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IP/06/1673

Brussels, 4 December 2006

Indirect taxation: the European Commission proposes to abolish capital duty on the raising of capital

The European Commission proposes a phasing out of capital duty by 2010 in order to support the development of EU companies. Capital duty is an indirect tax levied on contributions of capital for capital companies and restructuring operations involving capital companies. Given its detrimental economic effects, it is an obstacle to economic growth. Today, only 7 (Greece, Spain, Cyprus, Luxembourg, Austria, Poland and Portugal) of the 25 Member States continue to levy it.

"I consider capital duty as an obstacle to the development of EU companies. Abolishing capital duty is in line with our strategy to create more jobs and growth" said EU Taxation and Customs Commissioner László Kovács.

The purpose of the proposal is to:

  • abolish capital duty; and
  • reinforce the prohibition on creating or levying other similar taxes.

The proposal gives a phasing out in two steps. It proposes a limit of 0,5 % on the rate of capital duty by 2008 and a phasing out of capital duty by 2010.

The proposal also intends to simplify a rather complicated piece of Community legislation and is part of the Commission exercise for "Better regulation".

Background

Council Directive 69/335/EEC of 17 July 1969 regulates the levying of indirect taxes on the raising of capital. When adopted, the purpose of the Directive was to:

  • harmonise the taxes on the raising of capital, with regard to both their structures and rates; and
  • prevent Member States from creating or levying other similar taxes.

Following the last amendment to the Directive in 1985[1], Member States have the option not to levy a capital duty at all or to charge duty on the transactions falling within the scope of the Directive at a single rate not exceeding 1%.

Since 1985, the trend has been towards an elimination of capital duty in Member States. Today, only 7 (Greece, Spain, Cyprus, Luxembourg, Austria, Poland and Portugal) of the 25 Member States continue to levy it; and the acceding countries, Bulgaria and Romania, do not levy it either.
For recent information on taxation policy see:

http://ec.europa.eu/taxation_customs/index_en.htm


[1] Council Directive 85/303/EEC


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