Case C-747/26, Carrefour II – is a tax on buybacks a tax on raising capital?
Directive 2008/7 bans indirect taxes on putting capital into a company. France has taxed taking it out. Carrefour and Teleperformance argue that, for a listed company that buys back shares, the two are the same transaction seen from different ends.
Facts
Carrefour SA and Teleperformance SE are challenging before the Conseil d’État a French tax payable by a capital company that reduces its capital by buying back and cancelling its own shares. As the referring court describes it, the tax is levied on the amount of the capital reduction and, in the same proportion, on the share premiums in the balance sheet; in a second form it is levied on the positive difference, over a period, between capital reductions by cancellation (plus a portion of the premiums) and capital increases. Directive 2008/7/EC concerning indirect taxes on the raising of capital provides, in Article 5(1), that Member States “shall not subject capital companies to any form of indirect tax whatsoever” in respect of, among other things, “(a) contributions of capital” and “(d) alteration of the constituent instrument or regulations of a capital company”. The Conseil d’État asks whether the French tax is an indirect tax within the Directive at all, and if so whether either prohibition catches it. (Carrefour II is the Court’s name for the case.)
Questions Referred
1. Does a tax payable by a capital company in the event of a transaction whereby that company reduces its capital after buying back its own shares with a view to cancelling them, which is levied on the amount of that capital reduction and, in the same proportion as that reduction, on the amount of the share premiums appearing in the balance sheet, constitute an indirect tax within the meaning of Directive 2008/7/EC of 12 February 2008? Does a tax payable by a capital company on the positive difference between the total amount of the capital reductions carried out during a given period by means of the cancellation of shares resulting from that company’s repurchase of its own shares, plus a portion of the share premiums, and the total amount of the capital increases carried out during the same period, constitute an indirect tax within the meaning of that directive?
2. If the answer to the first question is in the affirmative, must Article 5(1)(a) of Directive 2008/7/EC of 12 February 2008, which requires, inter alia, that Member States do not subject transactions involving the contribution of capital to any indirect tax whatsoever, be interpreted as precluding such taxes, since they could be regarded as having the effect of taxing a transaction forming an integral part of an overall transaction with regard to the raising of capital and could, consequently, be regarded as a form of indirect tax on contributions of capital?
3. If the answer to the first question is in the affirmative, must Article 5(1)(d) of Directive 2008/7/EC of 12 February 2008, which requires Member States not to subject the alteration of the constituent instrument or regulations of a capital company to any form of indirect tax whatsoever, be interpreted as precluding a tax on a transaction whereby a company buys back its own shares with a view to cancelling them in order to reduce its capital since that transaction also has the effect of leading to an alteration of the regulations of the company liable for the tax?
Sources
OJ notice C/2026/4946 (EUR‑Lex) · Case file on CURIA · Directive 2008/7/EC
Comment
The Directive’s list of protected transactions runs in one direction. Article 3 defines “contributions of capital” as formation, conversion into a capital company, increases in capital or in assets by contribution, and the like — capital coming in. A buyback and cancellation is capital going out, and nothing in Article 3 or Article 5(1)(a) mentions it. On a literal reading the French tax falls outside the Directive altogether, which is presumably why the Conseil d’État begins with the threshold question whether it is an “indirect tax” within its meaning at all.
The companies’ argument in Question 2 is cleverer than the text. For a listed company, buybacks and issues are two halves of capital management: a company that knows it will pay a levy to return capital will raise less of it, or raise it differently. The second form of the tax makes the link explicit, since it is charged on the net difference between reductions and increases over a period — so that raising capital reduces the charge and returning it increases it. A tax whose base is computed by offsetting contributions of capital is, the companies say, a tax on the “overall transaction with regard to the raising of capital”, which is the phrase the referring court uses. Whether the Court will look through the form of the charge to its economic effect on capital raising, when the taxed transaction is itself an outflow, is the question that decides the case.
Question 3 is weaker. Every capital reduction amends a company’s statutes, because the statutes state the capital; reading Article 5(1)(d) to exempt any transaction that changes a figure in the articles would empty national taxation of corporate transactions of most of its content. The examples given in Article 5(1)(d) — conversion, transfer of seat, change of objects, extension of duration — are alterations of the company’s identity, not of its balance sheet.
The policy stakes are considerable. Share buyback taxes have become a favoured instrument for governments wanting large listed companies to retain or invest profits rather than return them; if the Court reads the Capital Duty Directive as catching them wherever the base is linked to capital raising, the design of every such tax in the Union will have to change.