4. COMPETITION POLICY

1. Treaty establishing the European Community, Title VI, Chapter 1, Rules on Competition.

(a) Notwithstanding Articles 87 and 88 of the EC Treaty and provided that the conditions set out below are fulfilled, Slovakia may apply until the end of the fiscal year 2008 the corporate income tax exemption granted on the basis of Government Regulation No 192/1998 Coll. to one beneficiary in the motor vehicle industry, provided that the total aid under this tax exemption does not exceed 30 % of the eligible investment costs of the relevant project incurred since 1998.

For the purposes of this paragraph, eligible costs shall be defined on the basis of the Guidelines on national regional aid [2].

(b) Slovakia shall supply to the Commission monitoring reports containing the following information:

- on a half-yearly basis, information on the eligible investment undertaken by the aid beneficiary, and,

- on an annual basis, information on the aid granted to the aid beneficiary under the aid scheme referred to above.

Slovakia shall provide the reports within four months of the end of each half year or year, beginning by the end of April 2003. The first reports shall include the information relating to the years 1998-2002. The last report shall be submitted by the end of August 2009, unless agreed otherwise by the Commission and Slovakia.

(c) Without prejudice to the preceding paragraph, the provisions on monitoring contained in Council Regulation (EC) No 659/1999 laying down detailed rules for the application of Article 93 of the EC Treaty shall apply.

(d) If the total aid reaches before the end of the fiscal year 2008 the maximum admissible level set out in paragraph (a), the tax exemption shall be discontinued and the normal corporate income tax shall be due by the beneficiary for that part of the company's earnings whose exemption from the tax would result in exceeding the maximum admissible level.

2. Treaty establishing the European Community, Title VI, Chapter 1, Rules on Competition.

(a) Notwithstanding Articles 87 and 88 of the EC Treaty, Slovakia may apply until the end of the fiscal year 2009 the corporate income tax exemption on the basis of Act No 366/1999 Coll. on Income Tax to one beneficiary in the steel industry, provided that the following conditions are fulfilled:

(i) the aid beneficiary caps its production of flat products and its sales of flat products (hot-rolled, cold-rolled and coated) in the enlarged EU. These caps shall be established on the basis of the figures concerned for the year 2001. As from 2002, the aid beneficiary may make annual increases of 3% in the cap for production and 2% in the cap for sales. The cap for sales shall take effect as from the date of accession. Output of specific product types may vary on condition that combined output does not exceed the established caps;

(ii) the beneficiary does not extend its range of groups of finished products existing on 13 December 2002;

(iii) the total aid granted to the beneficiary on the basis of Act No 366/1999 Z. z. on Income Tax does not exceed a total of US $ 500 million. This aid can only be granted once and may not be extended or renewed under any circumstances. All aid granted to the same beneficiary during the transitional period must be included within the level of US $ 500 million.

(iv) the beneficiary meets the terms of the privatisation contract regarding the maintenance of employment levels.

If the tax concession to the aid beneficiary is adapted in such a way as to guarantee a significant reduction in the total aid amount while not jeopardising viability, the Commission may review the above conditions in accordance with the procedure provided for in Article 88(1) of the EC Treaty. Before beginning this procedure, the Commission shall take full account of the views of Member States on whether a reduction of aid is significant. These views shall be expressed on the basis of a Commission recommendation and on the basis of available relevant information.

(b) Slovakia shall supply to the Commission and the Council half-yearly monitoring reports containing the following information as regards the aid beneficiary:

- production (in tonnes) of each of the following products: hot rolled coil, cold rolled sheet, galvanised sheet, tinplate, electrical sheet, organic coated sheet, welded tubes, as well as any other product (to be specified);

- sales (in tonnes) of the above products in the enlarged EU;

- development of employment in the company and the region as well as progress in preparations for the orderly outplacement of staff;

- once a year, the cost of staffing in the year and since privatisation;

- once a year, profits before tax for the fiscal year and the specified total amount of aid.

Slovakia shall provide these reports within four months of the end of each half year, beginning by the end of April 2003. The first report shall include the information relating to the years 2000, 2001 and 2002. The last report shall be submitted by the end of April 2010, unless agreed otherwise by the Commission, the Council and Slovakia.

(c) Without prejudice to the preceding paragraph, the provisions on monitoring as contained in Council Regulation (EC) No 659/1999 laying down detailed rules for the application of Article 93 of the EC Treaty shall apply.

(d) If the total aid reaches the maximum admissible level set out in subparagraph (a)(iii) before the end of the fiscal year 2009, the tax exemption shall be discontinued and the normal corporate income tax shall be due by the beneficiary for that part of the company's earnings whose exemption from the tax would result in exceeding the maximum admissible level.

(e) If the beneficiary fails to meet the terms of the privatisation contract regarding the maintenance of employment levels, the aid shall be discontinued with immediate effect and the penalties provided for in the privatisation contract shall apply.

[2] OJ C 74, 10.3.1998, p. 9.

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