EN Official Journal of the European Union L 269/93

COMMISSION DECISION (EU) 2015/1827

of 23 March 2015

on State aid SA 28876 (12/C) (ex CP 202/09) implemented by Greece for Piraeus Container Terminal SA & Cosco Pacific Limited

(notified under document C(2015) 66)

(Only the Greek text is authentic)

(Text with EEA relevance)

THE EUROPEAN COMMISSION,

Having regard to the Treaty on the Functioning of the European Union, and in particular the first subparagraph of Article 108(2) thereof,

Having called on interested parties to submit their comments pursuant to Article 6 of Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article 108 of the Treaty on the Functioning of the European Union (1) and having regards to the comments received from Greece and the Piraeus Container Terminal SA,

Whereas:

1. PROCEDURE

(1) By letter of 30 April 2009, the Prefect of Piraeus lodged a complaint with the Commission alleging that the Greek state granted unlawful State aid to the new concession holder of a part of the Port of Piraeus, the Piraeus Container Terminal SA (‘PCT’), a subsidiary of special purpose of COSCO Pacific Limited (‘COSCO’). The alleged aid was granted in the form of tax exemptions and favourable provisions inserted in the concession agreement after the tender.

(2) On 7 May 2009 the Federation of Greek Port workers sent a letter (2) informing the Commission on the alleged tax advantages that the Greek state granted to PCT. By letter of 31 August 2009, the Federation of Greek Port workers confirmed that its initial letter should be treated as a complaint and alleged that aid was granted in the form of tax advantages but also in the form of favourable provisions inserted in the concession agreement.

(3) By letter of 23 September 2009 (3), the International Dockworkers Council filed a complaint with a detailed description of the measures that allegedly constitute State aid.

(4) By letter of 14 October 2009 the Commission requested information from Greece on the alleged State aid measures. By letter of 12 November 2009 the Greek authorities asked for an extension of the deadline for replying, to which the Commission agreed in its letter of 18 November 2009. The Commission sent a reminder concerning this request on 3 February 2010 and on 23 February 2010 the Greek authorities responded to this request for information.

(5) On 5 May 2010 the Commission services met the representatives of the Greek authorities to discuss additional clarifications.

(6) The Commission requested additional information from the Greek authorities by letter dated 27 October 2010. The Greek authorities asked for an extension of the deadline by letter dated 18 November 2011, which the Commission accepted by letter of 2 December 2011. The Greek authorities responded to this request for information on 8 February 2011.

(7) By letter dated 11 July 2012 (4), the Commission informed Greece that it had decided that the differences between the concession agreement and the contract notice, as well as the fiscal measure related to the exemption from corporate income tax for goods, works and services provided to PCT outside Greece did not constitute State aid. It also decided to initiate the procedure laid down in Article 108(2) of the Treaty on the Functioning of the European Union in respect of all the other alleged State aid measures.

(8) The Commission decision to initiate the procedure was published in the Official Journal of the European Union on 5 October 2012 (5). The Commission invited interested parties to submit their comments on the measures.

(9) The Commission received comments from the beneficiary on 5 November 2012. These comments were forwarded to Greece on 14 January 2013, which was given the opportunity to react. Its comments and additional information were received by letters dated 2 November 2012, 27 March 2013 and 10 July 2013. On 13 September 2013 a meeting took place between the Commission services and the Greek authorities accompanied by the beneficiary. On 23 October 2013 the Greek authorities submitted additional information. The Commission sent a reminder for information that was still missing on 17 January 2014. The Greek authorities replied on 4 February 2014 and another meeting took place on 10 February 2014. Following this meeting, the Greek authorities provided additional information on 10 March 2014 and another meeting took place on 12 March 2014. Following that meeting the Greek authorities submitted supplementary information on 31 March 2014, 16 April 2014 and 28 April 2014. Additional meetings with the Greek authorities and the beneficiary took place on 19 May 2014 and 8 December 2014.

2. DESCRIPTION OF THE BENEFICIARY AND THE ALLEGED AID MEASURES

2.1. The Port of Piraeus

(10) The Port of Piraeus is divided into two areas: the commercial port and the passenger port. The commercial port has 3 terminals; the container terminal, the cargo terminal and the automobile terminal.

(11) The container terminal has two piers. Piraeus Port Authority (‘PPA’) decided to expand the infrastructure of the container terminal with the extension of Pier I, the upgrade of equipment of Pier II and the construction of Pier III.

2.2. The Piraeus Port Authority SA

(12) The company, Piraeus Port Authority SA was established by law 2688/1999, through conversion of a body governed by public law, Piraeus Port Authority created in 1930, into a public utility company.

(13) On 13 February 2002 a 40-year concession agreement was signed between the Greek state and PPA. This agreement was ratified by law 3654/2008. According to this agreement, PPA has the exclusive right of use and exploitation of land, building and infrastructure of the port land zone of the Port of Piraeus (6). In particular, the concession agreement provides for the right of PPA to subcontract the operation of part of the port to a third party against payment (7).

2.3. The concession agreement between PPA and PCT and the investment project

(14) With the purpose of conceding Piers II and III, PPA conducted a European public tender (8) for port management services. In this tender PPA received two applications from COSCO and from a consortium of companies consisting of Hutchinson Port Holdings Ltd, Hutchinson Ports Investments SARL., Alapis Joint Stock Company SA and Lyd SA

(15) The call for tenders provided for appeal procedures. However, no appeal was submitted to the judicial authorities concerning the tendering procedure or the final result by any of the participants. In addition, the procedure and the draft agreement were checked and approved by the Greek Court of Auditors.

(16) In November 2008 PPA signed with PCT a concession agreement through which PPA conceded to PCT the exploitation and exclusive use to of the so-called ‘New Container Terminal (NCT)’, comprising of the existing Pier II, to be upgraded, the new Pier III, to be constructed, and the area adjacent thereto, as well as the use of the adjacent berthing manoeuvre sea area, which allows the safe mooring and service of ships.

(17) According to the concession agreement PCT has the obligation to upgrade the existing Pier II, construct the new Pier III and provide the whole range of port services related to the operation of the container terminal. Furthermore, the concession holder will finance entirely at its own expenses all upgrades of Pier II as well as the construction and operation of Pier III. Therefore, the tender as well as the concession agreement foresaw that the concession holder will not receive any public money for its investments.

(18) In addition, it is foreseen that the concession holder assumes all (commercial) risks in respect of the upgrades and construction of the necessary infrastructure. It also undertakes a number of obligations in respect of ensuring a guaranteed capacity of the New Container Terminal.

(19) The concession agreement between PPA and PCT was ratified by Law 3755/2009 (‘the Law’). Article 1 of the Law incorporates the concession agreement as it was signed, while Article 2 sets out specific tax exemptions for PCT and Article 3 provides for the possibility that PCTs investments related to the concession agreement benefit a specific protective regime of foreign investments set out in legislative decree 2687/1953.

3. GROUNDS FOR INITIATING THE FORMAL INVESTIGATION PROCEDURE

(20) The Commission decided in its decision of 11 July 2012 (9) that the differences between the concession agreement and the contract notice, as well as two fiscal measures (10) do not constitute State aid. In the same decision, the Commission expressed its doubts and opened the formal investigation procedure as regards other alleged State aid measures: 1. Exemption from income tax on interest accrued until the date of the commencement of operation of Pier III (11); 2. Right to VAT credit refund irrespective of the stage of completion of the contract object; definition of the notion of ‘investment good’ for the purposes of VAT rules; right to arrear interests from the first day following the 60th day after the VAT refund request (12); 3. Loss carry-forward without any temporal limitation (13); 4. Choice among three depreciation methods concerning the investment costs of the reconstruction of Pier II and the construction of Pier III (14); 5. Exemption from stamp duties on the loan agreements and any ancillary agreement for the funding of the project (15); 6. Exemption from taxes, stamp duties, contributions and any rights in favour of the State or third parties on the contracts between the creditors of the loan agreements under which are transferred the obligations and rights resulting therefrom (16); 7. Exemption from stamp duties for any compensation paid by PPA to PCT under the concession contract, which is outside the scope of the VAT code (17); 8. Protection under the special protective regime for foreign investments (18). 9. Exemption from the general rules of forced expropriation.

(21) In particular, the Commission took the view that the measures in question confer a selective advantage to PCT, as they constitute a derogation to the normally applicable taxation rules that cannot be justified by the economic policy considerations the Greek authorities invoked. In particular the Commission considered that the objective of fostering the investments undertaken by big infrastructure projects is an economic policy consideration that is extrinsic to the taxation system at stake and cannot justify the differentiated treatment in favour of PCT.

(22) Furthermore, the Commission considered that the fact that some of those or similar tax exemptions were included in previous public contracts on which the Commission adopted positive decisions is not relevant for demonstrating that these measures are justified by the logic of the Greek fiscal system.

(23) Moreover, the Commission raised doubts as regards the compatibility of the measures at stake with Article 107(3)(a) and 107(3)(c) TFEU, argued by the Greek authorities. In particular the Commission raised doubts concerning the application of Article 107(3)(a) TFEU, as the conditions of compatibility of this Article have been developed by the Commission in its Guidelines on national regional aid for 2007-2013 and the Greek authorities provided no relevant argumentation as regards the conformity of the measures with the conditions of these Guidelines. Concerning the applicability of Article 107(3)(c), the Commission expressed its doubts as regards the necessity and proportionality of the measures.

4. COMMENTS FROM INTERESTED PARTIES AND GREECE

(24) Greece and the beneficiary submitted joint comments in this case. The Commission received no comments from any other third party after the opening of the formal investigation procedure.

4.1. As regards the existence of State aid

Absence of an advantage

(25) The Greek authorities and PCT argue that an exemption from a generally applicable tax rule does not necessarily confer an advantage which is selective, and that the Commission does not make a difference between the existence of selectivity and that of an advantage. Thus even when a selective measure is identified, it cannot be said that it automatically confers an advantage and vice versa. The application of the same general rule to different situations could give rise to discrimination or to a disadvantage for certain persons which are subject to this rule. The exemption may aim at ensuring that objectively different situations are treated differently and thus neither discrimination nor inadvertent disadvantages arise.

(26) Moreover they argue that in the same way as undertakings entrusted with the performance of services of general economic interest, the undertakings entrusted with long-term concessions to create and operate public infrastructure through private funds assume contractual obligations to invest significant sums of money for infrastructure that will be returned to the state at the end of the concession period. Thus the tax measures in question are meant to compensate for the ‘structural disadvantages’ these companies have. For this they refer to the Combus judgment (19), where the General Court stated that removing a ‘structural disadvantage’ does not amount to the grant of an ‘advantage’ caught by Article 107(1) TFEU.

Absence of selectivity and/or justification by the logic of the tax system

i. Concerning the ‘system of reference’ of the measures under examination

(27) According to the Greek authorities and PCT, the correct system of reference is the general regime applied to public infrastructure projects in Greece, including Private Public Partnerships. This scheme applies to all undertakings engaging in big infrastructure projects and public/private partnerships and does not differentiate between them. The fiscal provisions of Law 3755/2009 represent the individual application of this general scheme.

(28) As these projects have special characteristics (20) that distinguish them from other projects, the undertakings responsible for public infrastructure projects are objectively in a clearly different legal and factual situation when compared with other undertakings engaged in other types of activity. Thus the generally applicable tax rules cannot be considered as the valid ‘system of reference’. The correct system of reference is the one that has taken into account these characteristics also recognised by EU legislation (21) which calls for special treatment (22).

(29) Thus the mechanism set up by Greece to ensure the appropriate treatment of the particular characteristics of public infrastructure projects, which distinguish them from other activities, is the introduction of certain fiscal provisions clarifying the rules applying in certain areas of taxation, the application of which (i) could otherwise lead to discrimination against public infrastructure projects, (ii) is characterised by lack of clarity and consistency with the general principles of the tax system; or (iii) is outweighed by the above mandatory requirement in terms of ensuring the most efficient use/allocation of public resources.

(30) Furthermore, they indicate that the legislative technique used in introducing a tax measure does not determine the general nature of a measure. By making reference to the Gibraltar judgment (23), they argue that the introduction by a Member State of an exemption to generally applicable rules does not automatically give rise to selectivity and an advantage. Merely following a ‘derogation-based’ approach would be a formalistic methodology that would be easy to circumvent.

ii. Objective of the measure concerned

(31) The Greek authorities and PCT argue that in the light of the Adria-Wien case-law, the objective of the measure under which the provisions in favour of PCT have to be assessed consists in the promotion of the successful implementation of public infrastructure projects. They refute the Commission's assessment in the opening decision as to the ‘irrelevance’ and ‘invalidity’ of this type of objective.

(32) They also refer to the objective pursued by environmental levies, in order to argue that the Commission's conclusion in the opening decision has as a consequence that any tax measure with a specific objective other than the collection of tax revenue could never be justified by the nature of the general tax system. Member States are free within the limits of compliance with EU law to pursue the policy they deem appropriate through their tax systems.

(33) Moreover, they argue that the Commission was wrong to conclude that the said objective of the tax system is ‘irrelevant’ (24), as the Court in the Azores case (25) did not state that the objective is without importance. Under the selectivity analysis the aim is not to determine whether or not the ‘objective’ of the measure under examination ‘alone’ is ‘valid’ or ‘relevant’. The ‘objective’ of the measure consists in ‘the basis’ upon which the comparison of the ‘legal and factual situation’ of companies can be made.

(34) They argue that the Commission does not explain why the policy ‘objective’ is not ‘valid’ or ‘relevant’ for the purposes of the selectivity assessment. For this they refer to the Adria-Wien (26), Regione Sardegna (27) and British Aggregates (28) judgments arguing that the Court did not pronounce itself against these objectives, but simply assessed whether the measures at stake were selective.

iii. PCT's legal and factual situation in light of the objective of the measure concerned

(35) The Greek authorities and PCT argue that in light of the objective of the successful implementation of public infrastructure projects PCT and the other undertakings assuming big infrastructure projects are in a different legal and factual situation than other undertakings. On this basis, they argue that the Commission has overlooked in its opening decision the circumstances/particular characteristics of these projects. The tax treatment accorded to PCT and others in comparable situation cannot give a competitive advantage over other undertakings which do not receive such treatment, since the two types of undertakings do not compete in respect of the performance of the public infrastructure projects concerned.

(36) All the undertakings which are implementing such projects are equally subject to this scheme and no one is to be excluded, and there are no limitations set as regards the region or sector of application, budget or time limits. Thus there is no de facto selectivity.

(37) Moreover, the Greek authorities have not retained any discretionary power as to how to apply these fiscal provisions that have been systematically introduced in all public infrastructure projects for several years.

iv. Logic of the tax system

(38) The Greek authorities and PCT argue that the fiscal provisions in question and the scheme of which they are part are consistent with the basic or guiding principles governing the relevant Greek tax rules, since they (a) are intended to pursue a public policy objective consistent with the basic principles of the general tax system, in particular the principle of proportionality, the economy and the revenue raising objective of the tax system and key policies of Greece regarding the creation of public infrastructure; (b) aim to ensure that objectively different situations are treated differently, thus applying the principles of equality and proportionality and ensuring that the results intended by the tax system are not distorted; (c) are applied upon the basis of objective criteria; (d) are designed specifically as the legislative mechanism addressing key financial concerns arising in the implementation of public infrastructure projects, which risk jeopardising the private sector participation (29).

(39) Moreover by providing legal certainty through these provisions, and thus by safeguarding the ability of the taxpayer to pay tax, private sector investment in public infrastructure and thus the extension of the tax base and the collection of increased tax revenue is promoted. Thus the relevant measures are justified by the logic of the system.

Absence of an assessment regarding the conditions relevant to distortion of competition and effect on trade

(40) The Greek authorities and PCT argue that the Commission failed to identify the services and geographic markets which are relevant to the competitive assessment, did not analyse the conditions of competition in the relevant markets and did not establish that the competing EU ports mentioned in the opening decision are actual or potential competitors of the Port of Piraeus and PCT.

(41) They further argue that the Commission failed to examine the relevant market in which PCT's container terminal operates as well the competitive conditions in the relevant market. Such examination would demonstrate that the fiscal provisions at stake do not have an adverse effect on competition and trade in the EU.

(42) Concerning the competitive conditions in the market, they argue that on the basis of the WAM judgement (30) the mere fact that there is container cargo traded between EU Member States and that there are various ports which compete with each other on the provision of container port facility services does not automatically mean that any aid given to a port operator meets the criterion on effect on trade and/or distortion of competition set out in Article 107(1) TFEU. Thus they argue that the Commission did not analyse the effect of the fiscal provisions on competition and trade in the relevant markets.

(43) PCT provided more detailed comments as regards the above argumentation.

Definition of the relevant market

(44) Concerning the definition of the relevant market, PCT refers to Commission decisions in the area of mergers (31) in order to argue that there are two distinct relevant markets for container terminal port services; hinterland traffic and transhipment traffic.

(45) It also argues that concerning the hinterland traffic, the Commission in its opening decision appears to consider that the geographic scope of the market encompasses ‘Greece and Eastern Mediterranean’, without explaining why it defines it differently than the Hellenic Competition Commission, which ruled that the geographic scope of the market for stevedoring services as regards hinterland traffic is limited to central and southern Greece (32).

(46) Moreover, PCT argues that both from a supply and demand side perspective, the central and southern part of Greece constitute a geographic market which is distinct from the northern part of Greece, due to: (a) the capability of PCT's container port terminal to handle a far greater volume of traffic than the Thessaloniki port and any other Greek port, and under more competitive terms given its greater technical capacity; (b) the concentration of industry, commerce and the population principally in the wider Athens area and generally the central/southern part of the country; (c) the topography of Greece which dictates the additional cost of transporting container traffic between the Thessaloniki port in the northern part of Greece and the central and southern parts of the country and vice versa.

(47) Concerning the transhipment container services, PCT refers to the Maersk/ECT and Hutchinson/Evergreen Commission decisions where the Commission identified, as relevant geographic market for the transhipment container services, the Eastern Mediterranean and Black Sea area. It also considers that the Commission in its opening decision considers the geographic scope of the market as encompassing ‘Greece and the Eastern Mediterranean’.

Competitive conditions in the relevant market

(48) As regards transhipment traffic, PCT argues the PCT container terminal does not compete with EU ports on the provision of stevedoring services for deep-sea container transhipment traffic in the Eastern Mediterranean, other than PPA's Pier I container terminal. Moreover it argues that the Commission did not explain why it considers that there are various ports in EU Member States (33) in this market that compete with PCT's container terminal port. According to PCT the Commission's statement that ‘… the port of Thessaloniki, the port of Constanza in Romania, the port of Koper in Slovenia and a number of ports in Italy may be considered as direct competitors’ contradicts the Commission's findings in case C 21/09 (34). The ports of Italy and the port of Koper in Slovenia are not located in the eastern Mediterranean segment of the market that the Commission identified according to PCT, but rather in the central Mediterranean one. Moreover, transhipment traffic destined for the hinterland covered by these ports (‘catchment area’) is not handled presently through Piraeus port (35).

(49) From a supply-side perspective, PCT argues that these ports could be considered to some extent as substitutes for PCT's container port terminal, as they could service some of the types of container ship that the PCT container port could service, but not all, due to the fact that they have a smaller sea depth and crane capacity (36). From a demand-side perspective, these ports cannot be considered as substitutes for the Piraeus port, as: (a) Piraeus offers the shortest and cheapest (37) deviation from the Suez/Gibraltar axis which represents the principal deep-sea container shipping lines in the Mediterranean Sea (38); (b) Piraeus offers the lowest bunker oil prices at a worldwide level; (c) Constanza in particular would involve additional costs of pilots in the Dardanelles and Bosphorus.

(50) In view of the above, PCT argues that the ports mentioned in the opening decision cannot be considered as actual or potential substitutes for the PCT container port as regards the provision of stevedoring services for transhipment traffic in the eastern Mediterranean.

(51) In addition PCT refers to the Commission decision relevant to investments in the port of Piraeus, where the Commission considered that the competition between specific ports and the Port of Piraeus is insignificant (39). Moreover, it argues that the Commission failed to analyse the effect of the fiscal provisions on competition and trade in the relevant markets. Moreover the assessment of this effect would require an examination of the equivalent tax systems applying within the relevant markets as other ports may benefit from similar or equivalent fiscal provisions.

(52) It also argues that PCT only faces competition in the markets concerned from PPA, which operates the Pier I container terminal at the Piraeus port. However as regards PPA, the Commission has recognised that the concession to PCT will increase competition for stevedoring services for container traffic in the port of Piraeus (40).

(53) As far as the potential competitors that may result from the privatisation of PPA and other Greek ports, PCT argues that the Greek port operators that are not entrusted with a similar concession are not in a similar position, thus no competitive advantage nor a distortion of competition arise from the fiscal provisions at stake.

(54) It also argues that the Commission does not refer to any evidence that other port operators would be interested in undertaking a major investment to establish a major container port terminal in Greece. According to PCT it is highly unlikely that such competition would arise, since no other existing port in Greece would combine Piraeus's characteristics (41).

(55) Finally as regards competition from PPA, it argues that the Commission's view is inaccurate, as PCT already faces competition from PPA's Pier I container terminal and the effect of the concession is the opening of the market to competition and not a distortion of competition. In this respect it also argues that PPA benefits from certain legislative provisions of fiscal nature, in the light of which the adoption of some of the fiscal provisions as stake was seen as a necessary mechanism for ensuring that PCT was not put in a competitive disadvantage.

4.2. On the comparison of the alleged State aid measures with similar provisions in other contracts of big infrastructure projects (42)

(56) The Greek authorities and PCT indicate that similar provisions to those of Article 2 and 3 of the Law were included in the Greek laws that ratified several individual public infrastructure projects as well as Law 3389/2005 concerning Public Private Partnerships. As the Commission examined those laws under Article 107(1) TFEU and decided that they did not give rise to State aid, a conclusion that the fiscal provisions in favour of PCT constitute a selective measure and confer an undue advantage falling within the scope of Article 107(1) TFEU would jeopardise legal certainty and would be contrary to the Commission's practice and previous statements concerning the application of such provisions to public infrastructure projects in Greece.

(57) Concerning the Athens International airport case (43), where the Commission considered that the fiscal provisions applied in respect of airport services that were not liberalised at the time, they argue that the same conclusion can also be drawn for port infrastructure services in the current case. Moreover the Greek authorities retain their argumentation that the Commission examined the said provisions in that case.

(58) Concerning the Athens Ring Road case (44) and the Rio Antirrio Motorway Bridge case, according to them the Commission examined carefully the public and private sector financial contributions to the costs of the project as well as the fiscal provisions concerned. The Commission then concluded that the amount of the public sector contribution (in the form of grants and state guarantees) was determined as ‘market price’ (i.e. the lowest amount of the public sector contribution required) through an open, non-discriminatory and competitive tender. In the Athens Ring Road decision the Commission concluded that the fiscal provisions constituted a clarification of the applicable tax regime, the absence of which could risk jeopardising the success of the project and did not consider them as part of the remuneration of the concessionaire. Any financial value that might be associated with the application of the fiscal provisions adopted could not have been considered as part of the public sector contribution, since it could have been determined with accuracy only upon the expiry of the concession period. These provisions were only the necessary clarifications so that private investors would not be discouraged in particular as regards this type of non-viable construction projects of high risk. Thus PCT cannot be distinguished from the concessionaires in these cases, as these provisions were in all cases a ‘clarification’ and not a ‘remuneration’ as the Commission considered in its opening decision.

(59) Moreover, the case-law (45) the Commission mentions in its opening decision as regards the fact that its silence of the Commission on specific measures does not mean that they have been approved (46), cannot be applied in notified cases as the ones invoked by the Greek authorities and PCT.

(60) Concerning the subsequent State aid decisions on the rest of the infrastructure projects, the Commission did not need to refer in detail to the fiscal provisions in question because it did not change its position expressed in Rio Antirrio Motorway bridge and Athens Ring Road cases (47).

(61) They argue that the issue that arises is whether in the light of the Commission's approval in the above past decisions, the fiscal provisions at stake can be considered as consistent with State aid rules and not whether these provisions are concerned by the Commission's past assessment, as indicated in the opening decision. Moreover, had these provisions been included in the tender documents of this concession, the Commission would have concluded the same as in the past Commission decisions.

(62) They also argue that the distinction made by the Commission in its opening decision between the current case and the previous cases is based upon a technicality, i.e. the adoption of the fiscal provisions in Law 3755/2009 as opposed to including them in the concession contract. Furthermore it indicates that: (i) the bidders of the tender were aware of the application of these fiscal provisions as the standard framework used by Greece for public infrastructure projects and in respect of PPPs in Greece; (ii) PCT contacts in respect of the Piraeus and Thessaloniki container port concessions were carried out at the level of Greece's Prime Minister and Minister of Shipping who were promoting these project to investors at international level and were offering the full package of measures that Greece has in place for public infrastructure projects financed by private sector resources; (iii) PCT was aware that the Commission had examined and has raised no objections of all such previous projects; (iv) PCT requested from the Greek government and PPA during the tender procedure that these provisions be included in the concession contract; (v) PCT raised this issue again with the Greek Prime Minister and Minister for shipping and once again received reassurances that such legislation would be introduced; (vi) in the light of these reassurances and throughout the tender and the preparation of its offer, PCT took into account that the concession contract would be operated on the same basis as all other public infrastructure concessions and that therefore, lenders would be familiar with the concession terms.

(63) Therefore, the tender process for the award of the concession contract to PCT cannot be distinguished from the past cases, as the standard fiscal framework for big infrastructure projects was known to all bidders. They indicate further that there was no particular reason for keeping record of such exchanges in the context of the tender process since PPA does not have the power to adopt such provisions and at any case their application was a matter of established practice in Greece in line with the Commission's precedent.

(64) Thus, if the Commission relies on a technicality as the sole reason for distinguishing PCT from all undertakings carrying out public infrastructure in Greece, this formality would be contrary to the principle of legal certainty and legitimate expectations.

(65) Concerning the Commission's statement that ‘the evidence provided by the Greek authorities reinforces the finding that the bidders did not take the specific advantages into account …’ (48), PCT argues that it is not aware of the evidence mentioned and that the adoption of these provisions through the law ratifying the concession contract does not amount to any evidence.

4.3. On the compatibility of the alleged State aid measures

(66) The Greek authorities and PCT argue that in case the Commission concludes that the fiscal provisions at stake give rise to State aid, such aid should be considered compatible with the internal market on the basis of Article 107(3)(a) and 107(3)(c), in view of the importance of the relevant investments, infrastructure and services for the economic development of Greece and, in particular, for the development and modernisation of the sea container transport sector.

(67) The investment project at stake aims at developing Piraeus Port as modern sea container terminal in the Mediterranean Sea, with more capacity and storage space, enhancing its performance in handling sea container traffic more efficiently. The performance data relevant to the operation of Pier II (49) already demonstrate the accomplishment of this objective. Moreover, the project aims at the Commission's objective of common interest in relation to EU transport policy, as this has been analysed in different EU regulations and communications.

(68) The acquisition of equipment and the construction of Pier III are considered as initial investment under the relevant EU regional aid rules concerning the application of Article 107(3)(a) TFEU. They correspond to EUR […] (50) million and have created around 900 direct and indirect full-time jobs that will remain for the 35 year concession period. Given the high investment amount, any possible aid amount would be well below the maximum aid ceiling of 30 % which was applicable for the region of Attiki up to end of 2010 or the maximum aid amounts approved by the Commission in decisions relevant to port infrastructure (51). Thus the aid measures consist of the minimum necessary and appropriate measures for the support of such a big infrastructure project. PCT's own contribution to the project is well within the thresholds set out in the regional aid rules. Moreover any possible aid would be compatible with the common market on the basis of Article 107(3)(a) TFEU on the same grounds as the aid to PPA approved by the Commission in case C 21/09 (52).

(69) In particular the aid can be considered necessary in light of the need for public funding for the development of port infrastructure during the financial crisis, in accordance with EU policy in this respect (53), as well as to ensure the clarity, flexibility and predictability of the applicable tax system to concessions as this one. As regards the necessity of the aid measures, they argue that the fiscal provisions ensured compliance with the private sector project finance arrangements and avoidance of default of the company to pay its loans and potential liabilities. Without these fiscal provisions, the project finance arrangements that PCT could have achieved would be materially more onerous, something that might have potentially jeopardised its bid or the implementation of the concession contract (market failure). In practice the fiscal provisions were necessary to ensure access of the concessionaire to the necessary funding from private sector funders (54). Finally a cash grant instead of these measures would have been inappropriate and unnecessary incentive given the difficulty in calculating in advance with accuracy the funding requirements arising from this market failure.

(70) Moreover they argue that the measures have a clear incentive effect, as the commencement and implementation of the concession agreement and any investment works occurred after the adoption of these fiscal provisions. In light of the economic crisis and the lack of financial credit prevailing in Greece and worldwide in 2008/2009, PCT had an incentive to proceed with the implementation of the concession only after the adoption of the law. Otherwise it could have abandoned the concession at the cost of just losing its bank letter of guarantee of EUR 5 million. The incentive effect was also proven by the by the fact that PCT had undertaken the risk of the entire funding of the project.

(71) They argue further that the estimates they provided (55) show that the fiscal provisions provide an amount between EUR […] million and EUR […] million (56) for the whole concession period, i.e. […] % to […] % of the total investment costs of EUR […] million, much lower than the aid amounts approved by the Commission in cases relevant to investments for ports.

(72) Moreover they argue that the ex ante quantifications of the specific advantages were not necessary for their approval or for the implementation of the investment. According to them, this ex ante approach for the purposes of the assessment of Article 107 TFEU of any alleged benefit which might be said to arise from any of the fiscal provisions is appropriate in line with settled case-law (57).

(73) They also refer to certain Commission decisions (58) where the Commission approved non-notified State aid, by establishing the incentive effect and the necessary and proportionate character of such aid, in cases in which the aid had not been quantified upon an ex ante basis and/or could not be quantified even at the time of the adoption of the Commission's final decision. Thus the calculation (59) of the financial benefit was not necessary for establishing incentive effect and proportionality.

(74) Finally they have indicated that none of the measures under examination have been applied in practice.

5. ASSESSMENT OF THE STATE AID CHARACTER OF THE MEASURES

(75) Article 107(1) TFEU defines State aid as any aid granted by a Member State or through state resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods in so far as it affects trade between Member States. Therefore, in order to determine whether the measures at stake constitute State aid within the meaning of Article 107(1) TFEU, all the following conditions have to be met. Namely, the measure has to: (a) be granted through state resources, (b) confer an economic advantage to an undertaking; (c) be selective; (d) distort or threaten to distort competition and affect trade between Member States.

5.1. Notion of undertaking

(76) Based on Article 107(1) TFEU, State aid rules only apply where the recipient of an aid is an ‘undertaking’. According to settled case-law, an undertaking is an entity engaging in an economic activity regardless of its legal status and the way in which it is financed (60). In addition, any activity consisting in offering goods and/or services in a given market is an economic activity (61).

(77) The Commission has already considered that the construction and operation of some types of infrastructure can be considered as an economic activity (62). Moreover according to settled case-law (63), the provision of infrastructure facilities to third parties against remuneration constitutes an economic activity.

(78) As PCT has upgraded the existing Pier II, constructed the new Pier III and provides the whole range of port services related to the operation of the container terminal, it can be considered as an undertaking for the purposes of State aid rules. Thus PCT is subject to State aid rules.

5.2. State resources

(79) According to Article 107(1) TFEU, an alleged State aid measure should be granted by a Member State or through state resources. The measure is decided by the state and imputable to the state. By allowing PCT to enjoy a specific tax treatment, the Greek state foregoes state resources that it would have obtained if it had not enacted the alleged advantageous fiscal provisions. Hence the measures at issue involve a loss of state resources and they can be considered as granted through state resources.

5.3. Existence of a selective advantage

(80) According to constant case-law, in order to determine whether a state measure constitutes State aid, it is necessary to establish whether the recipient undertaking receives an economic advantage that it would not have obtained under normal market conditions, i.e. in the absence of state intervention (64).

(81) Only the effect of the measure on the undertaking is relevant, neither the cause nor the objective of the state intervention (65). To assess this, the financial situation of the undertaking following the measure should be compared with the financial situation if the measure had not been introduced. The notion of aid encompasses not only positive benefits, but also measures which, in various forms, mitigate the charges which are normally included in the budget of an undertaking and which, without being subsidies in the strict meaning of the word, are similar in character and have the same effect (66). With regard to tax, the Court of Justice has made clear that a measure by which the public authorities grant certain undertakings a tax exemption which places the recipient in a more favourable position than other taxpayers amounts to State aid within the meaning of Article 107(1) TFEU. Likewise, a measure allowing certain undertakings a tax reduction or to postpone a payment of tax normally due can amount to State aid (67).

(82) The measures under examination consist in exemptions or postponements of payments of the normal taxes or charges PCT would have to pay in the absence of the relevant provisions or in differentiated treatment allowing PCT to ensure a better cash flow during the first years of the construction phase (see hereafter the description of normal system of taxes or systems of reference). Thus through these measures the financial situation of PCT is improved as compared to its situation without the measures. Therefore they confer an advantage to PCT.

(83) The existence of an advantage can be ruled out in the case where the undertaking in question provides services of general economic interest in compliance with the criteria established in the Altmark case-law (68) or when the state's intervention has taken place in line with normal market conditions (69). However these two case scenarios are not applicable in the current case.

(84) Concerning the ‘structural disadvantage’ invoked by the beneficiary and the Greek authorities, the Commission first notes that in accordance with the Court's case-law, the existence of a structural disadvantage is not relevant for excluding the existence of an advantage and thus of State aid (70). In addition, the Combus case is not applicable in any case in the case under examination. In that case, Combus had indeed a structural disadvantage as compared to its private sector competitors and the measure in that case indeed ruled out the existence of an advantage. This was due to the fact that most of Combus's drivers had the status of officials which meant higher personnel costs than if it had employed drivers on a contract basis, as all the other bus operators. However, PCT does not have a structural disadvantage compared to its competitors, as the fact that it undertook to invest in a big public infrastructure project does not by itself constitute a structural disadvantage, but a private investor decision that was taken by its parent company Cosco within the context of its normal business activity. Thus the findings in the Combus case-law are not applicable in this case.

(85) In particular as regards the measure relevant to the exemption from taxes, contributions and any rights in favour of the state or third parties on the contracts between the creditors, and in particular its mother company Cosco, of the loan agreements under which are transferred the obligations and rights resulting therefrom (71), the Commission considers that this provision is equivalent to the granting of an insurance contract that the state grants to PCT's creditors for free. In essence, PCT's creditors, and in particular Cosco, may enjoy the immunity from the payment of any tax, contribution and any right in favour of the state or third parties that the Geek state may decide to impose in the future, without having to pay any compensation to the state for such immunity. Thus due to this measure Cosco is found in a more advantageous position than creditors of other investors, as it does not have to pay a premium to the state for such immunity.

(86) Given the nature of this measure that is foreseen to apply in case the state adopts generally applicable rules imposing indirect taxes for this type of transactions, in essence it foresees tax immunity in favour of PCT's creditors, in particular Cosco, as compared to the companies in the same legal and factual situation as other creditors of companies conducting investments. In case the state adopts generally applicable rules imposing indirect taxes on the transfer of loan obligations conducted by companies, the creditors of all other investors will have to pay such indirect taxes in the case of transfer of such loan rights. On the contrary in the case of PCT the transfer of any right deriving from any loan financing its investment between its creditors and in particular Cosco, will not be subject to any such tax, without the state being compensated for the grant of such immunity. Thus the advantage in question is selective as it only concerns PCT's creditors, in particular Cosco, that transfer rights and/or obligations deriving from the loans relevant to the funding of the concession contract and PCT.

(87) To fall within the scope of Article 107(1) TFEU, a state measure must ‘favour certain undertakings or the production of certain goods’ in comparison with others which, in the light of the objective pursued by that regime, are in a comparable legal and factual situation (72). Hence, in principle, for fiscal measures, the Commission has to assess the material selectivity of the measure by means of a three-step analysis.

(88) First it is necessary to identify the common or ‘normal’ regime under the tax system applicable (‘system of reference’). Secondly, it has to be assessed whether the measure constitutes a derogation from that system of reference insofar as it differentiates between economic operators, who in light of the objective intrinsic to the system, are in a comparable legal and factual situation (73).

(89) If such derogation is established, i.e. if the measure in question is prima facie selective, in a third stage, it has to be examined whether the derogatory measure results from the nature or the general scheme of the tax system of which it forms part and could hence be justified. In this context, according to the Court's case-law, the Member State has to show whether the differentiation derives directly from the basic or guiding principles of that system (74).

(90) The Greek authorities and PCT have provided extended argumentation in order to argue that for all the fiscal measures the correct system of reference is the general scheme applied for big public infrastructure projects in Greece with the objective of facilitating their access to finance in view of the high risks these projects entail, and that it follows from the Gibraltar judgement (75) that the introduction by a Member State of an exemption to generally applicable rules does not automatically give rise to selectivity and an advantage.

(91) The Commission will first analyse whether such argumentation can be accepted as regards all the elements of the selectivity analysis, i.e. system of reference, objective of the system, comparison of comparable legal and factual situation in light of this objective and justification on the basis of this objective. Then it will proceed to the selectivity analysis of each measure separately.

i. Concerning the ‘system of reference’ and its objective

(92) The reference system constitutes the framework against which the selectivity of a measure is assessed. It defines the boundaries for examining whether certain undertakings benefit from a derogation from the normal rules which together form that reference system and are therefore treated in an advantageous way compared to other undertakings subject to the general rules of the system.

(93) When establishing this reference taxation framework, its scope has to be determined in a consistent manner in order to avoid that objectives that are extrinsic to the system are taken as a basis for its definition. If the definition of the reference system was established in the light of the policy objective that Member States pursue in each case which is extrinsic to the logic of the taxation system, then all fiscal measures Member States put in place in order to promote certain sectors, activities or type of undertakings would in practice escape from the application of Article 107(1) TFEU (76).

(94) In the present case, the objective of facilitating companies engaged in big infrastructure projects by providing legal certainty and additional cash flow during the phase of construction, invoked by the Greek authorities and PCT, is a policy objective which is external to tax considerations and cannot be used for the purposes of the selectivity analysis. The characteristics of big public infrastructure projects are extrinsic to the tax system and cannot serve as a basis to determine the applicable system of reference. In any case, the fact that the Greek state adopts a specific law each time it wishes to allow a specific fiscal treatment to a specific company, cannot be considered as a general framework that the administration applies without discretion.

ii. PCT's legal and factual situation in light of the objective of the measure concerned

(95) Once the reference system has been established, the next step of the analysis consists of examining whether a given measure differentiates between undertakings in derogation from that system. To do this, it is necessary to determine whether the measure is liable to favour certain undertakings or the production of certain goods as compared with other undertakings which are in a similar factual and legal situation, in light of the intrinsic objective of the system of reference. However, for this purpose, external policy objectives cannot be relied upon to analyse the differentiated treatment of undertakings under a certain tax regime.

(96) As regards the ‘horizontal’ character of the argued scheme that is applicable to all undertakings implementing big infrastructure projects, it is settled case-law (77) that the fact that the number of undertakings able to claim entitlement under a measure is very large, or that they belong to different sectors of activity, is not sufficient to call into question the selective nature of that measure and, therefore, to rule out its classification as State aid (78). Therefore the fact that companies undertaking big infrastructure projects may benefit from several fiscal exemptions, is not sufficient to exclude the selective character of the measures in question. On the contrary, the criteria according to which these companies get access to such exemptions may entail de facto selectivity (79).

(97) Therefore PCT's comparable legal and factual situation has to be examined each time in the light of the objective of the relevant tax system applicable and not on the basis of external policy objectives.

iii. Justification by the logic of the tax system

(98) A measure which derogates from the reference system, which is thus prima facie selective, may still be found to be non-selective if it is justified by the nature or general scheme of that system. This is the case where a measure derives directly from the intrinsic or basic guiding principles of the reference system or where it is the result of inherent mechanisms necessary for the functioning and effectiveness of the system (80). On the contrary external policy objectives which are not inherent in the system cannot be relied upon for that purpose (81). Consequently tax exemptions which are the result of an objective that is unrelated to the tax system of which they form part cannot circumvent the requirements of Article 107(1) TFEU.

(99) In that respect, the European Court has established that even if a policy objective constitutes one of the essential objectives of the European Union, the need to take that objective into account does not justify the exclusion of selective measures from classification as aid (82). The successful implementation of the big infrastructure projects and the legal certainty for the implementation of these projects cannot be considered as an intrinsic objective of the tax system. Moreover, the Greek authorities and PCT have not proven how this objective is consistent with the principle of equality and proportionality of the general tax system, and in particular its revenue raising objective. The latter objective is hard to reconcile with the granting of tax reductions (83). Nor can the key financial concerns of the companies implementing big infrastructure projects be considered as objectives that can justify a differentiated treatment for these specific companies and in particular for PCT.

(100) Therefore if the fiscal measures that will be examined below constitute selective measures, they cannot be considered as justified by the public policy objective put forward by the Greek authorities and the beneficiary.

5.3.1. Exemption from income tax imposed on interest accrued until the date of the commencement (84) of operation of Pier III (85)

System of reference

(101) Under the Greek income tax system, in principle all profits of SA, companies of limited responsibility and private capital companies established in Greece, that are generated in Greece and abroad, including those in the form of interest, are taxed (86) at the applicable rate in the financial year concerned and the remaining amount of profits after tax may be either distributed to shareholders, accumulated as reserves or incorporated/converted into equity capital through a capital increase. Once the amount of profits after tax is distributed to shareholders or incorporated/converted into equity capital, it is taxed again at the applicable rate in the financial year concerned (87).

(102) Consequently, the system of reference for the taxation of interests accrued until the date of the commencement of operation of Pier III is the Greek corporate income tax system, in particular the taxation of companies on profits including those resulting from accrued interests.

Derogation from the system of reference

(103) The ‘accrued interests’ (88) constitute a part of PCT's gross taxable income and would normally be subject to taxation. However, PCT is exempted from income tax on accrued interest until the commencement of the operation of Pier III (89), a treatment that deviates from the system of reference, mainly the income tax on revenues under the Greek income tax code (‘GITC’). PCT may be considered as being in a comparable legal and factual situation with all S.A that are taxed on their profits under the generally applicable framework. Therefore it can be concluded that it has been granted a selective advantage.

(104) According to the Greek authorities and PCT, Article 99 of the GITC foresees that income exempt from taxation is subject to corporate income tax at the time of its distribution or capitalisation. On this basis they argue that the provision at stake only allows a tax deferral to PCT, in the sense that once PCT will capitalise or distribute its profits, PCT will be liable to pay corporate income tax on its' profits as well as withholding tax on shareholders' dividends.

(105) The Commission notes that Article 99(1)(a), third indent of the GITC states that for companies that are exempted from corporate income tax according to specific legislation (in this case the provision under examination), only the profits that are capitalised or distributed are taxed, after the corresponding corporate income tax is deducted from their value. Therefore this means that through this provision, PCT is not liable to pay income tax from interest accrued until its related income is capitalised or distributed or at the latest until the commencement of operation of Pier III. Thus the tax deferral only refers to the profits that may be distributed or capitalised. Due to this provision, PCT may use its' profits that derive from interest accrued until the commencement of operation of Pier III, in order to accumulate reserves without having to pay corporate income tax in this respect. Moreover as according to the Greek authorities there is no obligation under the Greek legislation to convert reserves into share capitals or to distribute profits, PCT may due to this provision enjoy a full tax exemption of its profits deriving from accrued interests generated in Greece and abroad (90). In any event, a tax deferral constitutes a selective advantage to PCT.

(106) The Greek authorities and PCT indicate that PCT has to maintain significant cash deposits in order to finance the investments required during the construction phase and the period prior to the commencement of Pier III and that this exemption aims at facilitating these investments in public infrastructure. In this sense they consider that PCT is in a legal and factual comparable situation to all companies undertaking big investments in public infrastructure.

(107) However, the fact that the measure is available to all companies realising investments in public infrastructures does not mean that the measure is not selective. On the contrary, it is established that only a certain category of companies, those investing in public infrastructures, can benefit from the measure. Other companies which are not active in this sector of activity cannot benefit from the same measure. Moreover, as already analysed above (91) the policy objective of facilitating companies engaged in big infrastructure projects during the phase of construction cannot be considered as an objective inherent to a fiscal regime on the basis of which the comparable legal and factual situation of companies can be determined.

Justification by the logic of the tax system

(108) The Greek authorities and PCT indicate that the tax exemption on accrued interests is based directly on a general provision of the GITC (92) that includes amongst certain types of tax exempted income, ‘incomes exempted by virtue of a contract ratified by law’. They argue that as the Greek legislator consistently uses this general exemption in order to introduce tax exemptions applying specifically to all large public infrastructure projects undertaken in Greece, the provision under examination does not introduce a special tax exemption. On the contrary, it forms part of a general scheme based upon the general tax system that aims at facilitating and supporting the implementation of large public infrastructure or investment projects. This provision has been applied consistently for all public infrastructure projects in order to ensure that companies undertaking such projects are not subject to discrimination or ‘structural disadvantage’.

(109) It derives from the EU courts case-law that treating economic agents on a discretionary basis may mean that the individual application of a general measure takes on the features of a selective measure, in particular where exercise of the discretionary power goes beyond the simple management of tax revenue by reference to objective criteria (93).

(110) In view of this case-law, it can be concluded that the alleged ‘general’ provision allows full discretion to the legislator to exempt any income from taxation, in practical terms after the state has negotiated and concluded any kind of contract with any taxable person. Therefore in practice this ‘general’ provision allows for exemptions which are not within the logic of the general taxation system, but within the logic of favouring the specific company with which a contract may be negotiated and concluded each time. Therefore, the alleged ‘general’ provision of the GITC cannot be considered as forming part of the logic of the income tax system.

(111) As regards the justification of the measure as inherent with the public policy objective of facilitation of public infrastructure projects, the Commission considers that these arguments might not be taken into consideration when assessing the notion of aid.

(112) Therefore the Commission concludes that the measure constitutes a selective advantage in favour of PCT which is equal to the income tax which PCT would normally have to pay on the accrued interests until the commencement of operations of Pier III.

5.3.2. Refund of VAT credit balance irrespective of the stage of completion of the contract object — ‘single investment good’ — VAT refund within 60 days from application; interests due to delay (94)

System of reference

(113) According to the Greek VAT tax system, a taxable person is entitled to deduct input VAT that is directly linked to the realisation of acts that are taxable (95) or that are not taxable but give right to deduction. The deduction is granted for the part of goods and services that are indeed used for the realisation of acts that are subject to the tax. Furthermore, VAT credit resulting from the deduction of input VAT and output VAT in a given tax period is not refunded but is carried forward to the next tax period (96). A refund is allowed if the company is not able to offset its VAT credit against output VAT over a 3-year period and upon completion of this period (97).

(114) The VAT credit may be refunded and not carried forward to the next tax period only under the exceptions set out in Article 34 of the VAT Code. One of these exceptions concerns VAT that has been paid on ‘investment goods’, as they are defined in the VAT Code (98), i.e. ‘tangible goods, owned by the company and put by it on continuous exploitation, as well as the buildings and other kind of constructions that are constructed by the taxable company on estate property that does not belong to it, but of which it has the use on the basis of any legal relation, for a period of at least 9 years… Reparation and maintenance costs are not included in the value of the investment good’.

(115) According to Article 5 of Ministerial Decision 1073/2004/EC (99), in the foreseen exceptional cases (100), VAT credit may be refunded as follows: (a) for the first VAT refund application, within 2 months from the application date; (b) for the subsequent VAT refund applications above EUR 6 000: (i) 90 % refunded within 1 month from the application date; and (ii) the remaining 10 % within 2 months from the application date; (c) for subsequent VAT refund applications of less than EUR 6 000, the entire VAT amount within 1 month from the application date.

(116) As the Greek authorities and PCT rightly point out, for the construction of immovable property, the refund of VAT credit is made after the commencement of the works and up to the amount that corresponds to the expenditure related to the works which have been performed and invoiced during each period for which VAT can be claimed (101).

(117) In particular as regards investment goods, the right to deduct VAT is decided definitely at the time the investment goods are put in use. Moreover, in order to avoid abuses in the VAT refund mechanism, if within 5 years from the realisation of the expenditure for the acquisition or the construction of an investment good, this good is not put in use, then the input VAT that has been deducted has to be returned to the State, as it is considered as not having been used for taxable acts (102).

(118) Finally according to the generally applicable framework, the interest computation on tax or unduly paid amounts refund starts 6 months after the first day of the month following the fiscal declaration of the taxable person (103). Nevertheless, the Greek administrative courts have considered that this provision is not in conformity with the constitutional principle of equality of taxpayers (104). Therefore they have set aside this provision by considering that the interest should be computed from the day the taxable person has filed an appeal against the tax authority's decision not to refund the claimed VAT credit (105).

(119) The Commission considers that these provisions constitute the system of reference on VAT credit refund in Greece.

Derogation from the system of reference

— Concerning the VAT credit refund irrespective of the stage of completion of the contract object

(120) According to Article 2, paragraph 3 of Law 3755/2009, PCT is entitled to VAT credit refund regardless of the degree of completion of the construction project or individual structures or parts thereof. Moreover according to the same Article PCT does not lose its VAT credit refund right, in case it has not made use of the investment good within 5 years from the realisation of the related expenditure, although this would be the case according to the generally applicable rules.

(121) The Greek authorities and PCT argue that as all companies have the right to VAT refund once the relevant expenditure is performed and invoiced, the provision as regards PCT does not grant any additional advantage to it, as in any case PCT would be entitled to VAT refund after the commencement of the works and not only when these works would be completed.

(122) On the basis of the additional information and explanations provided, the Commission has come to the conclusion that indeed PCT would have at any case the right to VAT refund after the commencement of the works on the project and up to the amount corresponding to the invoices issued. However, this right is definitely decided once the investment good is put in use. Given that PCT has the right to VAT refund irrespective of the completion of the investment project and at the same time does not lose this right in case it does not put the investment good in use within 5 years, as it should under the normally applicable rules, it enjoys a selective advantage.

(123) This advantage consists in the VAT refund that PCT is entitled to keep if 5 years after the realisation of the expenditure related with this refund, the project did not start, while other companies would have to pay back to the Greek state the VAT refunded in case of non-commencement of the project within 5 years (from the realisation of the related expenditure). It is recalled that, under the generally applicable rules, in such cases, the relevant acts (concerned by this expenditure) would not be considered any more as taxable acts (see recital 117 above). This means that, in similar circumstances, other companies would normally be prevented from using the VAT credit linked with these expenses to offset VAT due in a subsequent period. Therefore, the advantage that PCT enjoys from this provision is equal to the full amount of the VAT refund that it is allowed to keep (under this provision) if 5 years after the realisation of the related expenditure, the project did not start.

(124) The Greek authorities and PCT argue that this deviation is also applicable to public utility companies, as they are the ones who most of the times construct infrastructure projects that may take more time to be completed than this 5-year period generally applicable. According to them, the same line of reasoning stands also for PCT, who would construct a big infrastructure project that may need more time than 5 years. This is also why this provision has been inserted in all the other concession contracts related to big infrastructure projects. Therefore they consider that this deviation from the generally applicable rules is not an exception but a different application of the rules to different situations that are not comparable.

(125) The Commission considers that this deviation constitutes a selective advantage, as it allows PCT the flexibility to get access to VAT credit refund independently of when it will put in use the investment good, i.e. for an indefinite period of time. In this way, even if it never put in use the investment good, its right to VAT credit refund would never be decided definitely and adjusted accordingly, which in practice means that if it didn't complete the project, it would not be obliged to return the VAT credit that it received during the whole construction period. The fact that public utility companies might benefit from the same advantage does not mean that this advantage is not selective. Public utility companies constitute a category of companies which can benefit from the measure. Consequently, such a measure is selective.

— Concerning the definition of investment good

(126) Article 2, paragraph 3 of Law 3755/2009 foresees that for the purposes of the VAT code, the construction project of the concession agreement and any supply of goods, works, services and ancillary works related to the construction shall be considered as ‘single investment good’. This provision states in essence that for the purposes of the concession agreement, the notion of ‘investment good’ foreseen in the VAT code shall include all activities related to the object of the concession agreement, i.e. not only the ‘tangible goods’ (106) constructed but also all provision of goods, works and services that are related or ancillary to the concession agreement object.

(127) The Greek authorities and PCT argue that in light of Articles 34 and 33(4) of the VAT code relevant to the ‘investment good’, the provision under examination merely consists in a clarification of the generally applicable rules in order to avoid mistaken application of the VAT credit refund rules by the tax authorities in view of the particularities and the high amounts involved in big infrastructure projects. According to them, in light of the specific characteristics of the concession agreement, the measure under examination has as a purpose to treat each element of the investment costs as a single business unit for the VAT purposes. As all expenditure related to the investment project is integrated in the investment good from an accounting point of view at any case, this provision only clarifies what is already applicable. As PCT has undertaken considerable investments that would include separate actions and stages and types of expenditure on goods and services, if each of these costs were treated separately, PCT would be treated differently for the purposes of the VAT regime from any undertaking investing in order to engage in an economic activity.

(128) To support their argumentation, the Greek authorities and PCT refer to the INZO case-law (107), according to which the economic activities in the sense of the VAT directive ‘… may consist in several consecutive transactions and preparatory acts …’ (108) that allow the relevant VAT credit refund during the construction period. Moreover they indicate that in the same line of reasoning the law on PPPs was amended in 2011 (109) in order to foresee that PPPs are eligible to claim the refund of VAT credit each year upon the submission of their annual VAT return, without having to carry forward the credit balance to the next accounting period.

(129) Finally they argue that even if the investment was not considered as falling within the scope of the definition of ‘investment good’, PCT would be entitled to claim the refund: (i) upon an annual basis if it could establish that it would not be able to offset its VAT credit against output VAT over a three year period and (ii) upon the completion of three years.

(130) The Commission notes that the provision under examination includes a specific definition of the notion of ‘investment good’ which is broader for PCT than for other companies that are in the same legal and factual situation. In practice this definition has as a consequence that PCT has the right to be refunded for VAT credit in respect of all works, services and goods related to the construction object, although according to the generally applicable rules this possibility would only exist for tangible goods and not for services, works, repair and maintenance costs. As according to the generally applicable rules PCT would be entitled to a VAT credit refund upon an annual basis by establishing that it would not be able to offset its VAT credit against output VAT over a three-year period and upon the completion of three years, the broader definition of the single investment good for the purposes of the concession contract in practice results in granting to PCT additional cash in advance from VAT credit that would normally be refunded later (110).

(131) Indeed, thanks to this provision, PCT can get a tax refund not only for tangible goods but also for expenses relating to services, works, repair & maintenance, while other companies could for such expenses only offset input against output VAT or wait for 3 years to get a refund. Therefore, the advantage that PCT enjoys thanks to this provision is equal to the interests accrued on VAT refunded for all expenses other than for tangible goods (relating to the investment good), from the moment the refund was put at the disposal of PCT up to the moment PCT would have been entitled to such refund, namely 3 years later or up to the moment where PCT would have been able to offset its VAT credit (concerning these expenses) against output VAT.

(132) The fact that the tax authorities could possibly apply differently the VAT credit refund rules in the absence of this definition, demonstrates that this definition entails a selective advantage for PCT that is not applicable to all companies. Moreover the fact that the law on PPPs that is mainly applicable for infrastructure projects, was amended in order to foresee the right of PPPs to claim the refund and avoid VAT credit carrying forward to the next year, also proves that according to the generally applicable rules every expenditure related to an infrastructure project will not be treated as a ‘single investment good’ for the purposes of the application of VAT credit refund rules. The letter of the Ministry of Mercantile Marine to the Ministry of Economic Affairs (111) requesting specific VAT credit refund arrangements (112) for PCT and the successful bidder of the Port of Thessaloniki at the time, demonstrates that the generally applicable rules related to refund would not be the same. Finally the fact that after the 2013 Ministerial Decision there is no differentiation in the refund rules irrespective of the definition of investment good, also demonstrates that this definition constituted a selective advantage in favour of PCT at the time it was granted.

(133) Moreover the Commission notes that the INZO case-law mentioned refers to the right to deduct VAT for transactions subject to VAT that are related to the economic activity of the taxable person and not to the right for a refund.

— Concerning the computation of interests from the first day after the expiry of the 60-day deadline

(134) The provision under examination grants also PCT the right to interests from VAT credit against the state arising automatically once the 60-day deadline expires, without having to follow the procedural or temporal requirements set out by the general applicable framework related to the VAT credit refund, i.e. at an earlier stage than for other companies and without having to go through the administrative courts' procedure. Therefore it entails an additional selective advantage for PCT.

(135) This advantage consists in the interests which PCT can request (under this provision) from the Greek state once 60 days have passed from the moment it filed the relevant fiscal declaration (to request the VAT refund), while other companies in a similar situation would not be entitled to interests at the same point in time.

(136) The Greek authorities retain their argumentation that is supported by PCT by referring to the EU case-law on VAT (113) which states that the refund of VAT credit balance constitutes the refund of resources of the taxable person and not state resources. They argue further that the 60-day time limit derives to the principle of neutrality and equality deriving from the EU VAT case-law (114). Where the state delays in refunding VAT credit balance beyond what it has established as a ‘reasonable period of time’, it should be required to pay arrears interest by way of compensating the taxpayer claiming such refund. Thus the payment of this type of arrears interest on VAT credit balance does not constitute state resources.

(137) The Commission considers that the computation of interests in respect of the delay in the payment of the VAT refund implies state resources, as regards the additional interests the state will have to pay to PCT due to this provision. In practice due to this provision the state will pay interests automatically from the next day after the 60-day period and not from the date PCT would file an appeal in this respect, as it would be the case according to the applicable rules. As only PCT gets this right automatically although this is possible in general only after the filing of an appeal, the provision entails a selective advantage for PCT.

(138) The Greek authorities and PCT argue that this provision merely ensures that the state does not obtain a financial benefit at the expense of PCT. In the case of concession agreements of this type a big delay in VAT credit refund would be a considerable expense and thus a serious structural disadvantage for PCT. Moreover the possible payment of smaller amounts of arrear interests to other undertakings does not reduce the cost that PCT should normally bear in its business activity. Thus PCT does not have any competitive advantage and is not treated differently than other companies.

(139) The Commission does not consider that PCT is in a different situation than other companies which would justify a different treatment. As already mentioned the fact that PCT realises a large investment does not constitute an argument regarding the notion of selectivity. Moreover, the automatic payment of interest to PCT reduces the normal costs of the company and gives PCT an advantage compared to other companies.

Justification by the logic of the tax system

(140) The Greek authorities and PCT argue that even if there was an element of selectivity in the provisions relevant to VAT credit refund, this would be justified by the basic or guiding principles which are inherent in the VAT system, as this has been confirmed by the EU and Greek courts.

(141) The Commission notes that in this case the measures in favour of PCT indicate that PCT was granted a favourable treatment as regards VAT refund as compared to other companies that conduct investments and deduct VAT and this cannot be considered as justified by the principle of neutrality or even more of equality of the VAT tax system.

(142) In particular as regards the VAT credit refund irrespective of the stage of completion of the contract object, even if it could potentially be accepted that a deviation would be possible due to a longer construction period, that can be anticipated in bigger projects, an indefinite duration of this deviation cannot be considered as respecting the principle of equality or of neutrality of the VAT system. In particular, as PCT under the terms of the concession contract was under the obligation to complete Pier II until 30 April 2014 and Pier III until 31 October 2015 at the latest, the said flexibility for an unlimited period of time cannot explain in which terms the comparable and legal factual situation of PCT is different from that of other undertakings that make investments and get a VAT credit refund. In light of the principles of the VAT system, according to which it has to be ensured that companies do not benefit from an undue advantage from the VAT system in place, such specific treatment cannot be considered as justified by the logic of the system.

(143) As regards the broad definition of the notion of investment good, the Commission notes that the VAT directive allows Member States discretion to decide whether the companies may get VAT credit refunds or whether they will carry the VAT credit forward to the next year, as well as how they will define the ‘investment good’ for VAT purposes. Thus the Greek state had the discretion to determine the rules applicable in this respect and specify in which cases a refund could be claimed and on which basis. However, the broad definition of the notion of investment good that allowed PCT a facilitated and earlier refund of VAT credit cannot be considered as justified by the logic of the tax system, as this would be contrary to the equality principle that should be applied to all companies that conduct investments and not only to PCT.

(144) Concerning the computation of interests after the 60-month deadline, the Commission considers that it cannot be justified by the logic of the Greek VAT system either. The general VAT neutrality principle may justify the imposition on interests in case of delay of the VAT refund, to oblige the state not to shift the burden of the VAT system to the taxpayer. The Greek provisions in this respect have been interpreted by the Greek Courts so that the taxpayer of any kind does not suffer the consequences of a possible inaction of the state. This interpretation was made independently of the amounts that the state has to return to the taxpayer. Thus the advantage that PCT derives from the provision under examination that is supposed to put additional pressure to the Greek state in case it does not refund VAT in time cannot be considered as justified in view of the high expenditure of its investment.

(145) Consequently, the Commission considers that the abovementioned measures concerning the conditions of refund of VAT provide a selective advantage in favour of PCT.

5.3.3. Loss carry-forward without temporal limitation — Income tax (Article 2(5) of Law 3755/2009)

System of reference

(146) According to the general applicable framework (115), for the purposes of calculating the income tax, the losses of one year for commercial activities and activities of a liberal profession may be carried forward for up to a maximum period of 5 years. The GITC does not foresee any exception in respect of this rule.

Derogation from the system of reference

(147) According to Article 2 paragraph 5 of Law 3755/2009, PCT may carry forward its losses without any limitation in time. This measure grants a clear selective advantage to PCT as it deviates from the generally applicable rule that has no exceptions under the GITC. Due to this provision PCT will be able to carry forward its losses to any time it will be more appropriate for its interests, mainly once the balance between its investment costs and its taxable income will change, i.e. when it will have high profits, in order to avoid paying taxes that it would normally pay in the absence of the benefit of this exception.

(148) Therefore, this provision provides to PCT an advantage which is equal to the difference between the income tax that it actually pays and the corporate tax that it would have paid in the absence of the possibility to carry forward its losses more than 5 years after these losses occurred.

(149) The Greek authorities and PCT also argue that the right to carry forward losses for the duration of the concession in this case has been considered appropriate as an application of the income-expenses matching principle. According to the Greek authorities and PCT one of the basic principles of the GITC in this respect and has been applied as such in the general scheme of which Article 2(5) forms part, which they consider should be taken as the system of reference.

(150) Moreover they argue that in long term concessions to construct and operate public infrastructure, there is a marked imbalance between the initial period of construction of the infrastructure and the subsequent stages of operation of the infrastructure where the infrastructure is expected to be profitable so as to cover initial losses. As the investments required up-front lead to significant losses over more than 5 years and they can only be offset at the later part of the concession period, the 5-year limitation would deprive the concessionaire of the benefit of the tax loss carry-forward rule. In this respect, undertakings responsible for big infrastructure projects would be in a different situation from ordinary undertakings.

(151) The Commission considers that this derogation from the general rule cannot be considered as inherent in the logic of the Greek tax system. As the 5-year rule for fiscal loss carry-forward is general and without any differentiations, the loss carry-forward without any temporal limitation cannot be considered as justified for public infrastructure projects. The 10-year limitation that is now applicable for PPPs reinforces the conclusion that the indefinite period foreseen specially for PCT constitutes a clear selective advantage for it. Finally the Commission considers that all undertakings that conduct investments that may take several years are in the same legal and factual situation as PCT and the other concessioners in Greece, in light of the objectives of the General Income Tax Code. As the Greek tax system does not allow differentiations depending on the duration of the investments of undertakings but sets out this general 5-year rule for all, PCT cannot be considered as being different than other companies as regards this rule. As mentioned in point 107, a measure applicable to all undertakings responsible for big infrastructure projects is selective because it only applies to a limited category of undertakings.

Justification by the logic of the tax system

(152) The Greek authorities and PCT argue that: (a) the ‘objective pursued’ for this measure should be the one pursued by the derogating provision; (b) this provision aims at applying the income-expenses matching general principle of the tax system to the particular characteristics of the concessions; (c) the application of this principle to these projects does not amount to a removal of the risk borne by the concessionaire but aims at ensuring equal treatment and removal of the ‘structural disadvantage’ of these projects; (d) this provision has been consistently applied to all big public infrastructure projects in Greece; (e) the possibility to carry forward losses over the duration of the concession is the appropriate mechanism in addressing the particular characteristics of such concessions and the objective difference between the concessionaire and other commercial undertakings.

(153) The Commission notes that the objective of the tax system has to be established at the level of the system of reference and not at the level of the exception measure (116). If the measure itself constituted the reference system, then any fiscal measure would escape the classification of State aid no matter how exceptional it would be. The objective of the corporate income tax system is to generate revenue for the state budget and it would be jeopardised if specific companies were allowed to reduce their tax base when they see fit according to their financial interests. In addition the high investment amounts involved in big infrastructure projects does not mean that companies undertaking them are in a structural disadvantage that has to be corrected by the income tax system. All companies conducting investments have losses during the first years of the construction of their investment and they may not have revenues within the period of 5 years foreseen by the GITC. Such justification would not derive at any case from the principles of the Greek income tax system. Moreover the fact that a similar provision has been applied for certain big infrastructure projects in Greece does not mean that the measure may be justified for PCT. Finally the alleged specific characteristics of big concessions cannot be accepted as a valid objective of the generally applicable rules relevant to fiscal loss carry-forward, as explained above in recitals 98 to 100. Thus the Greek authorities and PCT have failed to prove that in light of the principles of the Greek income tax system the differentiation in favour of PCT can be justified.

(154) Consequently, the Commission considers that the selective measure under examination cannot be justified by the logic of the Greek tax system of reference described above.

5.3.4. Choice among three depreciation methods

System of reference

(155) The GITC foresees that for the depreciation of assets the general rule is the ‘fixed straight line method’ of depreciation (117) (118). According to Article 1 paragraph 2 of presidential decree 299/2003 (119) companies are obliged to depreciate their fixed assets every year with the depreciation rates set out in this decree, independently if they make profits or losses during the depreciation period. Consequently if the depreciation is conducted with rates that are higher than the ones foreseen in the presidential decree, they are not taken into account for tax purposes.

(156) Especially in respect of concession contracts, reserves for recovery of assets that will return to the state or third parties (120) after a certain period of time on the basis of a contract are deductible from gross revenues (121). According to Ministerial Decision 100/2005 (122), reserves for recovery of assets that will be returned to the state or to third parties without compensation, are formed every year and for as many years as the work concession lasts. This reserve is deducted from gross revenue and is not formed out of the profits of the company. The company is not entitled to calculate the depreciations on the basis of presidential decree 299/2003, which is generally applicable, due to this specific provision, but also due to the fact that the work constructed by the company for exploitation does not belong to the company but to the state or the third party. The deduction at stake is calculated independently of the existence of profits.

(157) Finally costs related to improvements and supplements on leased immovable property are depreciated in equal tranches over the period of the leasing, provided that the applicable depreciation rate is not lower than the rate set out in Presidential Decree 299/2003 (123).

(158) Thus the general system of reference as regards this measure consists in the straight line depreciation method which is generally applicable, for the whole concession period, which is the time period determined for contracts under which the depreciated asset will be returned to the state or a third party.

(159) The Greek authorities and PCT argue that the provisions related to depreciation allow flexibility to choose between alternative depreciation methods and depreciation rates, in order to allow appropriate treatment of different circumstances. At that prospect, they refer to the possibility of industrial, mining, quarry and mixed enterprises of this kind to decide on the use of the straight line or the declining depreciation method. According to them, the choice of the depreciation method, as well as the choice of the depreciation rates, is at the discretion of the taxpayers. In line with these two methods and reflecting the principle of flexibility in this regard, they refer to the possibility of PPPs to choose between the straight line method applying for the whole life-period of the project and the 10 year straight line method with an option to select a longer depreciation period within one month from the completion of the project (124). Finally they reiterate the argumentation provided before the opening decision, by indicating that the flexibility of this system is also shown by the fact that other companies awarded concessions of big public infrastructure projects in Greece have the choice between different depreciation methods.

(160) The Commission notes that the possibility for industrial, mining, quarry and mixed enterprises of this kind, to choose between two types of depreciation method would not apply to PCT because this possibility did not cover contracts through which the asset is returned to the state or a third party at the end of the contract.

(161) Moreover the fact that other companies might have benefitted from similar advantages does not mean that such advantages may constitute a system of reference. In particular, the fact that other companies awarded concessions of big public infrastructure projects in Greece have the choice between different depreciation methods only shows that the possibility is limited to a category of companies, those conducting big public infrastructure projects.

(162) Thus the Commission considers that the system of reference for this measure is the one determined above in recitals 155 to 156.

Derogation from the system of reference

(163) Article 2(6) of the Law under examination, provides to PCT the choice between 3 different methods of depreciation: a. Fixed straight line method during the whole concession period. b. Depreciation of the works' construction costs within 10 years from the moment of the completion of the works by yearly equal amounts (125). In case PCT wishes to depreciate such costs within a longer period, it may do so, but then it would have to notify this to the tax authority within one month from the end of the fiscal year during which the work has been completed. c. Depreciation of any amount up to 100 % of its construction costs within 5 years from the commencement of the commercial exploitation of the work (126). For all the subsequent years, it may depreciate up to 50 % of the non-depreciated construction costs of completed works irrespective of the time of completion. In case PCT wishes to use this method, it has to declare its intention to the competent tax authority at any time within 6 years after the commencement of the concession.

(164) PCT has been given the possibility to choose between the standard straight line generally applicable depreciation method and two other depreciation methods that are available to some of the big infrastructure projects in Greece. The provision allows PCT the right to choose depreciation methods that can entail an advantage as compared to the general system. If for instance PCT chooses one of the two accelerated depreciation methods, it will be able to reduce its taxable base to a larger extent and at an earlier stage than what it would do under the application of the standard straight line method. Moreover, the discretion granted to it to choose the third depreciation method within 6 years from the commencement of the concession, in practice means that PCT may choose the way and the level up to which it will reduce its taxable base at a later stage, when it will be in a position to calculate more precisely its taxable revenues. Thus depending on its revenues at that time it may benefit from the advantage to lower its taxable profits and pay less taxes than what it would pay if it depreciated all its assets according to the generally applicable rules.

(165) The Greek authorities and PCT argue that the choice of the depreciation method cannot constitute an advantage since the benefit of the tax allowance remains the full depreciation costs and only the number of years during which it will be spread will be different.

(166) The Commission notes in this respect that the full depreciation of an asset at a shorter or longer period of time may lead to a differentiation of the company's financial result and taxable situation at a certain period of time and thus lead to a benefit. If for instance a company depreciates the total value of an asset in 10 years' time instead of 35 years' time, then it will be able to reduce its taxable base at an earlier stage. The value of the depreciated costs that will be taken into account in the first case will be higher than the value of the same depreciated costs in a longer time period. Thus the Commission considers that indeed the tax allowance remains the full depreciation cost but the way this depreciation cost is used for taxation purposes may result in an additional advantage for PCT that other companies do not dispose of.

(167) The Greek authorities and PCT mentioned that the flexibility inherent to the depreciation rules in Greece should encompass an entire range of options in order to allow appropriate treatment of different circumstances of public infrastructure projects, whilst ensuring full depreciation of the costs of the assets.

(168) However, the generally applicable rule of the fixed straight line method for concession contracts, i.e. for companies that are in the same legal and factual situation, is clearly foreseen in the law and the ‘flexibility’ related to the range of depreciation rates is not generally applicable to costs of concession contracts, but to other types of investment costs.

(169) The Greek authorities also argue that the Commission in its opening decision misinterpreted the add