Case C-28/95

A. Leur-Bloem

v

Inspecteur der Belastingdienst/Ondernemingen Amsterdam 2

Reference for a preliminary ruling from the Gerechtshof, Amsterdam

‛Article 177 — Jurisdiction of the Court — National legislation adopting Community provisions — Transposition — Directive 90/434/EEC — Merger by exchange of shares — Tax evasion or avoidance’

Opinion of Advocate General Jacobs delivered on 17 September 1996   I-4165

Judgment of the Court, 17 July 1997   I-4190

Summary of the Judgment

1. Preliminary rulings — Jurisdiction of the Court — Limits — Interpretation sought owing to the applicability, to purely internal situations, of provisions of a directive transposed into national law after the treatment of internal situations has been aligned with Community law — Jurisdiction to provide such an interpretation — Assessment of the precise effect of the reference made by domestic law to Community law — Exclusive jurisdiction of the national court

   (EEC Treaty, Art. 117)

2. Approximation of laws — Common system of taxation applicable to mergers, divisions, transfers of assets and exchanges of shares concerning companies of different Member States — Directive 90/434 — Merger by exchange of shares — Concept — Financial, commercial or fiscal reasons for mergers — Not to be taken into account

   (Council Directive 90/434, Art. 2(d) and (h))

3. Approximation of laws — Common system of taxation applicable to mergers, divisions, transfers of assets and exchanges of shares concerning companies of different Member States — Directive 90/434 — Operations having as their purpose tax evasion or tax avoidance — Examination, subject to judicial review, by the national authorities — Possibility for the national authorities to establish a presumption of tax evasion or avoidance — Conditions and limits

   (Council Directive 90/434, Art. 11(1)(a))

4. Approximation of laws — Common system of taxation applicable to mergers, divisions, transfers of assets and exchanges of shares concerning companies of different Member States — Directive 90/434 — Operations having as their purpose tax evasion or avoidance — Possibility of presuming tax evasion or tax avoidance in the case of operations not carried out for valid commercial reasons — Concept of valid commercial reason — Horizontal setting-off of losses between participating companies — Excluded

   (Council Directive 90/434, Art. 11)

1.  The Court of Justice has jurisdiction under Article 177 of the Treaty to interpret Community law where the situation in question is not governed directly by Community law but the national legislature, in transposing the provisions of a directive into domestic law, has chosen to apply the same treatment to purely internal situations and to those governed by the directive, so that it has aligned its domestic legislation with Community law.

   Where, in regulating purely internal situations, domestic legislation adopts the same solutions as those adopted in Community law in order, in particular, to avoid discrimination against foreign nationals or any distortion of competition, it is clearly in the Community interest that, in order to forestall future differences of interpretation, provisions or concepts taken from Community law should be interpreted uniformly, irrespective of the circumstances in which they are to apply.

   However, in such a case, pursuant to the allocation of judicial functions between national courts and the Court of Justice under Article 177, it is for the national court alone to assess the precise scope of such a reference to Community law, the jurisdiction of the Court being confined to considering provisions of Community law only. Consideration of the limits which the national legislature may have placed on the application of Community law to purely internal situations is a matter for domestic law and consequently falls within the exclusive jurisdiction of the courts of the Member State.

2.  Directive 90/434, on the common system of taxation applicable to mergers, divisions, transfers of assets and exchanges of shares concerning companies of different Member States, must be interpreted as meaning that the common rules which it lays down, which cover different tax advantages, apply without distinction to all mergers, divisions, transfers of assets or exchanges of shares, irrespective of the reasons, whether financial, commercial or simply fiscal, for those operations.

   It follows that Article 2(d) of the directive, which defines a merger by exchange of shares, does not require the acquiring company, within the meaning of Article 2(h), to carry on business itself or there to be a permanent merger, from the financial and economic point of view, of the business of two companies into a single unit. Similarly, the fact that the same natural person who was the sole shareholder and director of the acquired companies becomes the sole shareholder and director of the acquiring company does not prevent the operation in question from being treated as a merger by exchange of shares.

3.  Article 11 of Directive 90/434 is to be interpreted as meaning that, in determining whether the planned operation has as its principal objective or as one of its principal objectives tax evasion or tax avoidance, the competent national authorities must carry out a general examination of the operation in each particular case. Such an examination must be open to judicial review.

   Under Article 11(1)(a) of the directive, the Member States may stipulate that the fact that the planned operation is not carried out for valid commercial reasons constitutes a presumption of tax evasion or tax avoidance. It is for the Member States, observing the principle of proportionality, to determine the internal procedures necessary for this purpose.

   However, the laying down of a general rule automatically excluding certain categories of operations from the tax advantage, whether or not there is actually tax evasion or tax avoidance, on the basis of criteria such as the acquiring company carrying on business itself, a permanent merger, from the financial and economic point of view, of the business of two companies into a single unit, or the fact that the same natural person who was the sole shareholder and director of the acquired companies becomes the sole shareholder and director of the acquiring company, would go further than is necessary for preventing such tax evasion or avoidance and would undermine the aim pursued by Directive 90/434, which is in fact to introduce tax rules which are neutral from the point of view of competition and to prevent the operations in question from being hampered by restrictions, disadvantages or distortions arising in particular from the Member States' tax provisions.

4.  ‘Valid commercial reasons’, within the meaning of Article 11 of Directive 90/434, must be interpreted as involving more than the attainment of a purely fiscal advantage such as horizontal off-setting of losses.