# CE2004088EN.01044601.xml

| 8.4.2004 | EN | Official Journal of the European Union | CE 88/446 |
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8.4.2004

EN

Official Journal of the European Union

CE 88/446

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(2004/C 88 E/0454)

WRITTEN QUESTION E-3006/03

by Joachim Wuermeling (PPE-DE) to the Commission

(14 October 2003)

Subject:   Tax exemptions in the Czech Republic

Subject:

| 1. | Is the Commission aware that the Czech Republic grants a 10-year exemption from corporation tax for first-time investments in manufacturing sectors, and a 10-15 % reduction in the income tax base for the purchase of new machinery? |
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1.

Is the Commission aware that the Czech Republic grants a 10-year exemption from corporation tax for first-time investments in manufacturing sectors, and a 10-15 % reduction in the income tax base for the purchase of new machinery?

| 2. | Are these tax breaks compatible with the aid rules under the Association Agreement, and will they be compatible with the provisions of the EC Treaty on the granting of aid? |
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2.

Are these tax breaks compatible with the aid rules under the Association Agreement, and will they be compatible with the provisions of the EC Treaty on the granting of aid?

| 3. | If not, is the Commission taking steps to ensure that the relevant tax regulations are amended? |
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3.

If not, is the Commission taking steps to ensure that the relevant tax regulations are amended?

Answer given by Mr Verheugen on behalf of the Commission

(5 December 2003)

(5 December 2003)

| 1. | Yes, the Commission is aware of the schemes mentioned by the Honourable Member in his question. |
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1.

Yes, the Commission is aware of the schemes mentioned by the Honourable Member in his question.

| 2. | Through a protocol to the Europe Agreement adopted in July 1998, the Czech Republic committed itself to aligning its legislation on the State Aid rules of the Community. This commitment was translated into Czech legislation by the State Aid Act that entered into force on 1 May 2000. The Act made the Office for the Protection of Economic Competition the Czech State Aid monitoring authority. Therefore, in the pre-accession period, while the content of the applicable State Aid rules in the Czech Republic are aligned on the State Aid rules of the Community, the enforcement of these rules rests with the Office for the Protection of Economic Competition. The investment scheme requires every individual aid granted under it to be notified to the Office for the Protection of Economic Competition. This office has assessed whether the individual tax exemptions are compatible with the ‘acquis’, in particular the Community guidelines on national regional aid.
  Under the Europe Agreement, the Commission has engaged itself in an ongoing process of contacts with the Office for the Protection of Economic Competition and other Czech authorities, in order to ensure that tax breaks and other investment schemes are compatible with the State Aid rules of the Community. These contacts have led the Czech authorities to enact amendments to the investment incentives legislation in order to align the schemes further with the practice in the EU.
  After accession, any new aid, or any modification of existing aid has to be notified to the Commission in accordance with Article 88(3) of the EC Treaty. |
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2.

Through a protocol to the Europe Agreement adopted in July 1998, the Czech Republic committed itself to aligning its legislation on the State Aid rules of the Community. This commitment was translated into Czech legislation by the State Aid Act that entered into force on 1 May 2000. The Act made the Office for the Protection of Economic Competition the Czech State Aid monitoring authority. Therefore, in the pre-accession period, while the content of the applicable State Aid rules in the Czech Republic are aligned on the State Aid rules of the Community, the enforcement of these rules rests with the Office for the Protection of Economic Competition. The investment scheme requires every individual aid granted under it to be notified to the Office for the Protection of Economic Competition. This office has assessed whether the individual tax exemptions are compatible with the ‘acquis’, in particular the Community guidelines on national regional aid.

Under the Europe Agreement, the Commission has engaged itself in an ongoing process of contacts with the Office for the Protection of Economic Competition and other Czech authorities, in order to ensure that tax breaks and other investment schemes are compatible with the State Aid rules of the Community. These contacts have led the Czech authorities to enact amendments to the investment incentives legislation in order to align the schemes further with the practice in the EU.

After accession, any new aid, or any modification of existing aid has to be notified to the Commission in accordance with Article 88(3) of the EC Treaty.

| 3. | The Commission will ensure, possibly under the ‘interim procedure’ laid down in the Accession Treaty, otherwise under the normal rules applicable after accession, that the tax exemption scheme will fully respect the ‘acquis’. To that effect, contacts with the Czech authorities have been ongoing to ensure that the investment incentives legislation is fully compatible with the State Aid rules of the Community. |
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3.

The Commission will ensure, possibly under the ‘interim procedure’ laid down in the Accession Treaty, otherwise under the normal rules applicable after accession, that the tax exemption scheme will fully respect the ‘acquis’. To that effect, contacts with the Czech authorities have been ongoing to ensure that the investment incentives legislation is fully compatible with the State Aid rules of the Community.

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