Important legal notice

61998C0426

European Court reports 2002 Page I-02793

Opinion of the Advocate-General

I - Object of the proceedings

In the present action, the Commission applies for a declaration that, by imposing for the benefit of the o ov (hereinafter Lawyers' Fund) and the o ovo v (hereinafter Lawyers' Welfare Fund) additional charges on the formation of public limited liability companies and private limited liability companies, on the publication and alteration of their statutes and on the increase of their capital, the Hellenic Republic has failed to fulfil its obligations under the EC Treaty and in particular under Articles 7 and 10 of Council Directive 69/335/EEC of 17 July 1969 concerning indirect taxes on the raising of capital, as amended by Council Directive 85/303/EEC of 10 June 1985 (hereinafter the Directive).

II - Legal framework

A - Community law

Article 7 of Directive 69/335/EEC, as amended by Directive 85/303/EEC, provides:

The exemption shall be subject to the conditions which were applicable, on that date, for the grant of the exemption or, as the case may be, for imposition at a rate of 0.50% or less.

The Hellenic Republic shall determine which transactions it shall exempt from capital duty.

Article 10 of Directive 69/335/EEC 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 Article 4;

(b) in respect of contributions, loans or the provision of services, occurring as part of the transactions referred to in Article 4;

(c) in respect of registration or any other formality required before the commencement of business to which a company, firm, association or legal person operating for profit may be subject by reason of its legal form.

Article 12(1) of Directive 69/335/EEC contains a supplementary list of taxes and duties which Member States may, in derogation from Articles 10 and 11, charge to capital companies in respect of the transactions referred to there. These duties include under Article 12(1)(e) duties paid by way of fees or dues.

B - National law

Under Article 10(1)(p)(aa) of Legislative Decree No 4114/1960, the Lawyers' Fund is financed in particular by the payment of an amount of one per cent. (1%) of the value of any agreement drawn up by notarial act.

The percentage rate referred to above was set at 1.30% by Article 14(1) of Law No 1512/1985.

Duty under Article 10(1)(p)(bb) of Legislative Decree No 4114/1960 is a further source of revenue for the Lawyers' Fund; this provision states as follows:

(1) increases in capital by means of an alteration to the statutes of the abovementioned companies and of private limited liability companies, to the extent that the increases in capital of the private limited liability companies occur within twelve (12) months of their formation;

(2) the capital of partnerships and limited partnerships which are transformed into public limited liability companies or private limited liability companies, and vice versa and

(3) acts by which the period of existence of companies is extended. In this case, the abovementioned sum shall be paid in respect of the amount of the companies' capital on which the corresponding stamp duty is payable. The duty which, under the abovementioned provisions, must be paid to the Fund may not in any case be less than half of the minimum stamp duty which, on each occasion, is prescribed in respect of the statutes of the companies. All other alterations to the statutes and the dissolution of companies shall be subject to a fixed duty of GRD one hundred (100) payable to the Fund.

Furthermore, the following is provided for by Article 17 of Law No 1676/1986:

In accordance with the provisions of the present law, a duty called "duty on the concentration of capital" shall be imposed on:

(a) commercial companies and professional associations,

(b) cooperative organisations of any level, all other companies, legal persons, associations of persons and partnerships, to the extent that they operate for profit,

(c) branches of foreign companies.

Under Article 21 of this Law, the percentage rate for this duty is set at one per cent. (1%) of the taxable value.

Moreover, it appears from Royal Decree No 22/1956 that an amount of 1% of the capital of partnerships and of private limited liability companies is levied for the benefit of the Lawyers' Welfare Fund, which is payable at the time when the statutes of such partnerships and companies are published at the Court of First Instance, Athens (Protodikio Atheni), as well as a further amount equal to two thirds of the stamp duty (0.5% of the capital) at the time of publication of the acts extending the period of existence of such partnerships and companies.

III - Pre-litigation procedure and procedure before the Court

As the Commission takes the view that in Greece the total burden of indirect taxes on the formation of a company, the publication and the alteration of its statutes and the increase of its capital goes far beyond the maximum rate authorised under Article 7 of Directive 69/335/EEC as amended by Directive 85/303/EEC, it initiated an infringement procedure under Article 169 of the EC Treaty (now Article 226 EC) against the Hellenic Republic by a letter of formal notice of 3 February 1993. The Greek Government replied by letter dated 6 May 1993. As this letter did not, in the opinion of the Commission, dispel the suspicion of a failure to fulfil obligations, it delivered a reasoned opinion to the Hellenic Republic on 23 February 1996, in which it requested the latter to take the necessary measures within two months. The Greek Government responded by letter dated 19 June 1996.

Since the Commission arrived at the view that the Hellenic Republic had failed to fulfil its obligations, it brought an action against the Hellenic Republic at the Court by application dated 20 November 1998, registered at the Registry of the Court on 26 November 1998.

The Commission applies

IV - Analysis of the plea in law submitted by the Commission

The Commission founds the incompatibility of the disputed provisions of Greek law with the provisions of Directive 69/335/EEC in substance on the basis that the duties concerned are indirect taxes within the meaning of Directive 69/335/EEC, the amount of which exceeds the authorised amount. In contrast, the Hellenic Republic claims in substance that the disputed duties are not indirect taxes within the meaning of Directive 69/335/EEC, but are instead the employer's share of social security contributions. As an alternative argument, the Hellenic Republic submits that the duties concerned are in any case compatible with the Directive, in that they are paid by way of fees or dues within the meaning of the Directive.

In accordance with the submissions of the parties, what must be examined first is the legal nature of the disputed duties. If they fall under the prohibition in Article 10 of the Directive, then whether they are excepted under Article 12 thereof would require to be considered.

A - The legal nature of the disputed duties

Submissions of the parties

The Commission takes as its starting point Article 7(2) of the Directive, according to which the rate of capital duty is not to exceed one per cent., and submits first of all that the total burden under Greek law of indirect taxes on the formation of a company, the publication and the alteration of its statutes and the increase of its capital reaches 3.8%. From that it infers an infringement of the Directive, as Article 10 thereof specifically prohibits Member States from levying, apart from capital duty, any other similar taxes whatsoever.

In response to the arguments of the Hellenic Republic in the pre-litigation procedure, the Commission emphasises that there is no link of an insurance nature between the persons liable to pay the duty and the funds that are benefited, as the persons liable to pay the duty cannot be regarded as either beneficiaries or employers. The classification of the disputed duties as indirect taxes derives from the absence of a legal relationship between the persons liable to pay the tax and the funds.

The Commission rejects the view of the Greek Government, according to which the relevant duties are not indirect taxes for the reason that in the first place they are not paid as income into the State budget in the narrow sense but into the budget of public legal persons, that in the second place the purpose for which they are levied is fixed by law and that in the third place they are imposed irrespective of the tax-paying capacity of the persons liable to pay them.

The Hellenic Republic rejects these arguments and, on an alternative basis, links what it considers to be the legal nature of the disputed duties as employer contributions with the question of whether they are paid by way of fees or dues within the meaning of the Directive. In its view, the disputed duties are, as employers' contributions, part of the fees paid to notaries or lawyers, as the case may be.

Assessment

First of all, it must be recalled that the Court has consistently held that the nature of a tax, duty or charge must be determined by the Court, under Community law, according to the objective characteristics by which it is levied, irrespective of its classification under national law.

Accordingly, the legal nature of the duties in question depends on their objective characteristics, and this is so, contrary to the submission of the Hellenic Republic, irrespective in this regard of both the position of the taxable person and the classification of those duties under national law.

Therefore, what must next be examined is the objective characteristics of the various individual duties.

It must first be observed that the duty under Articles 17 and 21 of Greek Law No 1676/1986 is clearly capital duty within the meaning of Directive 69/355/EEC.

As regards the objective characteristics of the duty under Article 10(1)(p)(aa) of Greek Legislative Decree No 4114/1960 in conjunction with Article 14(1) of Greek Law No 1512/1985 for the benefit of the Lawyers' Fund in the amount of 1.30% of the value of the subject of the contract, it is to be observed that this duty is linked to the value of the subject of the contract which is notarially attested. It is not disputed that in Greece at least some of the transactions the taxation of which is intended to be harmonised by Directive 69/335/EEC must be notarially attested: for example, the formation of a public limited liability company or of a private limited liability company, and an increase of capital if it accompanies an alteration of the statutes.

Thus, it is to be observed that the duty under Article 10(1)(p)(aa) of Greek Legislative Decree No 4114/1960 in conjunction with Article 14(1) of Greek Law No 1512/1985 falls within the prohibition in Article 10 of the Directive inasmuch as the notarial attestation, required by law, of the disputed transactions is an essential formality in connection with the legal form of the company concerned and a condition for the exercise and continuation of its activity.

As regards the objective characteristics of the duty under Article 10(1)(p)(bb) of Greek Legislative Decree No 4114/1960, it is to be observed that the relevant rate of duty is to be applied inter alia to the initial capital and to increases of capital. This duty thus falls under the prohibition in Article 10 of the Directive inasmuch as it is levied on the publication of the statutes of the company or on their alteration, as the case may be. In this connection, the levying of this duty on documents by which the period of companies' existence is extended may be disregarded.

Finally, the objective characteristics of the duty under Royal Legislative Decree No 22/1956 for the benefit of the Lawyers' Welfare Fund must be considered. This duty is payable on the publication of the statutes of private limited liability companies as well as on the extension of the period of their existence and is calculated by reference to the capital of the particular company. Accordingly, it is imposed on private limited liability companies within the jurisdiction of the Athens Court of First Instance in respect of registration or any other formality required before the commencement of business to which a company, firm, association or legal person operating for profit may be subject by reason of its legal form. It therefore likewise falls within the prohibition in Article 10 of the Directive.

As an interim finding, it may therefore be stated that the additional duties in dispute appear at first sight to fall under the prohibition in Article 10 of Directive 69/335/EEC inasmuch as they are levied in addition to the duty under Articles 17 and 21 of Greek Law No 1676/1986.

What must therefore be analysed, however, is the arguments of the Greek Government according to which the duties concerned cannot be indirect taxes within the scope of the Directive because they are not paid as income into the State budget in the narrow sense but into the budget of public legal persons, the purpose for which they are levied is fixed by law and they are imposed irrespective of the tax-paying capacity of the persons liable to pay them.

The failure to take account of the tax-paying capacity of the persons liable to pay the duty very much suggests - contrary to the view of the Hellenic Republic - classifying them as indirect taxes, as indirect taxes are characterised precisely by the fact that they are imposed irrespective of the tax-paying capacity of the persons liable to pay them. On the other hand, the purpose of the duties levied and their payment into the budget of public social security providers speak against such a classification and in favour of classification as social security contributions. In this respect, the submission of the Commission seems not very enlightening, as it did not justify its view in this regard in any greater detail.

What is in any case decisive is that the classification cannot be made while divorced from the provision of Community law being considered at the time. Specifically, the demarcation between social security contributions and indirect taxes plays a role not only within the context of Directive 69/335/EEC but also, for example, in the application of Regulation (EEC) No 1408/71 in regard to the prohibition on the payment of double contributions. A recent judgment of the Court shows that, for that reason, the classification is in each case to be made in the light of the objectives of the provision that is to be applied.

Accordingly, what would appear to be decisive in the present case is that the Directive has the objective inter alia of harmonising indirect taxes on the raising of capital in order to promote the free movement of capital. For this reason, Article 10 of Directive 69/335/EEC expressly prohibits both capital duty at a rate higher than the maximum rate under Article 7 thereof (letters (a) and (b)) and indirect taxes and duties having similar characteristics (letter (c)).

33.In my opinion, the Commission has shown that the disputed duties fall under the prohibition in Article 10 of the Directive. In the light of the objectives of the Directive, these duties are therefore to be classified as indirect taxes, irrespective in this regard of how and for what purpose the money thereby raised is used.

34.For that reason, the submissions of the Greek Government concerning the classification of the duties in question as employer contributions need be considered only on an alternative basis. For the following reasons, these submissions are not persuasive. In the first place, there is no contract of service between the company liable to pay the duty - as employer - and the notary or the lawyer - as a provider of services, so that such a classification could be considered only by way of analogy, if at all. The Greek Government ultimately admits this in its rejoinder, in that it speaks of a bundle of relationships in the context of which the duties would roughly correspond to employer contributions.

35.It is equally difficult to show the existence of a three-party relationship, such as is characteristic in the context of social security, between the social security provider concerned, an employer and a supplier of services. Specifically, the disputed duties in the present case are paid initially to the notary or the lawyer, as the case may be, such that the companies concerned are not linked to the funds in question in any way. This would also appear to be the reason for the fact that the task of the notary or lawyer which is connected to that, of collecting taxes for the State and paying them, appears to be not undisputed in Greece itself. Furthermore, it is to be emphasised that both the Lawyers' Fund and the Lawyers' Welfare Fund clearly - contrary to the submissions of the Hellenic Republic in its response - have further financial resources at their disposal.

36.From all the foregoing considerations, it appears that the Commission rightly classified the duties concerned as indirect taxes. From that it follows that the total burden of indirect taxes on the formation of capital companies, the publication and the alteration of their statutes and the increase of their capital far exceeds the maximum rate provided for in Article 7 of Directive 69/335/EEC, as amended by Directive 85/303/EEC.

B -The nature of the duties in dispute as being paid by way of fees or dues

37.However, the disputed duties could be paid by way of fees or dues under Article 12(1)(e) of Directive 69/335/EEC.

Submissions of the parties

38.In case the duties concerned should fall within the scope of application of Directive 69/335/EEC, the Hellenic Republic submits that they are paid by way of fees or duties under Article 12(1)(e) thereof.

39.In particular, it submits that the duties concerned are to be regarded as part of the consideration for the activity of the individual persons insured under the social security scheme. In this connection, it refers to the judgments in Ponente Carni and Cispadana Costruzioni and in Denkavit Internationaal and Others, which, according to it, mean that an annual duty levied in respect of the registration of capital companies could be paid by way of fees or dues. Also, the levying of a fee required by law in the public interest is permissible. Accordingly, the disputed duties are permissible in that they are levied for the benefit of social security providers as consideration for the activities performed by insured persons.

40.In contrast to this, the Commission considers that remuneration for the activity of lawyers and notaries in connection with the formation of a company, the increase of its capital or the alteration of its statutes depends on agreement. Furthermore, in its view the duties concerned are not related to the lawyers' remuneration.

41.As regards the case-law cited by the Hellenic Republic, the Commission observes that the characteristics of the duties in the judgment in Ponente Carni and Cispadana Costruzioni were significantly different from the characteristics of the duties at issue here, whereas the judgment in Denkavit does not concern duties falling within the scope of application of Article 10 of Directive 69/335/EEC.

Assessment

42.The Court has consistently held that duties paid by way of fees or dues comprise only those calculated on the basis of the cost of the service rendered. Where the amount payable is wholly unrelated to the cost of the service in question or is calculated, not by reference to the costs of the transaction for which it constitutes the consideration, but to all the operational and capital costs incurred by the department responsible for that transaction, it would have to be regarded as a tax falling exclusively within the prohibition laid down in Article 10 of the Directive (Joined Cases C-71/91 and C-178/91 Ponente Carni and Cispadana Costruzioni [1993] ECR I-1915, paragraphs 41 and 42, and Modelo I [judgment in Case C-56/98 Modelo [1999] ECR I-6427], paragraph 29).

43.However, whether the duties levied on the companies concerned in the present case have this characteristic appears to be questionable. Specifically, in so far as these duties are paid to social security providers in the form of the two funds referred to, they appear at first sight to be less a fee for the activity carried out by the notaries or the lawyers as a fee for the services supplied by those two funds, which, however, are themselves not supplied to the companies liable to pay the duty. Thus, the disputed duties and the activities of the notaries and the lawyers do not stand in any relationship of mutuality.

44.Whether the judgment in Ponente Carni and Cispadana Costruzioni is relevant in the present case appears, contrary to the view of the Hellenic Republic, to be likewise questionable. Specifically, according to that judgment, Article 10 of Directive 69/335/EEC is in principle applicable to an annual duty in respect of the registration of capital companies, even though the product of that charge contributes to financing the department responsible for keeping the register of companies.

45.In this respect, the Hellenic Republic emphasised that the Court accepted that the duties at issue in that case were paid by way of fees or dues. It in fact held that duties paid by way of fees or dues may be payment collected by way of consideration for transactions required by law in the public interest such as, for example, the registration of capital companies. The Court added that the amount of such duties, which may vary according to the legal form taken by the company, must be calculated on the basis of the cost of the transaction, which may be assessed on a flat-rate basis. However, as the duties at issue in the present case are certainly not to be taken as such consideration for the activity of notaries and lawyers which is required by law in the public interest, the judgment cited seems to be irrelevant.

46.Also, the relevance of the judgment in Denkavit is not comprehensible to the reader. According to that judgment, Article 10(c) of Council Directive 69/335/EEC ... must be interpreted as not prohibiting a levy which is payable annually by virtue of the registration of an undertaking with a Chamber of Trade and Industry, even if that operation also serves, where the undertaking is owned by a capital company, as registration of that company, without that latter formality being accompanied by an increase in the levy in question. In the present case, however, the duties are neither levied periodically nor linked to the registration of the companies concerned.

47.As an interim finding, it may therefore be stated that the disputed duties cannot be regarded as part of the remuneration paid to the notary or the lawyer, as the case may be.

48.A different conclusion would be possible only if notaries and lawyers were, as organs of legal services, deemed to be part of the State, so that the financing of their old-age and sickness benefits by companies employing their services might be regarded as part of their remuneration.

49.However, such an interpretation is not persuasive. In the first place, it must be recalled that the Lawyers' Fund is financed to a considerable extent by the lawyers and notaries themselves - whether by contributions related to income, by flat-rate contributions or, over and above that, by duties on particular transactions. To accept that the disputed duties are paid by way of fees or dues would amount to treating them as employer contributions, whereas in view of their classification this is not possible. The objections of the Commission summarised above appear for that reason to be sound, so that the duties do not display the characteristics of fees or dues.

50.If the Court should none the less be of the view that the disputed duties are linked to the individual activity of notaries and lawyers, then at least the calculation of them - the amount of which increases in direct proportion to the capital of the company and in respect of which there is no upper limit - appears, in the light of existing case-law, to merit discussion.

51.In its judgment in Case C-134/99, the Court held inter alia that, fees or dues within the meaning of Article 12(1)(e) of Directive 69/335, as amended by Directive 85/303, do not cover charges levied for entering an increase in the share capital of a capital company in a national register of legal persons, such as the charges at issue in the main proceedings, the amount of which increases in direct proportion to the share capital raised and in respect of which there is no upper limit.

52.In doing so, the Court relied on the principle, already referred to above, according to which a duty must display a link to the actual costs incurred in providing the service and must be calculated on the basis of those costs, for which it constitutes the consideration. In this connection, the Court stated that, charges with no upper limit which increase directly in proportion to the nominal value of the capital raised cannot, by their very nature, amount to duties paid by way of fees or dues within the meaning of the Directive. Even if there may be a link in some cases between the complexity of a registration and the amount of capital raised, the amount of such charges will generally bear no relation to the costs actually incurred by the authority on the registration formalities (Fantask and Others, paragraph 31).

53.In the present case, it was not disputed that all the disputed duties are calculated with no upper limit and increase directly in proportion to the capital of the company. For this reason alone, they are not paid by way of fees or dues, and there is no need to consider the further principles relating to the lawfulness of the means of calculating fees with regard to Article 12(1)(e) of Directive 69/335/EEC.

54.From all the foregoing considerations, it appears that the disputed duties are not paid by way of fees or dues within the meaning of Article 12(1)(e) of Directive 69/335/EEC.

C -The application of the Hellenic Republic for the restriction of the temporal effect of the decision to be made by the Court

55.At the end of the oral hearing, the representative of the Hellenic Republic requested that, if the Court were not to give judgment in its favour, a decision be made which ... did not in any case have retrospective effect. By way of justification, the representative of the Hellenic Republic pointed to a danger, of which no more detailed evidence was offered, of a financial crisis for the Lawyers' Fund and also to the requirements of the protection of legitimate expectations.

56.This application appears to merit discussion in a number of respects.

57.Apart from the question of the lateness of the request, its legal nature too - an independent reply or a plea in law within the meaning of Article 42(2) of the Rules of Procedure of the Court - appears at first questionable. In the latter case - in contrast to new applications - it would have to be examined in accordance with Article 42(2) of the Rules of Procedure whether new pleas in law are based on a change in the factual or legal circumstances.

58.However, as the application was made only at the end of the oral hearing, and without any substantive justification for which any detailed evidence was offered as well as without justification of the lateness in time, it is submitted to the Court that the application should be rejected in accordance with Article 42(2) of the Rules of Procedure as inadmissible, and in any case as unfounded.

59.For reasons of completeness, it must also be observed that which of the effects of the judgment of the Court would have to be subject to a temporal restriction also remains unclear. Specifically, an action under Article 169 of the EC Treaty (now Article 226 EC) is a declaratory action; the judgment of the Court is accordingly declaratory in nature.

60.In this connection, reference must be made to the judgment in Joined Cases 314/81, 315/81, 316/81 and 83/82, which holds that if the Court finds in proceedings under Articles 169 to 171 of the EEC Treaty that a Member State's legislation is incompatible with the obligations which it has under the Treaty the courts of that State are bound by virtue of Article 171 to draw the necessary inferences from the judgment of the Court. However, it should be understood that the rights accruing to individuals derive, not from that judgment, but from the actual provisions of Community law having direct effect in the internal legal order.

61.The Court has consistently held that entitlement to the repayment of charges levied by a Member State in breach of Community law is a consequence of, and an adjunct to, the rights conferred on individuals by the Community provisions prohibiting such charges.

62.If the application of the representative of the Hellenic Republic seeks to create a link to decisions regarding the restriction of the temporal effects of judgments on interpretation in the context of proceedings for preliminary rulings, the basis on which it proceeds appears at first glance perhaps to be comparable, in that both proceedings - one indirectly, the other directly - have as their object the question of the compatibility of national rules with Community law. However, reference must be made in this regard to the difference between the nature of proceedings for a preliminary ruling and proceedings concerning failure to fulfil obligations, which are also manifested in the different effect of the judgment concluding the particular proceedings. In the context of proceedings for a preliminary ruling, the Court can therefore exceptionally regard itself as being moved, to restrict for any person concerned the opportunity of relying upon the provisions thus interpreted with a view to calling in question legal relationships established in good faith.

63.Against this background, the application of the representative of the Hellenic Republic is to that extent also devoid of practical effect.

D -Costs

65.Under Article 69(2) of the Rules of Procedure, the unsuccessful party must be ordered to pay the costs if they have been applied for. As the Hellenic Republic has been unsuccessful in its submissions, and the Commission has made an appropriate application, the Hellenic Republic is to be ordered to pay the costs.

Conclusion

66.On the basis of the foregoing considerations, it is proposed that the Court should:

(1)declare that, by imposing for the benefit of the Lawyers' Fund and the Lawyers' Welfare Fund, in addition to the duty on the raising of capital under Articles 17 and 21 of Greek Law No 1676/1986, additional charges on the formation of public limited liability companies and private limited liability companies, on the publication and alteration of their statutes and on the increase of their capital, the Hellenic Republic has failed to fulfil its obligations under Articles 7 and 10 of Council Directive 69/335/EEC concerning indirect taxes on the raising of capital, as amended by Council Directive 85/303/EEC of 10 June 1985;

(2)reject the application of the Hellenic Republic for a restriction of the temporal effect of the judgment;

(3)order the Hellenic Republic to pay the costs of the proceedings.