Keywords
Summary

Keywords

1 . TAX PROVISIONS - HARMONIZATION OF LAWS - INDIRECT TAXES ON THE RAISING OF CAPITAL - CAPITAL DUTY ON CONTRIBUTIONS TO CAPITAL COMPANIES - BASIS OF ASSESSMENT - ACTUAL VALUE OF THE ASSETS AT THE TIME OF CONTRIBUTION - LIABILITIES AND EXPENSES DEDUCTIBLE - CONCEPT - EXCLUSION OF POTENTIAL LIABILITIES

( COUNCIL DIRECTIVE NO 69/335 , ART . 5 ( 1 ) ( A ))

2 . TAX PROVISIONS - HARMONIZATION OF LAWS - INDIRECT TAXES ON THE RAISING OF CAPITAL - CAPITAL DUTY ON CONTRIBUTIONS TO CAPITAL COMPANIES - BASIS OF ASSESSMENT - ACTUAL VALUE OF THE ASSETS AT THE TIME OF CONTRIBUTION - ENTERING OF ' ' PROVISIONS FOR TAXATION ' ' UNDER LIABILITIES IN THE BALANCE SHEET - NO EFFECT

( COUNCIL DIRECTIVES NO 69/335 , ART . 5 ( 1 ) ( A ) AND NO 78/660 , ART . 9 , LIABILITIES B.2 )

3 . TAX PROVISIONS - HARMONIZATION OF LAWS - INDIRECT TAXES ON THE RAISING OF CAPITAL - CAPITAL DUTY ON CONTRIBUTIONS TO CAPITAL COMPANIES - BASIS OF ASSESSMENT - ACTUAL VALUE OF THE ASSETS AT THE TIME OF CONTRIBUTION - LIABILITIES AND EXPENSES DEDUCTIBLE - CONCEPT - POTENTIAL TAX LIABILITY ON AN UNTAXED RESERVE - EXCLUSION

( COUNCIL DIRECTIVE NO 69/335 , ART . 5 ( 1 ) ( A ))

Summary

1 . IT IS EVIDENT FROM ARTICLE 5 ( 1 ) ( A ) OF COUNCIL DIRECTIVE NO 69/335 CONCERNING INDIRECT TAXES ON THE RAISING OF CAPITAL , IN THE LIGHT OF ITS OBJECTIVES , THAT THE CAPITAL DUTY IS TO BE CHARGED ON THE ' ' ACTUAL VALUE ' ' OF THE ASSETS AT THE TIME AT WHICH THEY WERE CONTRIBUTED AND NOT ON THEIR BOOK VALUE , AND THAT THE ' ' LIABILITIES AND EXPENSES ' ' WHICH ARE DEDUCTIBLE UNDER THIS PROVISION FROM THE ACTUAL VALUE OF THE CONTRIBUTIONS CAN ONLY BE THOSE THE EXISTENCE AND AMOUNT WHEREOF ARE CERTAIN .

THE NEED TO BASE THE TAXATION OF CAPITAL WHICH HAS BEEN RAISED ON CRITERIA WHICH ARE OBJECTIVE AND UNIFORM WITHIN THE COMMUNITY IN FACT PRECLUDES THE BOOK VALUE OF THE ASSETS CONTRIBUTED AND ALSO OF POTENTIAL TAX LIABILITIES CHARGEABLE ON THE PROFITS OF THE COMPANY FROM BEING TAKEN INTO CONSIDERATION . SUCH LIABILITIES , FOR THE VERY GOOD REASON THAT THEY ARE UNASCERTAINED , MAKE IT IMPOSSIBLE TO DETERMINE THE ACTUAL VALUE OF ASSETS CONTRIBUTED AT THE TIME AT WHICH THEY WERE CONTRIBUTED AND THUS TO CALCULATE ONE OF THE MAIN CONSTITUENT ELEMENTS FOR THE LEVYING OF THE DUTY , NAMELY THE BASIC TAXABLE AMOUNT .

2 . THE PRINCIPLE LAID DOWN IN ARTICLE 5 ( 1 ) ( A ) OF DIRECTIVE NO 69/335 THAT THE CHARGING OF CAPITAL DUTY ON THE ACTUAL VALUE OF THE ASSETS AT THE TIME AT WHICH THEY WERE CONTRIBUTED AND NOT ON THE BASIS OF THEIR BOOK VALUE CANNOT BE AFFECTED BY THE FACT THAT ARTICLE 9 , LIABILITIES B.2 OF COUNCIL DIRECTIVE NO 78/660 BASED ON ARTICLE 54 ( 3 ) ( G ) OF THE TREATY ON THE ANNUAL ACCOUNTS OF CERTAIN TYPES OF COMPANIES PROVIDES FOR ' ' PROVISIONS FOR TAXATION ' ' TO BE ENTERED UNDER LIABILITIES AS ' ' PROVISIONS FOR LIABILITIES AND CHARGES ' ' . THAT DIRECTIVE PURSUES AN OBJECTIVE WHICH DIFFERS CONSIDERABLY FROM THAT OF DIRECTIVE NO 69/335 : IT DOES NOT AIM AT HARMONIZING TAXATION OF THE RAISING OF CAPITAL , BUT , AS PROVIDED FOR IN ARTICLE 54 ( 3 ) ( G ) OF THE TREATY , IS AMONG THE MEASURES WHICH , IN THE CONTEXT OF THE RIGHT OF ESTABLISHMENT AIM AT ' ' CO-ORDINATING TO THE NECESSARY EXTENT THE SAFEGUARDS WHICH , FOR THE PROTECTION OF THE INTERESTS OF MEMBERS AND OTHERS , ARE REQUIRED BY MEMBER STATES OF COMPANIES OR FIRMS WITHIN THE MEANING OF THE SECOND PARAGRAPH OF ARTICLE 58 WITH A VIEW TO MAKING SUCH SAFEGUARDS EQUIVALENT THROUGHOUT THE COMMUNITY ' ' .

IN THESE CIRCUMSTANCES , ALTHOUGH ENTERING ' ' PROVISIONS FOR TAXATION ' ' UNDER LIABILITIES FULFILS THE REQUIREMENTS FOR THE PRESENTATION BY COMPANIES OF THEIR BALANCE SHEET , IN ACCORD WITH THE INTERESTS OF THE MEMBERS AND OF THIRD PARTIES , IT DOES NOT IMPLY THAT SUCH AN ENTRY MAY AFFECT THE VALUE OF CAPITAL WHICH HAS BEEN RAISED AND IS LIABLE TO THE CAPITAL DUTY INTRODUCED BY DIRECTIVE NO 69/335 .

ALTHOUGH ARTICLE 20 ( 1 ) OF DIRECTIVE NO 78/660 DOES NOT RULE OUT THE POSSIBILITY THAT PROVISIONS FOR LIABILITIES AND CHARGES ARE INTENDED TO COVER LOSSES OR DEBTS THE NATURE OF WHICH IS CLEARLY DEFINED AND WHICH AT THE DATE OF THE BALANCE SHEET ARE EITHER LIKELY TO BE INCURRED , OR CERTAIN TO BE INCURRED BUT UNCERTAIN AS TO AMOUNT OR AS TO THE DATE ON WHICH THEY WILL ARISE , PARAGRAPH ( 3 ) OF THE VERY SAME ARTICLE STATES THAT THE SAID PROVISIONS ' ' MAY NOT BE USED TO ADJUST THE VALUES OF ASSETS ' ' , AND THUS MAKES IT CLEAR THAT ENTERING THESE PROVISIONS IN THE ACCOUNTS RELATES TO THE REQUIREMENTS FOR THE PRESENTATION OF THE BALANCE SHEETS OF CERTAIN TYPES OF COMPANIES BUT CANNOT IN FACT ALTER THE BASIS FOR THE ASSESSMENT OF A TAX SUCH AS CAPITAL DUTY WHICH IN SUBSTANCE IS BASED ON THE ACTUAL VALUE OF THE ASSETS .

3 . THE PROVISIONS OF ARTICLE 5 ( 1 ) ( A ) OF DIRECTIVE NO 69/335 MUST BE INTERPRETED TO MEAN THAT THOSE PROVISIONS PREVENT A MEMBER STATE , IN ASSESSING THE LIABILITY TO CAPITAL DUTY ON THE RAISING OF THE CAPITAL OF A NEWLY-FORMED LIMITED COMPANY , WHOSE SHARE CAPITAL IS CREATED BY CONTRIBUTIONS FROM AN EXISTING UNDERTAKING BELONGING TO ONE OF THE FOUNDERS , FROM GRANTING A DEDUCTION FOR THE POTENTIAL TAX LIABILITY ON AN UNTAXED RESERVE CREATED WHEN THE AFORESAID FOUNDER CONTRIBUTED TO THE NEW COMPANY THE SAID UNDERTAKING ' S GOODS IN STOCK AND GOODS ON ORDER UNDER BINDING CONTRACTS AT A VALUE WRITTEN DOWN FOR TAX PURPOSES LESS THAN THEIR ACTUAL VALUE .

LIKEWISE , IN THE CIRCUMSTANCES RELATED ABOVE , ARTICLE 5 ( 1 ) ( A ) OF DIRECTIVE NO 69/335 PRECLUDES A DEDUCTION ' S BEING ALLOWED FOR THE AMOUNT OF ANY POTENTIAL TAX WHICH THE NEWLY-FORMED COMPANY WOULD HAVE TO PAY IF , DURING THE YEAR IN WHICH IT WAS FORMED , IT REALIZED A PROFIT FROM THE RESERVE RESULTING FROM THE WRITING-DOWN OF THE CONTRIBUTIONS FOR TAX PURPOSES AND THEREBY OBTAINED A CORRESPONDING AMOUNT OF ACTUAL INCOME LIABLE TO TAX AS SUCH .