#62024CJ0837EU Court clarifies tax treatment of share contributions involving property-rich companies
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The judgment clarifies when EU rules protecting companies from capital-raising taxes still allow national transfer taxes. It concerns a Portuguese group restructuring where a company paid up share capital by contributing shares in companies that owned real estate, and Portugal charged real estate transfer tax. For businesses, the practical point is that using shares in property-owning companies as a capital contribution may still trigger national transfer taxes. EU law blocks taxes that are really charges on raising capital, but it leaves room for certain transfer taxes, including taxes linked to securities or immovable property transfers.
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Key Changes
- Clarifies the boundary between prohibited capital-raising taxes and permitted transfer taxes under Directive 2008/7/EC
- Confirms that property-related taxes may still apply when shares in real estate-owning companies are contributed to a capital company
- Gives tax authorities and businesses guidance for structuring group reorganisations involving property-rich companies
Obligations
What this law requires
Directive 2008/7/EC prohibits Member States from imposing indirect taxes on contributions of capital to capital companies where the tax is in substance a charge on raising capital.
Directive 2008/7/EC does not prevent Member States from levying certain transfer duties, including duties linked to transfers of securities or immovable property, where those duties fall within Article 6 exceptions and are not capital-raising taxes.
A capital contribution made by transferring shares in companies that own immovable property may be subject to national immovable-property transfer tax if the tax is characterised as a permitted transfer duty rather than a prohibited capital-raising tax.