Keywords

Summary



Keywords

1. State aid - Concept - Tax concession constituting a general measure applicable without distinction to all economic operators - Excluded

(EC Treaty, Art. 92(1) (now, after amendment, Art. 87(1) EC))

2. State aid - Concept - Renunciation of tax revenue by a Member State where it allows investors to take up holdings in certain undertakings on conditions which are in tax terms more advantageous - Fact that investors then take independent decisions - Irrelevant - Included

3. State aid - Effect on trade between Member States - Prejudicial to competition - Operating aid

4. State aid - Effect on trade between Member States - Assessment criteria - Aid for undertakings having their registered office and their central administration in one of the new Länder or in Berlin

(EC Treaty, Art. 92(1) (now, after amendment, Art. 87(1) EC))

5. State aid - Prohibition - Derogations - Aid granted to certain areas affected by the division of Germany - Scope of the derogation - Strict interpretation - Economic disadvantages resulting from the isolation created by the frontier established between the two zones

(EC Treaty, Art. 92(1) and (2)(c) (now, after amendment, Art. 87(1) and 2(c) EC))

6. State aid - Prohibition - Derogations - Aid which may be regarded as compatible with the common market - Commission's discretion - Aid to promote the development of particular areas

(EC Treaty, Art. 92(3)(a) (now, after amendment, Art. 87(3)(a) EC); Commission communication 88/C 212/02, para. 6)

7. Freedom of movement for persons - Freedom of establishment - Tax legislation - Provision of national law granting a tax advantage to undertakings having their registered office on national territory while refusing to allow undertakings having their registered office in another Member State to benefit from that advantage - Not permitted

(EC Treaty, Art. 52 (now, after amendment, Art. 43 EC) and Art. 58 (now Art. 48 EC))

8. Acts of the institutions - Statement of reasons - Obligation - Scope - Decision one of a well-established line of decisions - Summary reasoning

(EC Treaty, Art. 92(1) (now, after amendment, Art 87(1) EC) and Art. 190 (now Art. 253 EC))

Summary

1. A tax concession in favour of taxpayers who sell certain financial assets and can offset the resulting profit when they acquire other financial assets confers on them an advantage which, as a general measure applicable without distinction to all economically active persons, does not constitute aid to those taxpayers within the meaning of Article 92(1) of the Treaty (now, after amendment, Article 87(1) EC).

( see para. 22 )

2. Article 92(1) of the Treaty (now, after amendment, Article 87(1) EC) provides that 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 is incompatible with the common market. In particular, measures which, in various forms, mitigate the charges which are normally included in the budget of an undertaking and which, without therefore being subsidies in the strict meaning of the word, are similar in character and have the same effect are considered to constitute aid.

That is the case where the origin of the advantage indirectly conferred on undertakings is the renunciation by the Member State of tax revenue which it would normally have received, inasmuch as it is this renunciation which has enabled investors to take up holdings in those undertakings on conditions which are in tax terms more advantageous. The fact that investors then take independent decisions does not mean that the connection between the tax concession and the advantage given to the undertakings in question has been eliminated since, in economic terms, the alteration of the market conditions which gives rise to the advantage is the consequence of the public authorities' loss of tax revenue. It follows that such a tax concession entails a transfer of State resources.

( see paras 25-28 )

3. In principle, operating aid, that is to say aid which is intended to release an undertaking from costs which it would normally have had to bear in its day-to-day management or normal activities, distorts the conditions of competition. The national authorities having failed to demonstrate that the Commission erred in its determination, the latter therefore rightly considered that aid consisting in reduction of the costs of certain financing charges for the undertakings concerned threatened to distort competition.

( see paras 29-31 )

4. The relatively small amount of aid or the relatively small size of the undertaking which receives it does not as such exclude the possibility that intra-Community trade might be affected. When aid granted by the State or through State resources strengthens the position of an undertaking compared with other undertakings competing in intra-Community trade the latter must be regarded as affected by that aid. That is the case where undertakings having their registered office and their central administration in one of the new Länder or in Berlin are granted a tax concession, since any undertaking other than those to which that measure applies can increase its own resources only on less advantageous terms, whether it is established in Germany or in another Member State.

( see paras 32-34 )

5. Since Article 92(2)(c) of the Treaty (now, after amendment, Article 87(2)(c) EC), by virtue of which aid granted to the economy of certain areas of the Federal Republic of Germany affected by the division of Germany, in so far as such aid is required in order to compensate for the economic disadvantages caused by that division, is compatible with the common market, has not, since the reunification of Germany, been repealed either by the Treaty on European Union or by the Treaty of Amsterdam, it cannot be presumed that that provision has been devoid of purpose since the reunification of Germany.

However, since it constitutes a derogation from the general principle, laid down in Article 92(1) of the Treaty, that State aid is incompatible with the common market, Article 92(2)(c) must be construed narrowly. Furthermore, in interpreting it, it is necessary to consider not only its wording but also the context in which it occurs and the objects of the rules of which it forms part.

In addition, although, following the reunification of Germany, Article 92(2)(c) of the Treaty falls to be applied to the new Länder, such application is conceivable only on the same conditions as those applicable in the old Länder during the period preceding the date of that reunification.

Since the phrase division of Germany refers historically to the establishment of the dividing line between the two occupied zones in 1948, the economic disadvantages caused by that division can only mean the economic disadvantages caused in certain areas of Germany by the isolation which the establishment of that physical frontier entailed, such as the breaking of communication links or the loss of markets as a result of the breaking off of commercial relations between the two parts of German territory.

By contrast, the conception according to which Article 92(2)(c) of the Treaty permits full compensation for the undeniable economic backwardness suffered by the new Länder disregards both the nature of that provision as a derogation and its context and aims. The economic disadvantages suffered by the new Länder as a whole have not been directly caused by the geographical division of Germany within the meaning of Article 92(2)(c) of the Treaty. It follows that the differences in development between the old and the new Länder are explained by causes other than the geographical rift caused by the division of Germany and in particular by the different politico-economic systems set up in each part of Germany.

( see paras 46-55 )

6. As regards the application of Article 92(3) of the Treaty (now, after amendment, Article 87(3) EC), the Commission enjoys a wide discretion, the exercise of which involves assessments of an economic and social nature which must be made within a Community context.

In that connection it is clear from paragraph 6 of Commission communication 88/C 212/02 on the method for the application of Article 92(3)(a) and (b) of the Treaty to regional aid that operating aid may only exceptionally be granted in areas assisted pursuant to Article 92(3)(a), that is to say, where the aid is likely to promote a durable and balanced development of economic activity.

( see paras 67-68 )

7. The freedom of establishment which Article 52 of the Treaty (now, after amendment, Article 43 EC) grants to nationals of the Member States and which entails the right for them to take up and pursue activities as self-employed persons under the conditions laid down for its own nationals by the law of the Member State where such establishment is effected includes, pursuant to Article 58 of the Treaty (now Article 48 EC), the right of companies or firms formed in accordance with the law of a Member State and having their registered office, central administration or principal place of business within the Community to pursue their activities in the Member States concerned through a subsidiary, branch or agency. As far as companies or firms are concerned, their registered office serves to determine, like nationality for natural persons, their connection to a Member State's legal order.

Moreover, the rules regarding equal treatment prohibit not only overt discrimination by reason of nationality or, in the case of a company, its registered office, but all covert forms of discrimination which, by the application of other criteria of differentiation, lead in fact to the same result. It is true that discrimination can arise only through the application of different rules to comparable situations or the application of the same rule to different situations and that, in relation to direct taxes, the situations of residents and non-residents are not, as a rule, comparable.

It follows that if a Member State grants, even indirectly, a tax advantage to undertakings having their registered office on its territory, refusing to allow the undertakings having their registered office in another Member State to benefit from that advantage, the difference in treatment between the two categories will in principle be prohibited by the Treaty, provided that there is no objective difference in situation.

( see paras 81-85 )

8. The reasoning required by Article 190 of the Treaty (now Article 253 EC) must show clearly and unequivocally the reasoning of the Community authority which adopted the contested measure so as to enable the persons concerned to ascertain the reasons for the measure in order to defend their rights and to enable the Court to exercise its power of review. However, the reasoning is not required to go into every relevant point of fact and law, inasmuch as the question whether a statement of reasons satisfies the requirements of Article 190 of the Treaty must be assessed with reference not only to its wording but also to its context and the whole body of legal rules governing the matter in question.

That principle, applied to the categorisation of a measure as State aid, requires the Commission to state the reasons for which the measure in question falls within the ambit of Article 92(1) of the Treaty (now, after amendment, Article 87(1) EC). Even where the very circumstances in which the aid has been granted show that it is liable to affect trade between Member States and to distort or threaten to distort competition, the Commission must at least set out those circumstances in the statement of reasons for its decision.

However, where a decision in the field of State aid was adopted in a context well known to the government concerned and it fits into a well-established line of decisions, particularly in relation to that government, such a decision may be reasoned in a summary manner.

( see paras 96-98, 105 )