The European Court of Justice (ECJ) has issued an order in the case C-151/08 (Renta) regarding the harmonization of tax laws within the European Union (EU). The case revolves around the prohibition of levying turnover taxes that can be characterized as other domestic taxes, as outlined in Article 33(1) of Council Directive 77/388. This directive, now Article 401 of the EU VAT Directive 2006/112/EC, allows Member States to maintain or introduce taxes on insurance contracts, betting and gambling, excise duties, stamp duties, or any other taxes that are not considered turnover taxes, as long as they do not create trade formalities between Member States.
The facts of the case involve Renta, a company that requested a refund of the tax on documented legal acts levied on a property sale in 2003. Renta’s business activity consists of purchasing and selling real estate, as well as purchasing properties for subsequent transformation or leasing. The transaction of purchasing and selling real estate is simultaneously taxed with value added tax (VAT) and the tax on documented legal acts, which is the core of Renta’s business activity. The refund that Renta requests is limited to the gradual or variable rate of the tax, not the fixed rate.
Renta argued before the referring court that Article 33 of the Sixth Directive prohibits the requirement of the tax on documented legal acts, considering the identity of the taxable event, the taxable amount, and the taxpayer of both VAT and stamp duty. The Superior Court of Justice of Catalonia expressed doubts about the compatibility of the tax on documented legal acts with Article 33. It referred to previous judgments, such as the Supreme Court’s ruling in 1997, which stated that the taxable event for the gradual payment of the tax is not the notarial document itself, but a complex entity constituted by specific acts or contracts.
The court also referred to a judgment in 1998, FECSA and ACESA, which declared that taxes on loan cancellation notarial deeds are also subject to Article 11(b) of Council Directive 69/335/EEC. The Superior Court of Justice of Catalonia considered these judgments relevant to the case, particularly regarding the nature of the tax on documented legal acts.
However, the court noted that the previous jurisprudence does not apply to the tax on documented legal acts. Unlike registration fees collected only when the property enters the assets of the final consumer, the tax on documented legal acts is accrued during the process of production and distribution of goods, specifically real estate acquired by a real estate company for transformation and subsequent leasing. Both VAT and the tax on documented legal acts accrue at each phase of the production and distribution process.
The referring court also distinguished the case from previous Supreme Court rulings, which primarily dealt with mortgage loan operations. In this case, the taxpayer of both VAT and the graduated rate of the tax on documented legal acts is a company engaged in the purchase and sale of real estate, an activity subject to the tax on documented legal acts. The court raised concerns about the maintenance of the gradual part of the tax, as it may infringe Article 33 of the Sixth Directive and create inequalities among economic agents involved in the operations.
In conclusion, the ECJ’s order in the case C-151/08 (Renta) addresses the compatibility of the tax on documented legal acts with Article 33 of the Sixth Directive. The case raises questions about the nature of the tax, its application to real estate transactions, and its potential impact on trade within the EU. The referring court’s doubts about the compatibility of the tax highlight the need for clarification and interpretation of EU tax laws to ensure fairness and consistency in the application of taxes across Member States.
