## Facts

- Solred SA, a Spanish company, was incorporated with nominal share capital of 300 million pesetas, fully subscribed but only partly paid at formation.
- Spain charged and Solred paid a 1% capital duty on the entire nominal share capital at the time of incorporation.
- The remaining subscribed capital (120 million pesetas) was paid later and documented in a notarial deed required for registration of the company’s fully paid-up capital.
- Spain imposed an additional 0.5% tax on the notarial deed under a general tax on documented legal transactions.
- Solred challenged the 0.5% charge, alleging it was an indirect tax prohibited by Council Directive 69/335/EEC, art. 10, because it effectively taxed the raising of capital already subject to capital duty.
- A Spanish court referred questions to the Court of Justice for a preliminary ruling on (i) compatibility with art. 10 and (ii) whether art. 10 could be invoked directly in national court.

## Issues

1. Whether Directive 69/335/EEC, art. 10 precludes a 0.5% tax on a notarial deed recording a deferred payment of subscribed share capital when a 1% capital duty has already been charged on the full nominal capital at incorporation.
2. Whether Directive 69/335/EEC, art. 10 has direct effect, allowing a company to rely on it to challenge an incompatible national tax.

## Decision

- The Court held that art. 10 precludes the 0.5% tax on the notarial deed recording the deferred contribution where capital duty was already charged on the full nominal share capital at formation.
- The Court treated the tax as functionally connected to an essential legal formality required to register the payment of unpaid share capital and complete the paid-up capital.
- The Court held that art. 10 has direct effect, permitting a company to invoke it before national courts against the state.

## Legal Principles

- Under Directive 69/335/EEC, art. 10, Member States may not impose indirect taxes that, in substance, share the characteristics of capital duty, even if framed as a tax on documents or formalities.
- A tax levied on a notarial deed required for registering payment of previously unpaid subscribed share capital can constitute a prohibited indirect tax because it targets an essential formality connected to a company’s legal form and capital-raising.
- Once capital duty has been charged on the entire nominal share capital, a Member State may not impose an additional indirect tax on subsequent documentation of contributions relating to that same capital.
- Directive 69/335/EEC, art. 10 is sufficiently clear and unconditional to have direct effect and may be relied upon by private parties in national litigation to disapply conflicting national taxes.

## Conclusion

The Court ruled that Spain could not levy a 0.5% notarial-deed tax on deferred payment of subscribed share capital after collecting capital duty on the full nominal capital at incorporation, and it confirmed that Directive 69/335/EEC, art. 10 is directly effective in national courts.


Solred SA v. Administracion Gen. del Estado, Case C-347/96 (C.J.E.U. 1998)