction at issue constitutes a simple contribution would be to call those two judgments into question, which does not seem desirable.
76.Fourthly, I would point out that, if the Community legislature had truly intended Article12(1)(c) of Directive 69/335 to take precedence in the event of simple contributions, it could have responded to the interpretation given by the Court in Immobiliare SIF and Codan by revising that article.
77.I would observe in this regard that no such revision has been made and, furthermore, none is contemplated in the draft of the 2006 proposal for a directive. That proposal, although post-dating Immobiliare SIF and Codan, simply reproduces in a new Article 6 the order and wording of Article12(1)(a), (b) and (c) of Directive 69/335, with the exception of a few minor drafting changes.
78.Fifthly, while it may be regrettable that the interpretation which I propose that the Court adopt leads to an outcome which runs counter to the objective of abolishing indirect taxes on the raising of capital other than capital duty, the fact remains that the possibility, in some cases, of charging two indirect taxes in the context of a transaction to raise capital follows from the very existence of the derogations expressly permitted by the Community legislature in Article12(1) of Directive 69/335.
79.With regard, in particular, to duties on the transfer of securities, it should be noted that the idea of such duties co-existing with capital duty is expressly referred to in the 1976 proposal for a directive.(21)
80.Article10(1) of that proposal set out the principle to the effect that no form of tax assessed on the basis of the value of the security involved in the transaction, other than the harmonised tax provided for in that proposal, was to be charged on transactions in securities. However, Article10(2)(a) of that proposal provided that, notwithstanding Article10(1), Member States could charge capital duty as defined by Directive 69/335.
81.If Article12(1)(a) of Directive 69/335 is viewed in conjunction with the provisions of the 1976 proposal for a directive, it is clear that that provision reflects the idea of coexistence mentioned above. Its purpose is therefore to afford Member States the possibility of applying, in addition to capital duty, duties on the transfer of securities, which have not yet been harmonised by the Community legislature. The explanatory memorandum of the 1964 proposal for a directive reinforces that idea in so far as it states that that proposal has no effect on indirect taxes on transactions in securities.(22)
82.Lastly, it should be noted that, while it is true that the Court has already stated that, like any exception, the derogation contained in Article12(1)(a) of Directive 69/335 must be interpreted strictly,(23) this must not, however, in my opinion, have the effect of divesting that provision of all effectiveness.
V–Conclusion
83.In the light of all the foregoing considerations, I propose that the Court should give the following answer to the question referred by the Korkein hallinto-oikeus:
‘Article12(1)(c) of Council Directive 69/335/EEC of 17July 1969 concerning indirect taxes on the raising of capital, as amended by Council Directive 85/303/EEC of 10June 1985, is to be interpreted as meaning that it does not preclude the charging of a duty, such as the Finnish capital transfer tax, where securities are transferred as a contribution to a capital company which gives new shares of its own in return, since such a duty is permitted under Article12(1)(a) of that directive’.
1 Original language: French.
2– OJ, English Special Edition 1969 (II), p.412. Directive as amended by Council Directive 85/303/EEC of 10June 1985 (OJ 1985 L 156, p.23; ‘Directive 69/335’). It should be pointed out that, on 4December 2006, the Commission of the European Communities submitted a Proposal for a Council Directive concerning indirect taxes on the raising of capital (COM(2006) 760 final; ‘2006 proposal for a directive’). According to the explanatory memorandum of that proposal, it is a recasting of Directive 69/335. Its purpose is ‘to simplify a very complicated piece of Community legislation, phase out capital duty which is recognised as a significant obstacle to the development of EU companies, and reinforce the prohibition on creating or levying of other similar taxes’.
3– COM(64) 526 final; ‘1964 proposal for a directive’.
4– Ibid. p.2.
5– OJ 1976 C 133, p.1; ‘1976 proposal for a directive’. The purpose of this proposal for a directive was to harmonise indirect taxes on transactions in securities. Under Article2(1) of that proposal, ‘[f]or the purposes of applying this directive, a taxable transaction is the disposal or the acquisition of securities for valuable consideration, where the transaction is concluded in a Member State or in a non-member country by a resident of a Member State. Each disposal or acquisition of securities constitutes a separate taxable transaction’.
6– COM(87) 139 final.
7– Second recital in the preamble to Directive 69/335.
8– Fifth recital in the preamble.
9– Sixth recital in the preamble.
10– Seventh recital in the preamble.
11– Last recital in the preamble.
12– C‑42/96, ECR I‑7089.
13– C‑236/97, ECR I‑8679.
14– Case C‑46/04 Aro Tubi Trafilerie [2006] ECR I‑3009, paragraph 33 and the case-law cited.
15– See, in particular, Case C‑188/95 Fantask and Others [1997] ECR I‑6783, paragraph 21.
16– See, in particular, C‑264/04 Badischer Winzerkeller [2006] ECR I‑5275, paragraph 31 and the case-law cited. See also in this regard Immobiliare SIF (paragraph 33) and Codan (paragraph 21 and the case-law cited).
17– See, in particular, Case C‑434/97 Commission v France [2000] ECR I‑1129, paragraph 21. As Professor Denys Simon explains, ‘the process of “effective” interpretation comprises … a number of different techniques ranging from a basic argument ab absurdo to fully-fledged teleological reasoning’. From the point of view of the intensity of the effects, it is therefore possible to ‘distinguish at least three levels of effective interpretation, classified by degrees of increasing effectiveness’. At the first stage, to which we will confine ourselves here, ‘the principle of effectiveness takes the form of reasoning ab absurdo: this rule traditionally states that “any interpretation which leads to the absurd must be dismissed … it is not possible to ascribe to any measure a meaning the outcome of which is absurd” (de Vattel, E. Le droit des gens, Paris, 1856, L. II, chap. XVII, paragraph 282). In other words, the measure must at the very least produce an effect.’ See Simon, D., L’interprétation judiciaire des traités d’organisations internationales – Morphologie des conventions et fonction juridictionnelle, Pedone, Paris, 1981, p.338 and 339.
18– See also the Order of 5 February 2004 in Case C‑357/02 Sonae Distribuição, not published in the ECR, paragraph 23, and Case C‑193/04 Organon Portuguesa [2006] ECR I‑7271, paragraph 21.
19– Paragraph 21. I would also point out that, in paragraph 22, the Court refers to ‘the derogation provided for in Article12(1)(a) of the directive’.
20– Paragraph 35. By extension of that reasoning, the rationale behind Article12(1) of Directive 69/335 is based, more generally, on the following idea: ‘[t]he permissibility of those taxes and duties, in addition to capital duty, is therefore indeed explained by the fact that, even if the transaction in question were not a contribution to a company, those duties or taxes would be applicable anyway. Those duties or taxes are not levied on the contribution as such but on a specific transaction which happens to constitute a contribution in the case concerned but is capable of existing independently of any contribution.’ See the article by Richard D., ‘Bilan de 25 ans d’harmonisation des impôts indirects frappant les rassemblements de capitaux’, Cahiers de droit européen, No 1-2, 1996, pp.31 to 72, p.69. Thus, the purpose of Article12(1) of Directive 69/335 is to enable Member States to retain their power to tax transactions, such as transfers of ownership, which can be separated from a contribution.
21– On the idea of coexistence, see also point 44 of the Opinion of Advocate General Alber, delivered on 17 September 1998, in Codan.
22– See point 6 of this Opinion.
23– Case C‑415/02 Commission v Belgium [2004] ECR I‑7215, paragraph37.