OPINION OF ADVOCATE GENERAL

delivered on 25 March 2010 1

Case C‑35/09

Ministero dell’Economia e delle Finanze

(Reference for a preliminary ruling from the Corte suprema di cassazione (Italy))

(Indirect taxes on the raising of capital – Capital duty – Tax on the registration of an instrument recording an increase in the capital of a capital company – Increase in capital not carried out – National legislation making the company and the notary attesting to the increase in capital jointly and severally liable for payment of duty – Proportionality of the attesting notary’s means of defence)

1.The Corte Suprema di Cassazione (Italy) has referred to the Court for a preliminary ruling three questions relating to Council Directive 69/335/EEC of 17 July 1969 concerning indirect taxes on the raising of capital 2 (‘Directive 69/335’), which are worded as follows:

(1) Is Article 4(1)(c) of Directive 69/335/EC, which provides that an increase in the capital of a capital company by contribution of assets of any kind is to be subject to capital duty, to be interpreted as meaning that an actual contribution is to be taxable, but not a mere decision to increase the share capital which remains essentially unimplemented?

(2) Is Article 4(1)(c) of Directive 69/335/EC to be interpreted as meaning that the duty must be levied exclusively on the company to which the capital is contributed and not also on the public officer who drafts or certifies the instrument?

(3) In any event, are the means of defence afforded to that public officer by the Italian legislation consistent with the principle of proportionality, in light of the fact that, under Article 38 of Decree No 131 of the President of the Republic of 26 April 1986, it is irrelevant whether the resolution to increase share capital is null and void or may be annulled, and repayment of the duty paid may be effected only after a civil judgment declaring the instrument null and void or annulling it has become final?

2.The referring court considers that the Court’s replies to the questions are necessary in order for it to be able to give a ruling on the appeal in cassation lodged by the Ministero dell’Economia e delle Finanze and the Agenzia delle Entrate against the judgment of 5 July 2004 delivered by the Commissione tributaria regionale del Veneto (Italy) upholding the appeal of Mr Speranza, a notary in Padua, in connection with a demand for payment of registration duty.

3.The origin of the dispute goes back to 30 July 1993, the date of the extraordinary general meeting of LEJA Srl (‘LEJA’), a private company established in Padua, at which a resolution was passed to convert the company into a public limited company and to increase the share capital from ITL 20 000 000 to ITL 58 400 000 000 (‘the resolution of 30 July 1993’). The whole of the increase was to be subscribed for by Tecnoitalia Srl (‘Tecnoitalia’), one of the two shareholders of LEJA, in return for a contribution of 6 244 shares in Lama d.d., a company governed by Slovenian law, the value of which was estimated by an ad hoc valuation at ITL 58 380 000 000.

4.The minutes of the general meeting were drawn up by Mr Speranza, the abovementioned notary, who consequently became jointly and severally liable for payment of registration duty, on the assumption that the duty is classified as a principal tax and not as a supplementary tax.

5.As the resolution of 30 July 1993 was definitively sanctioned by the Corte d’appello di Venezia (Appeal Court, Venice), and was registered on application by Mr Speranza, the instrument recording the increase in capital became subject to registration duty.

6.The revenue authority issued a demand for payment of ITL 578 102 000, which was notified to both LEJA and Mr Speranza as the person jointly and severally liable for payment.

7.However, the capital increase resolved upon by LEJA was not put into effect because it transpired that Tecnoitalia, which was to have subscribed for the whole of the increase, had never had at its disposal the shares which were to have been contributed for that purpose. LEJA was then declared insolvent. Consequently, Mr Speranza, as the notary who attested the document, alone remained liable for registration duty.

8.Mr Speranza challenged the demand for payment and his application was dismissed at first instance but upheld, on appeal, by the Commissione tributaria regionale del Veneto.

9.Unlike the Commissione tributaria regionale del Veneto, which classified the duty as a supplementary tax, the referring court is inclined to classify it as a principal tax and therefore considers that, on the basis of national law, Mr Speranza’s action must be dismissed. Nevertheless, the referring court shares Mr Speranza’s doubts as to whether the national legislation is compatible with Directive 69/335.

10.Before the Court, written observations have been submitted by Mr Speranza, the Italian Government and the European Commission. They were all represented at the hearing which took place on 28 January 2010, at the request of Mr Speranza and the Italian Government.

Legal context

11.As is clear from the second recital in the preamble to Directive 69/335, the objective of the Directive is to eliminate, by means of harmonisation, obstacles to the free movement of capital consisting in discrimination, double taxation and disparities caused by indirect taxes on the raising of capital which were then applicable in the Member States.

12.The seventh recital states that the duty on the raising of capital should be harmonised, with regard to both its structure and its rates.

13.Article 1 of Directive 69/335 provides that the Member States are to charge on contributions of capital to capital companies a duty harmonised in accordance with the provisions of Articles 2 to 9 of the directive.

14.Article 4 of Directive 69/335 sets out a list of transactions which the Member States may or must make subject to capital duty. Accordingly, Article 4(1)(c) provides that the Member States must levy capital duty on ‘an increase in the capital of a capital company by contribution of assets of any kind’.

15.Article 5(1)(a) of Directive 69/335 provides as follows:

‘[capital] duty shall be charged: in the case of formation of a capital company or of an increase in its capital or assets, as referred to in Article 4 (1)(a), (c) and (d): on the actual value of assets of any kind contributed or to be contributed by the members, after the deduction of liabilities assumed and of expenses borne by the company as a result of each contribution. Member States may postpone the charging of capital duty until the contributions have been effected.’

National law

16.Registration duty is governed by Decree No 131 of the President of the Republic of 26 April 1986 (Ordinary Supplement to GURI No 99 of 30 April 1986) in the version applicable at the material time (‘Decree No 131/1986’).

17.Article 1 of Decree No 131/1986 provides that ‘registration duty shall be payable … on instruments subject to compulsory registration and on those voluntarily submitted for registration’.

18.Under Article 2(a) of Decree No 131/1986, the instruments listed in the Tariff annexed to the decree are subject to registration, in accordance with the following articles, if they have been drawn up in writing in the territory of the State.

19.Under Article 4(a), note 5, of part I of the tariff annexed to Decree No 131/1986, instruments recording an increase in capital are subject to duty equivalent to 1% of the increase approved.

20.Article 27(5) of Decree No 131/1986 provides that instruments recording an increase in capital are subject to duty as soon as they have been approved.

21.Article 38 of Decree No 131/1986 provides as follows: ‘The fact that an instrument is null and void or may be annulled does not extinguish the obligation to apply for the registration thereof and to pay the duty thereon. The duty paid in accordance with paragraph (1) shall be refunded, as to the amount exceeding the fixed rate, where the instrument is declared null and void or is annulled on grounds not involving fault on the part of either party, by a judgment which has become final and is not open to ratification, validation or confirmation’.

22.The persons liable for the duty are specified in Article 57 of Decree No 131/1986, which is worded as follows: ‘In addition to the public officers who drafted, certified or authenticated the instrument and the persons on whose behalf registration is applied for, the contracting parties, the persons who signed or should have signed the declarations referred to in Articles 12 and 19 and those who requested application of the provisions referred to in Articles 633, 796, 800 and 825 of the Code de Civil Procedure, shall be jointly and severally bound to pay the duty. The liability of public officers shall not extend to the payment of supplementary and rectifying taxes.’

Assessment

23.I should like to begin by mentioning that the Court has already considered the registration duty governed by Decree No 131/1986 in Aro Tubi Trafilerie, 3 which concerned the registration duty paid on a merger between companies. In the judgment, the Court stated that that duty has the characteristics of ‘capital duty’, as provided for in Articles 1 to 9 of Directive 69/335. 4 Although the present case concerns registration duty paid in connection with an increase in capital, it nevertheless constitutes capital duty for the purposes of Articles 1 to 9 of Directive 69/335.

24.Consequently, I shall proceed on the basis of the premiss established in the judgment cited above. In the light of the line of case‑law beginning with Fantask and Others, 5 it must, however, be said that, in view of the evidence in the file, it is with some hesitation that I classify the Italian registration duty in question as a capital duty for the purpose of Articles 1 to 9 of Directive 69/335 and not as a tax akin to capital duty within the meaning of Article 10 of the Directive. If the Italian registration duty were a tax akin to capital duty, the national legislation would be contrary to Directive 69/335 and therefore the questions referred to the Court would be pointless.

25.The Italian Government considers that the logical order of the questions referred should be changed and, in its view, the second question is the fundamental one.

26.I do not agree. As the need for a reply to the second and third questions depends on the answer to the first, I shall deal with the questions in the order in which they have been put.

First question

27.In essence, the first question from the referring court asks whether liability to capital duty in respect of an increase in the capital of a capital company by contribution of assets of any kind, as provided for by Article 4(1)(c) of Directive 69/335, depends on whether that contribution was in fact effected.

28.First of all, it should be noted that the phrase ‘subject to capital duty’, used by the referring court and in Article 4(1) of Directive 69/335, designates a tax process which is triggered by a chargeable event, consisting of more than one stage.

29.Article 4(1) of Directive 69/335 contains only a list of the transactions which are subject to capital duty, which include an increase in the capital of a capital company by contribution of assets of any kind. That provision does not deal with the different stages of the tax process such as the assessment and collection of duty. It follows that Article 4(1) can be of no assistance, directly or indirectly, in replying to the first question referred by the Corte Suprema di Cassazione.

30.Nevertheless, it is necessary to ascertain whether any other provisions of Directive 69/335 may be of assistance in answering the question referred.

31.The Court has already considered the registration duty governed by Decree No 131/1986 in Aro Tubi Trafilerie, which concerned the registration duty paid on a merger between companies. In the judgment, the Court stated that that duty has the characteristics of ‘capital duty’, as provided for in Articles 1 to 9 of Directive 69/335. Although the present case concerns registration duty paid in connection with an increase in capital, it nevertheless constitutes capital duty for the purposes of Articles 1 to 9 of Directive 69/335.

The relevant provision could, in my opinion, be Article 5(1)(a) of Directive 69/335, which, with regard to the charging of capital duty in the case of an increase in the capital of a capital company, defines the basis for assessing such duty. For the purpose of that provision, the basis of assessment is the actual value of assets of any kind contributed or to be contributed by the members, after the deduction of liabilities assumed and of expenses borne by the company as a result of each contribution.

32.Furthermore, Article 5(1)(a) of Directive 69/335 gives the Member States the option of postponing the charging of capital duty until the contributions have been effected.

33.As the Court has already held, neither that Article nor Article 4(1) of Directive 69/335 specifies the point at which the chargeable event for capital duty occurs. Future contributions may also give rise to the levying of capital duty. Payments which a natural or legal person is obliged to make and which are definite are to be regarded as coming within the scope of that provision.

34.The requirement established by the abovementioned case-law that the future contribution is to be definite, must, in my view, be understood to mean that the contribution must be unconditional.

35.I think that it may be inferred from Article 5(1)(a) of Directive 69/335, in accordance with the abovementioned judgment, that the charging of capital duty, as one of the stages in a tax process, consisting in the calculation of the duty by applying a rate to the basic taxable amount, may precede the actual making of the contribution itself.

36.Article 5(1)(a) of Directive 69/335 allows the Member States a discretion in determining the point at which duty is to be charged. The option which they have of postponing the charging of capital duty until the contributions have been effected means that the Member States may also charge the duty even before the contribution itself is made.

37.Consequently, the possibility of charging capital duty even before the contribution is actually made means that the event giving rise to capital duty, which must precede the charging of the duty, may take the form of a legal instrument, as in the present case.

38.However, it must be added that the charging of capital duty must not be confused or equated with collection. Charging, as the stage at which the duty is calculated by applying a rate to the basic taxable amount, and collection, as the stage of actual payment of the duty, are two different stages of the tax process.

39.Whereas the charging of capital duty by the Member States is partly governed by Article 5(1)(a) of Directive 69/335, the Directive contains no provisions relating to collection. It must also be borne in mind that, according to the seventh recital in the preamble to Directive 69/335, its objective is to harmonise capital duty with regard to both its structure and its rates. It follows that Directive 69/335 does not seek to harmonise the entire tax process concerning capital duty as such. Consequently, legislation on the collection of capital duty and on the obligation to pay the tax due is a matter for the Member States.

40.Nevertheless, account must also be taken of the fact that if capital duty were charged and collected irrespective of whether the capital contribution was actually made, that could deprive Article 1 of Directive 69/335 of some of its material scope, since it provides that the Member States are to charge on contributions of capital to capital companies a duty harmonised in accordance with the provisions of Articles 2 to 9 of the directive.

41.The charging and collection of capital duty in the absence of an actual capital contribution would result in protecting the interest of the State in the charging and collection of taxes to such an extent as to cause injustice to taxpayers and enrich the State which levied the tax, in spite of the fact that the contribution has not in fact been effected.

42.Therefore, I consider that the Court’s reply to the first question should be that Article 4(1)(c) of Directive 69/335 must be interpreted as meaning that the decision alone to increase the share capital of a capital company by means of the contribution of assets of any kind may be made subject to capital duty. However, the taxpayer must be given the opportunity in the tax procedure to raise effectively the defence that the contribution cannot be effected.

Second question

43.By its second question, the referring court asks, in essence, who is liable for capital duty or, more precisely, who is liable for the tax arising in connection with an increase in the share capital of a capital company by means of the contribution of assets of any kind within the meaning of Article 4(1)(c) of Directive 69/335.

44.To reply to that question, the concept of ‘tax liability’ must first be clarified. In principle, it is the obligation of a taxpayer to pay the tax which he has been charged by operation of law and in accordance with the law.

45.The existence of such liability on the part of a taxpayer is always dependent on a chargeable event which permits the State to charge and, subsequently, collect the tax. In the present case, the resolution to increase the share capital of a public company by means of the contribution of shares in another company is the chargeable event giving rise to registration duty.

46.The Court has already held that, according to the scheme and structure of Directive 69/335, capital duty is to be levied on the capital company receiving the contribution in question. That means, in the present case, that LEJA is liable for capital duty, not Mr Speranza as the notary who certified the document in question. It was LEJA that received or, rather, ought to have received, the contribution which was approved.

47.On that point it must be observed, however, that Directive 69/335 does not as such regulate the arrangements for the collection of capital duty. Consequently, it appears that, in general, these arrangements are the responsibility of the Member States. However, the arrangements for the collection of capital duty also include, in my view, any provision designed to ensure that the taxpayer’s obligation to pay tax is fulfilled.

48.Joint and several liability on the part of persons who, for certain reasons laid down by law or by operation of law, play a part in the creation of liability to tax, is one of the means commonly used by Member States to ensure that a taxpayer’s obligation to pay tax is fulfilled. That is also the case here.

49.Even though the notary is liable for payment of an amount corresponding to registration duty, it is not, so far as he is concerned, a liability to tax arising from the event giving rise to registration duty. The notary’s liability for registration duty is consequent upon his joint and several liability.

50.It should also be added that, in the notary’s case, the liability and the obligation are joint and several. Consequently, registration duty cannot be paid twice. Where liability is joint and several, the discharge of the obligation by one of the parties extinguishes the obligation on the part of the others.

51.The reply to the second question referred should therefore be that the only person with liability to tax in connection with an increase in the share capital of a capital company by means of the contribution of assets of any kind within the meaning of Article 4(1)(c) of Directive 69/335 is the company receiving the contribution. That liability to tax should not be confused with the notary’s liability for payment of an amount corresponding to registration duty by virtue of the joint and several liability imposed on him under national law as a means of ensuring that the duty will be paid.

Third question

52.By its third question, the referring court seeks to ascertain whether the means of defence afforded to the public officer by the Italian legislation are consistent with the principle of proportionality, in view of the fact that, under Article 38 of Decree No 131/1986, it is irrelevant whether the resolution to increase the share capital is null and void or may be annulled and that the duty paid can be repaid only after a civil judgment declaring the instrument null and void or annulling it has become final.

53.As I have already said, since Directive 69/335 does not as such regulate the arrangements for the collection of capital duty, it does not regulate the means of ensuring that the tax liability is met. Those matters have no connection with the subject matter or purpose of Directive 69/335.

54.Consequently, the arrangements for the collection of capital duty and the protection of the person who is jointly and severally liable – that is, in the present case, the notary who drafted or certified the instrument – against the charging and collection of registration duty, representing the capital duty payable on an increase in the share capital of a capital company by means of the contribution of assets of any kind within the meaning of Directive 69/335, where the contribution in question has not in fact been effected, are matters for the Member States. I must point out that, in my opinion, neither the position of the notary as a person jointly and severally liable for the payment of registration duty nor the means of defence which can be relied on by that person have any effect on the attainment of the objectives pursued by Directive 69/335.

55.In view of the foregoing, I am of the view that the Italian Government is right in asserting that the Court has no jurisdiction to reply to the third question.

56.However, for the sake of completeness, I shall consider the relationship that may exist between the principle of proportionality, as established in the Court’s case-law in similar cases, and the protection of the notary against the charging and collection of registration duty within the scope of Directive 69/335 in the case in which the contribution has not in fact been effected.

57.It is clear from the Court’s case-law that the principle of proportionality requires Member States to employ means which, whilst enabling them effectively to attain a specific objective, cause the least possible detriment to the objectives and principles laid down by the relevant Community legislation, in the present case Directive 69/335.

58.In the present case, it follows that, even though Member States may adopt measures to protect their financial interests as best they can, in particular their interest in the charging and collection of capital duty, such measures must not go beyond what is necessary to achieve that objective.

59.The referring court’s description of the Italian legislation on registration duty shows that that legislation provides for the possibility of repayment of duty paid, provided that the instrument by virtue of which the duty was charged is declared null and void or is annulled. However, the tax courts have no jurisdiction to make such a decision, which falls within the jurisdiction of the civil courts.

60.In the order for reference, the national court states that, under Article 27 of Law No 89 of 16 February 1913 on the notarial profession, a notary is also under a duty to act when requested to do so. However, the Italian Government stated that, under Article 28 of that law, a notary is permitted to refuse to draw up any document when called upon to do so if the parties do not provide him with the funds for taxes, fees and expenses relating to the document. Such authorisation may be interpreted as a means of preventive protection against any obligation to pay registration duty on the basis of joint and several liability.

61.In addition, it must not be forgotten that the notary has a right of redress against the company where he has been obliged to discharge his joint and several obligation.

62.It does not seem that the fact that the notary can refuse to draw up the document and exercise his right of redress against the company is likely to have a decisive influence on the reply to be given to the third question. Clearly, this does not mean that I would dispute the importance of those possibilities.

63.I am of the view that the decisive issue is whether there is legal protection for a notary who seeks to obtain reimbursement of the amount corresponding to the duty paid on the basis of his joint and several liability.

64.As I have already observed, the resolution to increase the share capital of a company, which has to be drawn up by the notary, constitutes the chargeable event giving rise to Italian registration duty. The chargeable event exists as an objective fact and, for as long as it exists, it produces the legal effects provided for by law.

65.Consequently, where the resolution to increase the share capital of a company has not been declared null and void or annulled, the chargeable event stands and is sufficient to justify the right of the State to charge and collect the capital duty.

66.For that reason, as it is possible to obtain repayment of duty paid only after obtaining a civil judgment declaring the resolution to increase the share capital of the company in question null and void or annulling the resolution, I consider that the means of defence afforded to the notary by the Italian legislation are consistent with the principle of proportionality because, in actual fact, that is the only means of cancelling the resolution constituting the event giving rise to capital duty and its legal effects.

Conclusion

67.In the light of the foregoing considerations, I propose that the Court reply as follows to the questions referred by the Corte suprema di cassazione:

(1)Article 4(1)(c) of Council Directive 69/335/EEC of 17 July 1969 concerning indirect taxes on the raising of capital must be interpreted as meaning that the decision alone to increase the share capital of a capital company by means of the contribution of assets of any kind may be made subject to capital duty. However, the taxpayer must be given the opportunity in the tax procedure to raise effectively the defence that the contribution cannot be effected.

(2)The only person with liability to tax in connection with an increase in the share capital of a capital company by means of the contribution of assets of any kind within the meaning of Article 4(1)(c) of Directive 69/335 is the company receiving the contribution. That liability to tax should not be confused with the notary’s liability for payment of an amount corresponding to registration duty by virtue of the joint and several liability imposed on him under national law as a means of ensuring that the duty will be paid.

(3)Where a public officer who has drafted, certified or authenticated an instrument recording an increase in the share capital of a capital company is jointly and severally liable for payment of capital duty, that officer’s right to obtain repayment of the duty paid only after obtaining a civil judgment, which has become final, declaring the resolution to increase the share capital of the company in question null and void or annulling it, is, having regard to the legal effects of the role assigned to the notary in connection with the instrument increasing the capital, consistent with the principle of proportionality.

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(1) Original language: French.

(2) OJ English Special Edition 1969 (II), p. 412. With effect from 1 January 2009, Directive 69/335 was repealed by Council Directive 2008/7/EC of 12 February 2008 concerning indirect taxes on the raising of capital (OJ 2008 L 46, p. 11).

(3) Case C-46/04 [2006] ECR I-3009.

(4) See, to that effect, Case C-46/04, paragraph 28.

(5) Case C-188/95 [1997] ECR I-6783. The same approach was taken in Case C‑134/99 IGI [2000] ECR I-7717, and Case C-206/99 SONAE [2001] ECR I-4679.

(6) Emphasis added.

(7) See, to that effect, Case C-339/99 ESTAG [2002] ECR I-8837, paragraphs 49 and 50.

(8) This approach may appear contrary to that taken by the Court in Aro Tubi Trafilerie (cited in footnote 3, paragraph 27), in which the Court took the view that, because of the proportional nature of the registration duty at issue, charged at the rate of 1% on the value of contributions of capital, the event giving rise to such duty was the contribution itself. However, that approach must be considered in the context of that particular case, in which the Court sought to distinguish capital duty from a tax akin to capital duty for the purpose of Directive 69/335.

(9) It should be noted that, in the order for reference, the national court stated that registration duty was under national law a typical tax on documents.

(10) See, to that effect, Case C-339/99 ESTAG [2002] ECR I-8837, paragraphs 44 to 47, and Case C‑494/03 Senior Engineering Investments [2006] ECR I-525, paragraph 25.

(11) See, to that effect, Joined Cases C-286/94, C-340/95, C-401/95 and C-47/96 Molenheide and Others [1997] ECR I-7281, paragraphs 46 and 47; Case C-409/04 Teleos and Others [2007] ECR I-7797, paragraph 52; Case C-271/06 Netto Supermarkt [2008] ECR I-771, paragraphs 19 and 20; and Case C-25/07 Sosnowska [2008] ECR I-5129, paragraph 23.

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