Case C-321/05

Hans Markus Kofoed

v

Skatteministeriet

(Reference for a preliminary ruling from the Østre Landsret)

(Directive 90/434/EEC – Common system of taxation applicable to mergers, divisions, transfers of assets and exchanges of shares – National decision to tax an exchange of shares – Exchange of shares – Distribution of a dividend shortly afterwards – Abuse of rights)

Summary of the Judgment

1.        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

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

2.        Acts of the institutions – Directives – Implementation by Member States

(Art. 249, third para., EC)

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

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

1.        On a proper interpretation of 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, the common tax 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, economic or simply fiscal.

In that regard, the concept of the ‘cash payment’ made to shareholders of the acquired company in the context of an exchange of shares, within the meaning of Article 2(d) of that directive covers monetary payments having the characteristics of genuine consideration for the acquisition, namely payments agreed upon in a binding manner in addition to the allotment of securities representing the share capital of the acquiring company, irrespective of any reasons underlying the acquisition. Consequently, a monetary payment made by an acquiring company to the shareholders of the acquired company cannot be classified as a ‘cash payment’ for the purposes of Article 2(d) of Directive 90/434 merely because of a certain temporal or other type of link to the acquisition, or possible fraudulent intent. On the contrary, it is necessary to ascertain in each case, having regard to the circumstances as a whole, whether the payment in question has the characteristics of binding consideration for the acquisition.

It follows that a dividend paid by an acquiring company to shareholders of the acquired company shortly after the exchange of shares, but not forming an integral part of the consideration payable by the acquiring company, is not to be included in the calculation of the ‘cash payment’ provided for in Article 2(d) of Directive 90/434.

(see paras 27-31, 33, 48, operative part)

2.        All authorities of a Member State, in applying national law, are required to interpret it as far as possible in the light of the wording and purpose of Community directives in order to achieve the result pursued by those directives. Although it is true that the requirement of a directive-compliant interpretation cannot reach the point where a directive, by itself and without national implementing legislation, may create obligations for individuals or determine or aggravate the liability in criminal law of persons who act in contravention of its provisions, the Member State may nevertheless, in principle, impose a directive-compliant interpretation of national law on individuals.

(see para. 45)

3.        Under Article 11(1)(a) of 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, by way of exception and in specific cases, Member States may refuse to apply or withdraw the benefit of all or any part of the provisions of that directive, inter alia, where the exchange of shares has tax evasion or tax avoidance as its principal objective or as one of its principal objectives.

Where there is some evidence which might justify application of that article, but the national law of the Member State concerned does not contain any specific provision transposing it, taxation of the exchange of shares in question may be justified if national law contains a provision or general principle prohibiting abuse of rights or other provisions on tax evasion or tax avoidance which might be interpreted in accordance with the said article.

(see paras 37, 39, 46, 48, operative part)