Keywords
Summary

Keywords

Tax provisions – Harmonisation of laws – Indirect taxes on the raising of capital – Increase in the assets of a company

(Council Directive 69/335, Art. 4(2)(b))

Summary

On a proper construction of Article 4(2)(b) of Directive 69/335 concerning indirect taxes on the raising of capital, as amended by Directive 85/303, the absorption by a member of a company’s losses pursuant to an undertaking given by the member before the losses were sustained, the sole purpose of which was to cover such losses, does not increase the assets of that company.

Although the absorption by a member of losses incurred by a company must, in principle, be regarded as a contribution increasing the company’s assets, that is not the case in the circumstances mentioned above. That exception is justified by the fact that, by virtue of the obligation accepted beforehand by its member, the company in whose favour such an undertaking is entered into will not be able to record a loss, whatever the results of its economic activity, for any losses will automatically be passed on to its member. Consequently, in the specific situation in which such an undertaking has been given before the company records a loss, it is established that the results of the company’s economic activity will not affect its economic potential.

(see paras 21-24, 26, operative part)