(Reference for a preliminary ruling from the Unabhängiger Finanzsenat, Außenstelle Linz)

(Sixth VAT Directive — Supplies for consideration — Share issue — Admission of a company to a stock exchange — Deductibility of VAT)

Opinion of Advocate General Jacobs delivered on 24 February 2005

Judgment of the Court (First Chamber), 26 May 2005

Summary of the Judgment

1. Tax provisions – Harmonisation of laws – Turnover taxes – Common system of value added tax – Taxable transactions — Supplies of goods or services effected for consideration — Meaning — New share issue — Not included

(Council Directive 77/388, Art. 2(1))

(Council Directive 77/388, Art. 17(1) and (2))

1.A new share issue, whether or not carried out in connection with admission of the company concerned to a stock exchange, does not constitute a transaction falling within the scope of Article 2(1) of Sixth Council Directive (77/388/EEC) on the harmonisation of the laws of the Member States relating to turnover taxes, as amended by Directive 95/7.

That transaction does not constitute a supply of goods or of services for consideration within the meaning of that provision.

(see paras 27-28, operative part 1)

2.Article 17(1) and (2) of Sixth Directive 77/388, as amended by Directive 95/7, confer the right to deduct in its entirety the VAT charged on the expenses incurred by a taxable person for the various supplies acquired by him in connection with a share issue, provided that all the transactions undertaken by the taxable person in the context of his economic activity constitute taxed transactions.

The costs of those supplies form part of the overheads of the company concerned and are, as such, component parts of the price of its products, as those supplies have a direct and immediate link with the whole economic activity of the taxable person.

(see paras 36, 38, operative part 2)

26 May 2005 (*)

(Sixth VAT Directive – Supplies for consideration – Share issue – Admission of a company to a stock exchange – Deductibility of VAT)

In Case C-465/03,

REFERENCE for a preliminary ruling under Article 234 EC, by the l’Unabhängiger Finanzsenat, Außenstelle Linz (Austria), by decision of 20 October 2003, received at the Court on 5 November 2003, in the proceedings

Finanzamt Linz,

THE COURT (First Chamber),

composed of P. Jann, President of the Chamber, K. Lenaerts (Rapporteur), J.N. Cunha Rodrigues, M. Ilešič and E. Levits, Judges,

Advocate General: F.G. Jacobs,

Registrar: M.-F. Contet, Principal Administrator,

having regard to the written procedure and further to the hearing on 15 December 2004,

after considering the observations submitted on behalf of:

– Kretztechnik AG, by P. Farmer, Barrister, assisted by J. Kajus and Professor B. Terra,

– Finanzamt Linz, by W. Ritirc, acting as Agent,

– the Austrian Government, by H. Dossi, acting as Agent,

– the Danish Government, by J. Molde, acting as Agent,

– the German Government, by F. Huschens, M. Lumma and A. Tiemann, acting as Agents,

– the Italian Government, by I.M. Braguglia, acting as Agent, assisted by P. Gentili, Avvocato dello Stato,

– the United Kingdom Government, by M. Bethell, acting as Agent, and M. Hall, Barrister,

– the Commission of the European Communities, by D. Triantafyllou and K. Gross, acting as Agents,

after hearing the Opinion of the Advocate General at the sitting on 24 February 2005,

gives the following

1.1 This request for a preliminary ruling concerns the interpretation of Articles 2 and 17 of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes – Common system of value added tax: uniform basis of assessment (OJ 1977 L 145, p. 1), as amended by Council Directive 95/7/EC of 10 April 1995 (OJ 1995 L 102, p. 18, hereinafter ‘the Sixth Directive’).

2.2 The questions were raised in proceedings between Kretztechnik AG (‘Kretztechnik’) and the Finanzamt Linz (Linz District Tax Office) concerning the latter’s refusal to allow that company to deduct value added tax (‘VAT’) paid by it on supplies relating to the issue of shares for the purposes of its admission to the Frankfurt Stock Exchange (Germany).

Legal background

The Community legislation

Directive 2011/92

3 Recitals 7 to 9 of Directive 2011/92 state:

‘(7) Development consent for public and private projects which are likely to have significant effects on the environment should be granted only after an assessment of the likely significant environmental effects of those projects has been carried out. …

(8) Projects belonging to certain types have significant effects on the environment and those projects should, as a rule, be subject to a systematic assessment.

(9) Projects of other types may not have significant effects on the environment in every case and those projects should be assessed where the Member States consider that they are likely to have significant effects on the environment.’

4 Article 2(1) of that directive provides:

‘Member States shall adopt all measures necessary to ensure that, before development consent is given, projects likely to have significant effects on the environment by virtue, inter alia, of their nature, size or location are made subject to a requirement for development consent and an assessment with regard to their effects on the environment. Those projects are defined in Article 4.’

5 Under Article 3(1) of that directive:

‘The environmental impact assessment shall identify, describe and assess in an appropriate manner, in the light of each individual case, the direct and indirect significant effects of a project on the following factors:

…

(b) biodiversity, with particular attention to species and habitats protected under [Council Directive 92/43/EEC of 21 May 1992 on the conservation of natural habitats and of wild fauna and flora (OJ 1992 L 206, p. 7), as amended by Council Directive 2013/17/EU of 13 May 2013 (OJ 2013 L 158, p. 193) (“Directive 92/43”)] and Directive 2009/147/EC [of the European Parliament and of the Council of 30 November 2009 on the conservation of wild birds (OJ 2010 L 20, p. 7)];

…’

Article 4 of Directive 2011/92 provides:

‘1. Subject to Article 2(4), projects listed in Annex I shall be made subject to an assessment in accordance with Articles 5 to 10.

(a) a case-by-case examination;

(b) thresholds or criteria set by the Member State.

Member States may decide to apply both procedures referred to in points (a) and (b).

Where a case-by-case examination is carried out or thresholds or criteria are set for the purpose of paragraph 2, the relevant selection criteria set out in Annex III shall be taken into account. Member States may set thresholds or criteria to determine when projects need not undergo either the determination under paragraphs 4 and 5 or an environmental impact assessment, and/or thresholds or criteria to determine when projects shall in any case be made subject to an environmental impact assessment without undergoing a determination set out under paragraphs 4 and 5.

Where Member States decide to require a determination for projects listed in Annex II, the developer shall provide information on the characteristics of the project and its likely significant effects on the environment. The detailed list of information to be provided is specified in Annex IIA. The developer shall take into account, where relevant, the available results of other relevant assessments of the effects on the environment carried out pursuant to Union legislation other than this Directive. The developer may also provide a description of any features of the project and/or measures envisaged to avoid or prevent what might otherwise have been significant adverse effects on the environment.

The competent authority shall make its determination, on the basis of the information provided by the developer in accordance with paragraph 4 taking into account, where relevant, the results of preliminary verifications or assessments of the effects on the environment carried out pursuant to Union legislation other than this Directive. The determination shall made available to the public and:

(a) where it is decided that an environmental impact assessment is required, state the main reasons for requiring such assessment with reference to the relevant criteria listed in Annex III; or

(b) where it is decided that an environmental impact assessment is not required, state the main reasons for not requiring such assessment with reference to the relevant criteria listed in Annex III, and, where proposed by the developer, state any features of the project and/or measures envisaged to avoid or prevent what might otherwise have been significant adverse effects on the environment.

Member States shall ensure that the competent authority makes its determination as soon as possible and within a period of time not exceeding 90 days from the date on which the developer has submitted all the information required pursuant to paragraph 4. In exceptional cases, for instance relating to the nature, complexity, location or size of the project, the competent authority may extend that deadline to make its determination; in that event, the competent authority shall inform the developer in writing of the reasons justifying the extension and of the date when its determination is expected.’

Annex II.A of that directive contains the list of ‘information to be provided by the developer on the projects listed in Annex II’. That list reads as follows:

‘1. A description of the project, including in particular:

(a) a description of the physical characteristics of the whole project and, where relevant, of demolition works;

(b) a description of the location of the project, with particular regard to the environmental sensitivity of geographical areas likely to be affected.

(a) the expected residues and emissions and the production of waste, where relevant;

(b) the use of natural resources, in particular soil, land, water and biodiversity.

ECLI:EU:C:2025:140

JUDGMENT OF 6. 3. 2025 – CASE C-41/24 WALTHAM ABBEY RESIDENTS ASSOCIATION

The criteria of Annex III shall be taken into account, where relevant, when compiling the information in accordance with points 1 to 3.’

Annex III to that directive sets out the ‘criteria to determine whether the projects listed in Annex II should be subject to an environmental impact assessment’.

Directive 2014/52

Recitals 11 and 29 of Directive 2014/52 state:

‘(11) The measures taken to avoid, prevent, reduce and, if possible, offset significant adverse effects on the environment, in particular on species and habitats protected under [Directive 92/43] and Directive 2009/147 …, should contribute to avoiding any deterioration in the quality of the environment and any net loss of biodiversity, in accordance with the [European] Union’s commitments in the context of the [United Nations Convention on Biological Diversity, signed in Rio de Janeiro on 5 June 1992,] and the objectives and actions of the Union Biodiversity Strategy up to 2020 laid down in the [Communication from the Commission to the European Parliament, the Council, the Economic and Social Committee and the Committee of the Regions] of 3 May 2011 entitled ‘Our life insurance, our natural capital: an EU biodiversity strategy to 2020’ [(COM(2011) 244 final)]

…

When determining whether significant effects on the environment are likely to be caused by a project, the competent authorities should identify the most relevant criteria to be considered and should take into account information that could be available following other assessments required by Union legislation in order to apply the screening procedure effectively and transparently. In this regard, it is appropriate to specify the content of the screening determination, in particular where no environmental impact assessment is required. Moreover, taking into account unsolicited comments that might have been received from other sources, such as members of the public or public authorities, even though no formal consultation is required at the screening stage, constitutes good administrative practice.’

Directive 92/43

Article 6(3) of Directive 92/43 provides:

‘Any plan or project not directly connected with or necessary to the management of the site but likely to have a significant effect thereon, either individually or in combination with other plans or projects, shall be subject to appropriate assessment of its implications for the site in view of the site’s conservation objectives. In the light of the conclusions of the assessment of the implications for the site and subject to the provisions of paragraph 4, the competent national authorities shall agree to the plan or project only after having ascertained that it will not adversely affect the integrity of the site concerned and, if appropriate, after having obtained the opinion of the general public.’

Article 12(1) of that directive provides:

‘Member States shall take the requisite measures to establish a system of strict protection for the animal species listed in Annex IV(a) in their natural range, prohibiting:

(a) all forms of deliberate capture or killing of specimens of these species in the wild;

(b) deliberate disturbance of these species, particularly during the period of breeding, rearing, hibernation and migration;

(c) deliberate destruction or taking of eggs from the wild;

(d) deterioration or destruction of breeding sites or resting places.’

Point (a) of Annex IV to that directive mentions ‘all species’ of bats belonging to the suborder of ‘microchiroptera’.

Irish law

18In that connection, it must be borne in mind that it is clear from Article 2(1) of the Sixth Directive, which defines the scope of VAT, that, within a Member State, only activities of an economic nature are subject to VAT. Economic activities are defined in Article 4(2) of the Sixth Directive as encompassing all activities of producers, traders and persons supplying services, in particular the exploitation of tangible or intangible property for the purpose of obtaining income therefrom on a continuing basis (KapHag, paragraph 36).

19It is settled case‑law that the mere acquisition and holding of shares is not to be regarded as an economic activity within the meaning of the Sixth Directive. The mere acquisition of financial holdings in other undertakings does not amount to the exploitation of property for the purpose of obtaining income therefrom on a continuing basis because any dividend yielded by that holding is merely the result of ownership of the property and is not the product of any economic activity within the meaning of that directive (see Harnas & Helm, paragraph 15; KapHag, paragraph 38, and Case C-8/03 Banque Bruxelles Lambert (BBL) [2004] ECR I‑0000, paragraph 38). If, therefore, the acquisition of financial holdings in other undertakings does not in itself constitute an economic activity within the meaning of that directive, the same must be true of activities consisting in the sale of such holdings (see Case C-155/94 Wellcome Trust [1996] ECR I-3013, paragraph 33; KapHag, paragraph 40, and BBL, paragraph 38).

20On the other hand, transactions that consist in obtaining income on a continuing basis from activities which go beyond the compass of the simple acquisition and sale of securities, such as transactions carried out in the course of a business trading in securities, do fall within the scope of the Sixth Directive but are exempted from VAT under Article 13B(d)(5) of that directive (see Case C-77/01 EDM [2004] ECR I-0000, paragraph 59, and BBL, paragraph 41).

21As regards the question whether the issue of shares by a company may be regarded as an economic activity within the scope of Article 2(1) of the Sixth Directive, it is important to note, first, that the nature of such a transaction does not differ according to whether it is carried out by a company in connection with its admission to a stock exchange or by a company not quoted on a stock exchange.

22Second, it must be borne in mind that, under Article 5(1) of the Sixth Directive, a supply of goods involves the transfer of the right to dispose of tangible property as owner. The issue of new shares – which are securities representing intangible property – cannot therefore be regarded as a supply of goods for consideration within the meaning of Article 2(1) of that directive.

23The taxability of a share issue therefore depends on whether that transaction constitutes a supply of services for consideration within the meaning of Article 2(1) of the Sixth Directive.

24In that connection the Court has already held that a partnership which admits a partner in consideration of payment of a contribution in cash does not effect to that partner a supply of services for consideration within the meaning of Article 2(1) of the Sixth Directive (KapHag, paragraph 43).

25The same conclusion must be drawn regarding the issue of shares for the purpose of raising capital.

26As the Advocate General rightly observes in points 59 and 60 of his Opinion, a company that issues new shares is increasing its assets by acquiring additional capital, whilst granting the new shareholders a right of ownership of part of the capital thus increased. From the issuing company’s point of view, the aim is to raise capital and not to provide services. As far as the shareholder is concerned, payment of the sums necessary for the increase of capital is not a payment of consideration but an investment or an employment of capital.

27It follows that a share issue does not constitute a supply of goods or of services for consideration within the meaning of Article 2(1) of the Sixth Directive. Therefore, such a transaction, whether or not carried out in connection with admission of the company concerned to a stock exchange, does not fall within the scope of that directive.

28The answer to the first question must therefore be that a new share issue does not constitute a transaction falling within the scope of Article 2(1) of the Sixth Directive.

The second question

29In view of the answer given to the first question, it is unnecessary to answer the second.

The third question

30By its third question, the national court seeks essentially to ascertain whether Article 17(1) and (2) of the Sixth Directive confer a right to deduction of input VAT paid on supplies linked with a share issue.

31The Finanzamt Linz and the Austrian, Danish, German and Italian Governments maintain that, since a share issue associated with admission to a stock exchange does not constitute a taxable transaction within the meaning of Article 2(1) of the Sixth Directive, there is no right to deduct the VAT levied on the supplies acquired for consideration for the purposes of that share issue. In contrast to the position in Case C-408/98 Abbey National [2001] ECR I‑1361, in the present case the inputs, which are subject to VAT, do not form an integral part of Kretztechnik’s overall economic activity as a component of the price of the products that it markets. The expenses associated with those supplies are linked only to the admission of the company to a stock exchange and have no connection with its general business on which tax is paid.

32Conversely, Kretztechnik, the United Kingdom Government and the Commission consider that, even if the inputs subject to VAT were connected not with specific taxable transactions but with expenses relating to the share issue, they could form part of the overheads of the company and constitute components of the price of the products marketed by it. In those circumstances, Kretztechnik has a right to deduct the input VAT on expenditure incurred in obtaining the supplies linked to the admission of that company to a stock exchange (see Case C-4/94 BLP Group [1995] ECR I-983, paragraph 25; Case C-98/98 Midland Bank [2000] ECR I‑4177, paragraph 31, and Abbey National, paragraphs 34 to 36).

33In that connection, it must be borne in mind that, according to settled case-law, the right of deduction provided for in Articles 17 to 20 of the Sixth Directive is an integral part of the VAT scheme and in principle may not be limited. It must be exercised immediately in respect of all the taxes charged on transactions relating to inputs (see, in particular, Case C-62/93 BP Soupergaz [1995] ECR I‑1883, paragraph 18, and Joined Cases C-110/98 to C-147/98 Gabalfrisa and Others [2000] ECR I‑1577, paragraph 43).

34The deduction system is meant to relieve the trader entirely of the burden of the VAT payable or paid in the course of all his economic activities. The common system of VAT consequently ensures complete neutrality of taxation of all economic activities, whatever their purpose or results, provided that they are themselves subject in principle to VAT (see, to that effect, Case 268/83 Rompelman [1985] ECR 655, paragraph 19; Case C-37/95 Ghent Coal Terminal [1998] ECR I-1, paragraph 15; Gabalfrisa and Others, paragraph 44; Midland Bank, paragraph 19, and Abbey National, paragraph 24).

35It is clear from the last-mentioned condition that, for VAT to be deductible, the input transactions must have a direct and immediate link with the output transactions giving rise to a right of deduction. Thus, the right to deduct VAT charged on the acquisition of input goods or services presupposes that the expenditure incurred in acquiring them was a component of the cost of the output transactions that gave rise to the right to deduct (see Midland Bank, paragraph 30, and Abbey National, paragraph 28, and also Case C-16/00 Cibo Participations [2001] ECR I-6663, paragraph 31).

36In this case, in view of the fact that, first, a share issue is an operation not falling within the scope of the Sixth Directive and, second, that operation was carried out by Kretztechnik in order to increase its capital for the benefit of its economic activity in general, it must be considered that the costs of the supplies acquired by that company in connection with the operation concerned form part of its overheads and are therefore, as such, component parts of the price of its products. Those supplies have a direct and immediate link with the whole economic activity of the taxable person (see BLP Group, paragraph 25; Midland Bank, paragraph 31; Abbey National, paragraphs 35 and 36, and Cibo Participations, paragraph 33).

37It follows that, under Article 17(1) and (2) of the Sixth Directive, Kretztechnik is entitled to deduct all the VAT charged on the expenses incurred by that company for the various supplies which it acquired in the context of the share issue carried out by it, provided, however, that all the transactions carried out by that company in the context of its economic activity constitute taxed transactions. A taxable person who effects both transactions in respect of which VAT is deductible and transactions in respect of which it is not may, under the first subparagraph of Article 17(5) of the Sixth Directive, deduct only that proportion of the VAT which is attributable to the former transactions (Abbey National, paragraph 37, and Cibo Participations, paragraph 34).

38The answer to the third question must therefore be that Article 17(1) and (2) of the Sixth Directive confer the right to deduct in its entirety the VAT charged on the expenses incurred by a taxable person for the various supplies acquired by him in connection with a share issue, provided that all the transactions undertaken by the taxable person in the context of his economic activity constitute taxed transactions.

Costs

39Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. The costs incurred in submitting observations to the Court, other than those of those parties, are not recoverable.

On those grounds, the Court (First Chamber) hereby rules:

A new share issue does not constitute a transaction falling within the scope of Article 2(1) of Sixth Council Directive (77/388/EEC) of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes – Common system of value added tax: uniform basis of assessment, as amended by Council Directive 95/7/EC of 10 April 1995.

Article 17(1) and (2) of Sixth Directive 77/388, as amended by Directive 95/7, confer the right to deduct in its entirety the VAT charged on the expenses incurred by a taxable person for the various supplies acquired by him in connection with a share issue, provided that all the transactions undertaken by the taxable person in the context of his economic activity constitute taxed transactions.

[Signatures]

*

Language of the case: German.