CJEU, 6th chamber, June 20, 2024, No C-420/23

Judgment

1 This request for a preliminary ruling concerns the interpretation of Articles 18 and 63 and Article 65(3) TFEU.

2 The request has been made in proceedings between Faurécia – Assentos de Automóvel Lda (‘Faurécia’) and the Autoridade Tributária e Aduaneira (Tax and Customs Authority, Portugal) concerning the imposition of stamp duty on short-term cash transactions.

 Portuguese law

3 Article 1(1) of the Código do Imposto do Selo (Stamp Duty Code; ‘the CIS’), in the version applicable to the dispute in the main proceedings, is worded as follows:

‘Stamp duty shall be charged on all transactions, contracts, documents, securities, papers and other legal matters or situations provided for in the [Tabela Geral do Imposto do Selo (Schedule of Stamp Duties)], including transfers of goods free of charge.’

4 Under Article 7(1) and (2) of the CIS:

‘1. The following shall also be exempt from stamp duty:

(g) financial transactions, including interest thereon, for a period not exceeding one year, provided that they are exclusively intended to cover cash-flow shortages and are carried out by venture capital companies (VCCs) in favour of companies in which they have holdings, financial transactions carried out by other companies in favour of companies controlled by them or companies in which they hold at least 10% of the voting capital or whose acquisition value is not less than EUR 5 000 000, in accordance with the last approved balance sheet, and financial transactions carried out for the benefit of a company with which there is a controlling or group relationship;

2. Article 7(1)(g) and (h) shall not apply if one of the parties does not have its head office or effective management in national territory, except in situations where the creditor has its head office or effective management in another Member State of the European Union or in a State in respect of which an agreement for the avoidance of double taxation on income and wealth concluded with the Portuguese Republic applies, in which case entitlement to the exemption shall subsist, unless the creditor has previously provided the financing envisaged in Article 7(1)(g) and (h) by means of transactions carried out with credit institutions or financial companies established abroad or with foreign subsidiaries or branches of credit institutions or financial companies established in national territory.’

5 Paragraph 17 of the Schedule of Stamp Duties, entitled ‘Financial transactions’, is worded as follows:

‘17.1. For the use of credit, in the form of funds, assets and other securities, pursuant to the grant of credit for whatever purpose, including the assignment of claims, factoring and cash transactions involving any type of financing of the assignee, member or debtor, whereby the extension of the duration of the contract shall always be regarded as a new grant of credit – up to its respective value, based on the duration:

17.1.4. Credit used in the form of a current account, bank overdraft or any other form for which the period of use is neither fixed nor ascertainable, on the monthly average obtained by the addition of the balances payable recorded daily, over one month, divided by 30 – 0.04%.’

 The dispute in the main proceedings and the question referred for a preliminary ruling

6 Faurécia, a company established in Portugal, is active in the automotive subcontracting industry. At the time of the facts giving rise to the dispute in the main proceedings, it was owned by Faurécia Investments SA (99.99%) and Financière Faurécia SA (0.01%), two companies established in France belonging to the same group (‘the Faurécia group’).

7 In order to manage cash flows within the Faurécia group, a cash pooling agreement was signed in February 2000 between the entities in that group, under which Financière Faurécia would be responsible for managing that cash pooling. The agreement provided that cash surpluses generated by certain entities in the Faurécia group were to be transferred, in the form of the grant of interest-bearing loans, to the account of Faurécia Investments, which would then use those funds to meet the cash needs of other entities in the Faurécia group.

8 It was against that background that a loan agreement was concluded between Faurécia, as lender, and Faurécia Investments, as borrower. Under that loan agreement, which took effect on 1 January 2011, Faurécia granted a loan to Faurécia Investments in the form of a one-year renewable credit facility for a maximum amount of EUR 65 million, in return for the payment of interest calculated at the end of each month on the basis of the monthly use of the credit facility. That agreement was the subject of several subsequent amendments concerning, inter alia, its duration and the maximum amount of the loan.

9 Following four tax inspections carried out in 2019, relating to the financial years 2014 to 2017, the Tax and Customs Authority issued an additional tax assessment, taking the view that stamp duty was payable on the grant of such loans by Faurécia.

10 After the dismissal of its administrative appeal against that assessment, Faurécia brought an action before the Tribunal Arbitral em Matéria Tributária (Centro de Arbitragem Administrativa – CAAD) (Tax Arbitration Tribunal (Centre for Administrative Arbitration – CAAD), Portugal) alleging, inter alia, a breach of the principles of non-discrimination and free movement of capital enshrined, respectively, in Articles 18 and 63 TFEU. That arbitration tribunal made an award on 3 November 2020 dismissing Faurécia’s action. However, in an earlier award of 6 October 2020 involving the same parties and the same facts and based on the same national legislation, which had not been amended, the arbitration tribunal had held that the levying of stamp duty was contrary to the free movement of capital.

11 Faurécia lodged an appeal against the award of the Tribunal Arbitral em Matéria Tributária (Centro de Arbitragem Administrativa – CAAD) (Tax Arbitration Tribunal (Centre for Administrative Arbitration – CAAD)) of 3 November 2020 before the Supremo Tribunal Administrativo (Supreme Administrative Court, Portugal), which is the referring court, on the ground that that award was at odds with the award made by the same arbitration tribunal on 6 October 2020.

12 The referring court is thus required to determine whether the relevant provisions of the CIS are consistent with EU law. In that regard, the referring court states that, in principle, the exemption from stamp duty provided for in Article 7(1)(g) of the CIS is applicable to the financial transactions at issue in the main proceedings. However, Article 7(2) of the CIS restricts the scope of that exemption, which does not apply if one of the parties does not have its head office or effective management in Portugal.

13 Although Article 7(2) of the CIS provides for an exception to the exclusion from the exemption, that exception applies only if the creditor has its head office or effective management in another Member State of the European Union or in a State with which the Portuguese Republic has concluded an agreement for the avoidance of double taxation on income and wealth. In the present case, the creditor, namely Faurécia, has its head office in Portugal, so that it is not covered by that exception.

14 The referring court adds that, in the award of 6 October 2020, the Tribunal Arbitral em Matéria Tributária (Centro de Arbitragem Administrativa – CAAD) (Tax Arbitration Tribunal (Centre for Administrative Arbitration – CAAD)) found that Article 7(2) of the CIS constituted a restriction on the free movement of capital, since residents of other Member States would be deprived of the possibility of benefiting, as regards stamp duty, from the exemption applicable to loans taken out in Portugal.

15 By contrast, in the award of 3 November 2020, the fact that, in the present case, the person liable to pay the stamp duty is the creditor, namely Faurécia, and not the debtor established in France, was regarded as decisive in reaching the opposite conclusion to that reached in the award of 6 October 2020. Thus, in the award of 3 November 2020, the Tribunal Arbitral em Matéria Tributária (Centro de Arbitragem Administrativa – CAAD) (Tax Arbitration Tribunal (Centre for Administrative Arbitration – CAAD)) held that, as regards stamp duty, creditors resident in Portugal would not be subject to different tax treatment depending on the nationality or place of residence of their borrowers.

16 In those circumstances, the Supremo Tribunal Administrativo (Supreme Administrative Court) decided to stay the proceedings and to refer the following question to the Court of Justice for a preliminary ruling:

‘Is the provision contained in Article 7(2) of the [CIS] according to which [the exemption from stamp duty for] short-term cash transactions [is applicable where those transactions involve] two entities resident in Portugal [or where] the borrower is resident in Portuguese territory (and the creditor is resident in the European Union) …, but [is not applicable] where the borrower (debtor) is resident in a Member State of the European Union and the lender (creditor) resides in Portugal …, compatible with the principles of non-discrimination and the free movement of capital established in Articles 18 and 63 and Article 65(3) TFEU?’

 Consideration of the question referred

17 By its question, the referring court asks, in essence, whether Articles 18 and 63 and Article 65(3) TFEU must be interpreted as precluding legislation of a Member State under which short-term cash transactions are exempt from stamp duty if they involve two entities established in that Member State or if the borrower is established in that Member State, but are not exempt if the lender is established in that Member State and the borrower is established in another Member State.

 Applicable principles and freedoms

18 As a preliminary matter, it should be borne in mind that Article 18 TFEU applies independently only to situations governed by EU law for which the TFEU lays down no specific rules of non-discrimination (judgment of 18 March 2021, Autoridade Tributária e Aduaneira (Tax on capital gains from property), C‑388/19, EU:C:2021:212, paragraph 20 and the case-law cited).

19 Article 63 TFEU lays down, in particular, a specific rule of non-discrimination in relation to the free movement of capital (judgment of 18 March 2021, Autoridade Tributária e Aduaneira (Tax on capital gains from property), C‑388/19, EU:C:2021:212, paragraph 21 and the case-law cited). Furthermore, the Court has already held that loans granted by residents to non-residents, such as those at issue in the main proceedings, constitute movements of capital falling within the scope of Article 63 TFEU (see, to that effect, judgment of 14 October 1999, Sandoz, C‑439/97, EU:C:1999:499, paragraph 7).

20 Therefore, the question referred for a preliminary ruling must be examined solely in the light of Article 63 TFEU.

 Free movement of capital

21 Article 63(1) TFEU generally prohibits restrictions on movements of capital between Member States. The measures prohibited by that provision as restrictions on the movement of capital include those which are liable to dissuade non-residents from making investments in a Member State or to dissuade residents of that Member State from making investments in other States (judgment of 27 April 2023, L Fund, C‑537/20, EU:C:2023:339, paragraph 42 and the case-law cited).

22 In the present case, it is apparent from the request for a preliminary ruling that, in relation to loans granted by a Portuguese resident, the CIS laid down different tax rules depending on whether the borrower was resident in Portugal or not, with the exemption from stamp duty applying only in the former situation.

23 Such a difference in treatment is liable to diminish the attractiveness, to Portuguese residents, of investments such as the grant of loans, made abroad, compared with investments made in Portugal. That difference in treatment also has a restrictive effect on non-resident borrowers in that it constitutes an obstacle to their raising capital in Portugal, an obstacle not faced by resident borrowers.

24 It is irrelevant, in that context, that, under the Portuguese legislation at issue in the main proceedings, the person liable to pay stamp duty is the lender established in Portugal and not the borrower established in another Member State. The fact that the exercise of the free movement of capital is made less attractive because of national tax legislation which treats a domestic situation differently from a cross-border situation is sufficient in itself to establish the existence of a restriction.

25 Furthermore, the Portuguese Government’s argument that stamp duty does not constitute a tax burden for the lender, on the ground that it is the borrower who actually bears the tax, while as a general rule being able to deduct the amount of that duty in the context of tax on profits, is also not such as to demonstrate that there is no restriction on the free movement of capital.

26 It is true, as the applicant in the main proceedings itself stated in its written observations, that it may ultimately be the borrower who bears the stamp duty, either because the lender charges the borrower an equivalent amount or because the tax is claimed directly from the borrower if the taxable person does not pay that tax. However, first, that observation does not alter the fact that, under the national legislation at issue in the main proceedings, it is the lender who is liable to pay the stamp duty. Secondly, in any event, as pointed out in paragraph 23 above, that legislation has a restrictive effect not only on resident lenders but also on non-resident borrowers.

27 Consequently, national legislation such as that at issue in the main proceedings constitutes a restriction on the free movement of capital which is, in principle, prohibited by Article 63 TFEU.

28 That being the case, pursuant to Article 65(1)(a) TFEU, Article 63 TFEU is without prejudice to the right of Member States to apply the relevant provisions of their tax law which distinguish between taxpayers who are not in the same situation with regard to their place of residence or with regard to the place where their capital is invested.

29 It is apparent from settled case-law that Article 65(1)(a) TFEU, in so far as it is a derogation from the fundamental principle of the free movement of capital, must be interpreted strictly. That provision cannot therefore be interpreted as meaning that all tax legislation which draws a distinction between taxpayers based on their place of residence or the State in which they invest their capital is automatically compatible with the Treaty (judgment of 16 November 2023, Autoridade Tributária e Aduaneira (Capital gains on share transfers), C‑472/22, EU:C:2023:880, paragraph 27 and the case-law cited).

30 The differences in treatment permitted by Article 65(1)(a) TFEU must not constitute, in accordance with Article 65(3) TFEU, a means of arbitrary discrimination or a disguised restriction. The Court has held, consequently, that such differences in treatment are permitted only when they concern situations which are not objectively comparable or, otherwise, when they are justified by an overriding reason in the public interest (judgment of 16 November 2023, Autoridade Tributária e Aduaneira (Capital gains on share transfers), C‑472/22, EU:C:2023:880, paragraph 28 and the case-law cited).

31 According to the Court’s case-law, the comparability of a cross-border situation with an internal situation within a Member State must be examined having regard to the aim pursued by the national provisions at issue as well as their purpose and content. Only the relevant distinguishing criteria laid down by the legislation in question must be taken into account in determining whether the difference in treatment resulting from that legislation reflects an objectively different situation (judgment of 16 November 2023, Autoridade Tributária e Aduaneira (Capital gains on share transfers), C‑472/22, EU:C:2023:880, paragraph 29 and the case-law cited).

32 In that regard, first, neither the referring court nor the Portuguese Government has explained what objective is pursued by the partial exemption from stamp duty resulting from the national legislation at issue in the main proceedings.

33 Secondly, the only distinguishing criterion laid down by the national legislation at issue in the main proceedings is based on the borrower’s place of residence, since short-term cash transactions are exempt from stamp duty if they involve two entities established in Portugal or if the borrower is established in Portugal, but not if the borrower is established in another Member State.

34 However, as the Commission pointed out in its written observations, with regard to stamp duty levied in Portugal, a loan granted to a resident borrower appears to be comparable to a loan granted to a non-resident borrower, since that tax is calculated on the basis of each transaction taken individually and to which a fixed tax rate applies, taking account of the particular circumstances of the transaction.

35 Thus, in the light of the purpose and content of the national legislation at issue in the main proceedings, the difference in treatment resulting from that legislation does not appear to be based, subject to verification by the referring court, on an objective difference in situation.

36 Moreover, neither the referring court nor the Portuguese Government has put forward any overriding reason in the public interest justifying the restriction imposed by that legislation.

37 In the light of all the foregoing considerations, the answer to the question raised is that Article 63 TFEU must be interpreted as precluding legislation of a Member State under which short-term cash transactions are exempt from stamp duty if they involve two entities established in that Member State, but are not exempt if the borrower is established in another Member State.

 Costs

38 Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the referring court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.

On those grounds, the Court (Sixth Chamber) hereby rules:

Article 63 TFEU

must be interpreted as precluding legislation of a Member State under which short-term cash transactions are exempt from stamp duty if they involve two entities established in that Member State, but are not exempt if the borrower is established in another Member State.