Companies increasing their share capital may rely directly upon Community law against national legislation providing for the collection of indirect taxes which are not merely charges for the service provided by notaries who are public servants.
The Portuguese Code governing the notarial profession provides that certain acts making changes to companies must be recorded in official documents drawn up by a notary. A table of notarial charges determines the amount to be paid by the company in each case. Part of a notary's salary is variable and depends on the value of the acts notarised.
In Portugal, notaries are employed by the State, which pays the fixed portion of their remuneration, determined on the same basis as for all other civil servants. Notaries pay a share of the variable portion of their earnings to a fund which is responsible for paying the salaries of the profession as a whole, and for financing their training and other expenditure (office space and miscellaneous costs incurred in the conduct of their legal business, etc.).
Modelo decided to increase its share capital from PTE 7 240 000 000 to PTE 14 000 000 000 and to change its name and registered office. For the deeds officially attesting these operations, it had to pay a charge of PTE 21 006 000.
Modelo contested the Portuguese legislation on the ground that it was not compatible with the directive concerning indirect taxes on the raising of capital.
The Supremo Tribunal Administrativo, to whom Modelo appealed when its action was unsuccessful at first instance, referred a number of questions to the Court of Justice of the European Communities for a preliminary ruling.
In the Court's view, charges collected by State employees for drawing up notarially attested acts constitute taxes for the purposes of the directive where they are paid in part to the State for the financing of public expenditure.
The Court held that Community law prohibits, in addition to capital duty, the imposition of charges for which a company may be liable by reason of its legal form, in respect of registration or any other formality required for the carrying on of its business.
According to the Court, charges levied in such circumstances are in principle prohibited by the directive.
Lastly, the Court examined the derogation provided for in the directive, which permits the collection of charges by way of fees or dues calculated solely by reference to the cost of the service provided. According to the Court, that derogation does not cover the charges at issue in the present case: «fees or dues» which may lawfully be charged under the relevant Community legislation do not include a charge for drawing up a notarially attested act recording an increase in share capital or a change in a company's name or registered office, where the amount increases in direct proportion to the share capital raised.
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