Commission Notice on the application of the State aid rules to measures relating to direct business taxation
Date: 1998-12-10
Institutions: European Commission
Subjects: State aid, code of conduct, control of State aid, corporation tax, fiscal policy, tax system

10.12.98

EN

Official  Journal  of  the  European  Communities

C  384/3

Commission  notice  on  the  application  of  the  State  aid  rules  to  measures  relating  to  direct
business  taxation

(98/C  384/03)

(Text  with  EEA  relevance)

Introduction

1.(cid:217)On  1  December  1997,  following  a  wide(cid:220)ranging
discussion  on  the  need  for  coordinated  action  at
Community  level  to  tackle  harmful  tax  competition,
the  Council  (Ecofin)  adopted  a  series  of  conclusions
and  agreed  a  resolution  on  a  code  of  conduct  for
business  taxation  (hereinafter  "code  of  conduct’)(cid:216)(cid:216)(˛).
On  that  occasion,  the  Commission  undertook  to
draw  up  guidelines  on  the  application  of  Articles  92
and  93  of  the  Treaty  to  measures  relating  to  direct
business  taxation  and  committed  itself  "to  the  strict
application  of  the  aid  rules  concerned’.  The  code  of
conduct  aims  to  improve  transparency  in  the  tax  area
through  a  system  of  information  exchanges  between
Member  States  and  of  assessment  of  any 
tax
measures  that  may  be  covered  by  it.  For  their  part,
the  State  aid  provisions  of  the  Treaty  will  also
contribute  through  their  own  mechanism  to  the
objective  of  tackling  harmful  tax  competition.

2.(cid:217)The  Commission’s  undertaking  regarding  State  aid
in  the  form  of  tax  measures  forms  part  of  the  wider
objective  of  clarifying  and  reinforcing  the  application
of  the  State  aid  rules  in  order  to  reduce  distortions
of  competition  in  the  single  market.  The  principle  of
incompatibility  with  the  common  market  and  the
derogations  from  that  principle  apply  to  aid  "in  any
form  whatsoever’, 
including  certain  tax  measures.
However,  the  question  whether  a  tax  measure  can  be
qualified  as  aid  under  Article  92(1)  of  the  Treaty
calls  for  clarification  which  this  notice  proposes  to
provide.  Such  clarification  is  particularly  important
in  view  of  the  procedural  requirements  that  stem
from  designation  as  aid  and  of  the  consequences
where  Member  States  fail  to  comply  with  such
requirements.

3.(cid:217)Following  the  completion  of  the  single  market  and
the  liberalisation  of  capital  movements,  it  has  also
become  apparent  that  there  is  a  need  to  examine
the
the  particular  effects  of  aid  granted 

in 

form  of  tax  measures  and  to  spell  out  the  conse(cid:220)
quences  as  regards  assessment  of  the  aid’s  compati(cid:220)
bility  with  the  common  market(cid:216)(ˇ).  The  establishment
of  economic  and  monetary  union  and  the  consoli(cid:220)
dation  of  national  budgets  which  it  entails  will  make
it  even  more  essential  to  have  strict  control  of  State
aid  in  whatever  form  it  may  take.  Similarly,  account
must  also  be  taken,  in  the  common  interest,  of  the
major  repercussions  which  some  aid  granted  through
tax  systems  may  have  on  the  revenue  of  other
Member  States.

are 

transparent 

to 
decisions 

this  notice  also  aims 

the  objective  of  ensuring 

that
4.(cid:217)In  addition 
and
Commission 
ensure
to 
predictable, 
treatment  between
consistency  and  equality  of 
Member  States.  The  Commission 
intends,  as  the
code  of  conduct  notes,  to  examine  or  re(cid:220)examine
case  by  case,  on  the  basis  of  this  notice,  the  tax
arrangements  in  force  in  the  Member  States.

A.  Community  powers  of  action

5.(cid:217)The  Treaty  empowers 

the  Community 

take
measures  to  eliminate  various  types  of  distortion  that
harm  the  proper  functioning  of  the  common  market.
It 
the
thus  essential 
different  types  of  distortion.

to  distinguish  between 

to 

is 

6.(cid:217)Some  general  tax  measures  may  impede  the  proper
functioning  of  the  internal  market.  In  the  case  of
such  measures,  the  Treaty  provides,  on  the  one
hand,  for  the  possibility  of  harmonising  Member
States’  tax  provisions  on  the  basis  of  Article  100
(Council  directives,  adopted  unanimously).  On  the
other,  some  disparities  between  planned  or  existing
general  provisions 
in  Member  States  may  distort
competition  and  create  distortions  that  need  to  be
eliminated  on  the  basis  of  Articles  101  and  102
(consultation  of  the  relevant  Member  States  by
the  Commission; 
if  necessary,  Council  directives
adopted  by  a  qualified  majority).

(˛)(cid:217)OJ  C  2,  6.1.1998,  p.  1.

(ˇ)(cid:217)See  action  plan  for  the  single  market,  CSE(97)  1,  4  June

1997,  strategic  target  2,  action  1.

C  384/4

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Official  Journal  of  the  European  Communities

10.12.98

the  Commission  has  approved 

7.(cid:217)The  distortions  of  competition  deriving  from  State
aid  fall  under  a  system  of  prior  Commission  author(cid:220)
isation,  subject  to  review  by  the  Community  judi(cid:220)
cature.  Pursuant  to  Article  93(3),  State  aid  measures
must  be  notified  to  the  Commission.  Member  States
may  not  put  their  proposed  aid  measures  into  effect
until 
them.  The
Commission  examines  the  compatibility  of  aid  not  in
terms  of  the  form  which  it  may  take,  but  in  terms  of
its  effect.  It  may  decide  that  the  Member  State  must
amend  or  abolish  aid  which  the  Commission  finds  to
be  incompatible  with  the  common  market.  Where
aid  has  already  been  implemented  in  breach  of  the
procedural  rules,  the  Member  State  must  in  principle
recover  it  from  the  recipient(s).

B.  Application  of  Article  92(1)  of  the  EC  Treaty  to  tax
measures

8.(cid:217)Article  92(1)  states  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  under(cid:220)
takings  or  the  production  of  certain  goods  shall,  in
so  far  as  it  affects  trade  between  Member  States,  be
incompatible  with  the  common  market’.  In  applying
the  Community  rules  on  State  aid,  it  is  irrelevant
whether  the  measure  is  a  tax  measure,  since  Article
92  applies  to  aid  measures  "in  any  form  whatsoever’.
To  be  termed  aid,  within  the  meaning  of  Article  92,
a  measure  must  meet 
the  cumulative  criteria
described  below.

9.(cid:217)Firstly,  the  measure  must  confer  on  recipients  an
advantage  which  relieves  them  of  charges  that  are
normally  borne  from  their  budgets.  The  advantage
may  be  provided  through  a  reduction  in  the  firm’s
tax  burden  in  various  ways,  including:

-(cid:217)a  reduction 

in  the  tax  base  (such  as  special
deductions,  special  or  accelerated  depreciation
arrangements  or  the  entering  of  reserves  on  the
balance  sheet),

-(cid:217)a  total  or  partial  reduction  in  the  amount  of  tax

(such  as  exemption  or  a  tax  credit),

-(cid:217)deferment,  cancellation  or  even  special  resche(cid:220)

duling  of  tax  debt.

is  equivalent 

10.(cid:217)Secondly,  the  advantage  must  be  granted  by  the
loss  of  tax
State  or  through  State  resources.  A 
revenue 
to  consumption  of  State
resources  in  the  form  of  fiscal  expenditure.  This
criterion  also  applies  to  aid  granted  by  regional  or
local  bodies  in  the  Member  States(cid:216)(—).  Furthermore,
State  support  may  be  provided  just  as  much  through
tax  provisions  of  a  legislative,  regulatory  or  adminis(cid:220)
trative  nature  as  through  the  practices  of  the  tax
authorities.

11.(cid:217)Thirdly,  the  measure  must  affect  competition  and
trade  between  Member  States.  This 
criterion
presupposes  that  the  beneficiary  of  the  measure
exercises  an  economic  activity,  regardless  of  the
legal  status  or  means  of  financing.
beneficiary’s 
Under  settled  case(cid:220)law,  for  the  purposes  of  this
provision,  the  criterion  of  trade  being  affected  is  met
if  the  recipient  firm  carries  on  an  economic  activity
involving  trade  between  Member  States.  The  mere
fact  that  the  aid  strengthens  the  firm’s  position
compared  with 
firms  which  are
that  of  other 
competitors  in  intra(cid:220)Community  trade  is  enough  to
allow 
intra(cid:220)
Community  trade  is  affected.  Neither  the  fact  that
aid  is  relatively  small  in  amount(cid:216)((cid:209)),  nor  the  fact  that
the  recipient  is  moderate  in  size  or  its  share  of  the
Community  market  very  small(cid:216)((cid:210)),  nor  indeed  the
fact  that  the  recipient  does  not  carry  out  exports(cid:216)((cid:211))
or  exports  virtually  all  its  production  outside  the
Community(cid:216)((cid:212))  do  anything  to  alter  this  conclusion.

the  conclusion 

to  be  drawn 

that 

it 

certain 

favours 
of 

"certain  undertakings  or 

12.(cid:217)Lastly,  the  measure  must  be  specific  or  selective  in
the
that 
selective
goods’.  The 
production 
advantage 
from  an
involved  here  may  derive 
exception  to  the  tax  provisions  of  a  legislative,  regu(cid:220)
latory  or  administrative  nature  or  from  a  discre(cid:220)
tionary  practice  on  the  part  of  the  tax  authorities.
However,  the  selective  nature  of  a  measure  may  be
justified  by  "the  nature  or  general  scheme  of  the
system’(cid:216)((cid:213)).  If  so,  the  measure  is  not  considered  to  be
aid  within  the  meaning  of  Article  92(1)  of  the
Treaty.  These  various  aspects  are  looked  at  below.

(—)(cid:217)Judgment  of  the  Court  of  Justice  in  Case  248/84  Germany

v.  Commission  [1987(cid:129)  ECR  4013.

((cid:209))(cid:217)With  the  exception,  however,  of  aid  meeting  the  tests  of  the
de  minimis  rule.  See  the  Commission  notice  published  in
OJ  C  68,  6.3.1996,  p.  9.

((cid:210))(cid:217)Joined  Cases  C(cid:220)278/92,  C(cid:220)279/92  and  C(cid:220)280/92  Spain

v.  Commission  [1994(cid:129)  ECR  I(cid:220)4103.

((cid:211))(cid:217)Case  102/87  France  v.  Commission  [1998(cid:129)  ECR  4067.
((cid:212))(cid:217)Case  C(cid:220)142/87  Belgium  v.  Commission  [1990(cid:129)  ECR  I(cid:220)959.
((cid:213))(cid:217)Case  173/73  Italy  v.  Commission  [1974(cid:129)  ECR  709.

10.12.98

EN

Official  Journal  of  the  European  Communities

C  384/5

Distinction  between  State  aid  and  general  measures

13.(cid:217)Tax  measures  which  are  open  to  all  economic  agents
operating  within  a  Member  State  are  in  principle
general  measures.  They  must  be  effectively  open  to
all  firms  on  an  equal  access  basis,  and  they  may  not
de  facto  be  reduced  in  scope  through,  for  example,
the  discretionary  power  of  the  State  to  grant  them  or
through  other  factors  that  restrict  their  practical
effect.  However,  this  condition  does  not  restrict  the
power  of  Member  States  to  decide  on  the  economic
policy  which  they  consider  most  appropriate  and,  in
particular,  to  spread  the  tax  burden  as  they  see  fit
across  the  different  factors  of  production.  Provided
that  they  apply  without  distinction  to  all  firms  and  to
the  production  of  all  goods,  the  following  measures
do  not  constitute  State  aid:

setting 

-(cid:217)tax  measures  of  a  purely  technical  nature  (for
example, 
taxation,
the 
depreciation  rules  and  rules  on  loss  carry(cid:220)overs;
provisions  to  prevent  double  taxation  or  tax
avoidance),

rate 

of 

-(cid:217)measures  pursuing  general  economic  policy
objectives  through  a  reduction  of  the  tax  burden
related  to  certain  production  costs  (research  and
development  (R&D),  the  environment,  training,
employment).

14.(cid:217)The  fact  that  some  firms  or  some  sectors  benefit
more  than  others  from  some  of  these  tax  measures
does  not  necessarily  mean  that  they  are  caught  by
the  competition  rules  governing  State  aid.  Thus,
measures  designed  to  reduce  the  taxation  of  labour
for  all  firms  have  a  relatively  greater  effect  on
labour(cid:220)intensive  industries  than  on  capital(cid:220)intensive
industries,  without  necessarily  constituting  State  aid.
Similarly,  tax  incentives  for  environmental,  R&D  or
training 
investment  favour  only  the  firms  which
undertake  such  investment,  but  again  do  not  neces(cid:220)
sarily  constitute  State  aid.

cation  for  this  exemption  on  the  basis  of  the  nature
or  general  scheme  of  this  system’  constituted  State
aid.  The  judgment  also  states  that  "Article  92  does
not  distinguish  between  the  measures  of  State  inter(cid:220)
vention  concerned  by  reference  to  their  causes  or
aims  but  defines  them  in  relation  to  their  effects’.
The  judgment  also  points  out  that  the  fact  that  the
measure  brings  charges  in  the  relevant  sector  more
in  other
into 
Member  States  does  not  alter  the  fact  that  it  is  aid.
Such  divergences  between  tax  systems,  which,  as
pointed  out  above,  are  covered  by  Articles  100  to
102,  cannot  be  corrected  by  unilateral  measures  that
target  the  firms  which  are  most  affected  by  the
disparities  between  tax  systems.

line  with  those  of 

its  competitors 

16.(cid:217)The  main  criterion  in  applying  Article  92(1)  to  a  tax
measure  is  therefore  that  the  measure  provides  in
favour  of  certain  undertakings  in  the  Member  State
an  exception  to  the  application  of  the  tax  system.
The  common  system  applicable  should  thus  first  be
determined.  It  must  then  be  examined  whether  the
exception  to  the  system  or  differentiations  within
that  system  are  justified  "by  the  nature  or  general
scheme’  of  the  tax  system,  that  is  to  say,  whether
they  derive  directly  from  the  basic  or  guiding  prin(cid:220)
ciples  of  the  tax  system 
in  the  Member  State
concerned.  If  this  is  not  the  case,  then  State  aid  is
involved.

The  selectivity  or  specificity  criterion

17.(cid:217)The  Commission’s  decision(cid:220)making  practice  so  far
shows  that  only  measures  whose  scope  extends  to
the  entire  territory  of  the  State  escape  the  specificity
criterion  laid  down  in  Article  92(1).  Measures  which
are  regional  or  local  in  scope  may  favour  certain
undertakings,  subject  to  the  principles  outlined  in
itself  qualifies  as  aid
paragraph  16.  The  Treaty 
measures  which  are 
the
to  promote 
economic  development  of  a  region.  Article  92(3)(a)
and  (c)  explicitly  provides,  in  the  case  of  this  type  of
the  general
aid, 
principle  of 
in  Article
92(1).

for  possible  derogations 

from 
laid  down 

incompatibility 

intended 

15.(cid:217)In  a  judgment  delivered  in  1974(cid:216)((cid:214)),  the  Court  of
Justice  held  that  any  measure  intended  partially  or
wholly  to  exempt  firms  in  a  particular  sector  from
the  charges  arising  from  the  normal  application  of
the  general  system  "without  there  being  any  justifi(cid:220)

((cid:214))(cid:217)See  footnote  8.

18.(cid:217)The  Treaty  clearly  provides  that  a  measure  which  is
sectorally  specific  is  caught  by  Article  92(1).  Article
92(1)  expressly  includes  the  phrase  "the  production
of  certain  goods’  among  the  criteria  determining
whether  there  is  aid  that  is  subject  to  Commission

C  384/6

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10.12.98

monitoring.  According  to  well(cid:220)established  practice
and  case(cid:220)law,  a  tax  measure  whose  main  effect  is  to
promote  one  or  more  sectors  of  activity  constitutes
aid.  The  same  applies  to  a  measure  that  favours
only  national  products  which  are  exported(cid:216)(˛˝).
Furthermore,  the  Commission  has  taken  the  view
that  a  measure  which  targets  all  of  the  sectors  that
are  subject  to  international  competition  constitutes
rate  of
aid(cid:216)(˛˛).  A  derogation 
corporation  tax  for  an  entire  section  of  the  economy
therefore  constitutes,  except  for  certain  cases(cid:216)(˛ˇ),
State  aid,  as  the  Commission  decided  for  a  measure
concerning 
the  manufacturing
sector(cid:216)(˛—).

the  whole  of 

the  base 

from 

19.(cid:217)In  several  Member  States,  different  tax  rules  apply
depending  on  the  status  of  the  undertakings.  Some
public  undertakings,  for  example,  are  exempt  from
local  taxes  or  from  company  taxes.  Such  rules,  which
accord  preferential  treatment  to  undertakings  having
the  legal  status  of  public  undertaking  and  carrying
out  an  economic  activity,  may  constitute  State  aid
within  the  meaning  of  Article  92  of  the  Treaty.

20.(cid:217)Some  tax  benefits  are  on  occasion  restricted  to
certain  types  of  undertaking,  to  some  of  their
functions  (intra(cid:220)group  services, 
intermediation  or
coordination)  or  to  the  production  of  certain  goods.
In  so  far  as  they  favour  certain  undertakings  or  the
production  of  certain  goods,  they  may  constitute
State  aid  as  referred  to  in  Article  92(1).

Discretionary  administrative  practices

21.(cid:217)The  discretionary  practices  of  some  tax  authorities
may  also  give  rise  to  measures  that  are  caught  by
Article  92.  The  Court  of  Justice  acknowledges  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
the
measure, 

in  particular  where  exercise  of 

(˛˝)(cid:217)Joined  Cases  6  and  11/69  Commission  v.  France  [1969(cid:129)

ECR  561.

(˛˛)(cid:217)Commission  Decision  97/239/EC  of  4  December  1996  in
the  "Maribel  bis/ter’  case  (OJ  L  95,  10.4.1997,  p.  25)
(currently  sub  judice,  Case  C(cid:220)75/97).

(˛ˇ)(cid:217)In  particular,  agriculture  and  fisheries,  see  paragraph  27.
(˛—)(cid:217)Commission  decision  of  22  July  1998 

the 

in 

"Irish

corporation  tax’  case  (SG(98)  D/7209)  not  yet  published.

discretionary  power  goes  beyond 
simple
management  of  tax  revenue  by  reference  to  objective
criteria(cid:216)(˛(cid:209)).

the 

22.(cid:217)If  in  daily  practice  tax  rules  need  to  be  interpreted,
they  cannot  leave  room  for  a  discretionary  treatment
of  undertakings.  Every  decision  of  the  administration
that  departs  from  the  general  tax  rules  to  the  benefit
of  individual  undertakings  in  principle  leads  to  a
presumption  of  State  aid  and  must  be  analysed  in
detail.  As  far  as  administrative  rulings  merely  contain
an  interpretation  of  general  rules,  they  do  not  give
rise  to  a  presumption  of  aid.  However,  the  opacity
of  the  decisions  taken  by  the  authorities  and  the
room  for  manoeuvre  which  they  sometimes  enjoy
support  the  presumption  that  such  is  at  any  rate  their
instances.  This  does  not  make
effect 
in  some 
Member  States  any 
their
taxpayers  with  legal  certainty  and  predictability  on
the  application  of  general  tax  rules.

to  provide 

less  able 

Justification  of  a  derogation  by 
scheme  of  the  system’

"the  nature  or  general

23.(cid:217)The  differential  nature  of  some  measures  does  not
necessarily  mean  that  they  must  be  considered  to  be
State  aid.  This  is  the  case  with  measures  whose
economic  rationale  makes  them  necessary  to  the
functioning  and  effectiveness  of  the  tax  system(cid:216)(˛(cid:210)).
However,  it  is  up  to  the  Member  State  to  provide
such  justification.

is 

24.(cid:217)The  progressive  nature  of  an  income  tax  scale  or
profit  tax  scale 
justified  by  the  redistributive
purpose  of  the  tax.  Calculation  of  asset  depreciation
and  stock  valuation  methods  vary  from  one  Member
State  to  another,  but  such  methods  may  be  inherent
in  the  tax  systems  to  which  they  belong.  In  the  same
way,  the  arrangements  for  the  collection  of  fiscal
debts  can  differ  from  one  Member  State  to  the
other.  Lastly,  some  conditions  may  be  justified  by
objective  differences  between  taxpayers.  However,
freedom
tax  authority  has  discretionary 
if 

the 

(˛(cid:209))(cid:217)Case  C(cid:220)241/94  France  v.  Commission  (Kimberly  Clark

Sopalin)  [1996(cid:129)  ECR  I(cid:220)4551.

(˛(cid:210))(cid:217)Commission  decision  96/369/EC  of  13  March  1996
concerning  fiscal  aid  given  to  German  airlines  in  the  form
of  a  depreciation  facility  (OJ  L  146,  20.6.1996,  p.  42).

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to  set  different  depreciation  periods  or  different
valuation  methods,  firm  by  firm,  sector  by  sector,
there  is  a  presumption  of  aid.  Such  a  presumption
also  exists  when  the  fiscal  administration  handles
fiscal  debts  on  a  case  by  case  basis  with  an  objective
different 
the
recovery  of  tax  debts  from  the  enterprise  concerned.

the  objective  of  optimising 

from 

system 

25.(cid:217)Obviously,  profit  tax  cannot  be  levied  if  no  profit  is
earned.  It  may  thus  be  justified  by  the  nature  of  the
tax 
that  non(cid:220)profit(cid:220)making  undertakings,
such  as  foundations  or  associations,  are  specifically
exempt  from  the  taxes  on  profits  if  they  cannot
actually  earn  any  profits.  Furthermore,  it  may  also
be  justified  by  the  nature  of  the  tax  system  that
cooperatives  which  distribute  all  their  profits  to  their
members  are  not  taxed  at  the  level  of  the  cooperative
when  tax  is  levied  at  the  level  of  their  members.

scheme 

social  or 

(in  particular, 

26.(cid:217)A  distinction  must  be  made  between,  on  the  one
hand,  the  external  objectives  assigned  to  a  particular
tax 
regional
objectives)  and,  on  the  other,  the  objectives  which
are  inherent  in  the  tax  system  itself.  The  whole
purpose  of  the  tax  system  is  to  collect  revenue  to
finance  State  expenditure.  Each  firm  is  supposed  to
pay  tax  once  only.  It  is  therefore  inherent  in  the
logic  of  the  tax  system  that  taxes  paid  in  the  State  in
which  the  firm  is  resident  for  tax  purposes  should  be
taken  into  account.  Certain  exceptions  to  the  tax
rules  are,  however,  difficult  to  justify  by  the  logic  of
a  tax  system.  This 
if
non(cid:220)resident  companies  are  treated  more  favourably
than  resident  ones  or  if  tax  benefits  are  granted  to
head  offices  or  to  firms  providing  certain  services
(for  example,  financial  services)  within  a  group.

is,  for  example,  the  case 

take  account  of 

27.(cid:217)Specific  provisions  that  do  not  contain  discretionary
elements,  allowing  for  example  tax  to  be  determined
on  a  fixed  basis  (for  example,  in  the  agriculture  or
fisheries  sectors),  may  be  justified  by  the  nature  and
general  scheme  of  the  system  where,  for  example,
they 
re(cid:220)
quirements  or  of  the  importance  of  land  in  assets
which  are  specific  to  certain  sectors;  such  provisions
do  not  therefore  constitute  State  aid.  Lastly,  the
logic  underlying  certain  specific  provisions  on  the
small  and  medium(cid:220)sized  enterprises
taxation  of 
(including 
is
agricultural 
comparable  to  that  underlying  the  progressiveness  of
a  tax  scale.

specific  accounting 

enterprises(cid:216)(˛(cid:211))) 

small 

(˛(cid:211))(cid:217)Operators  in  the  agricultural  sector  with  no  more  than  10

annual  work  units.

C.  Compatibility  with  the  common  market  of  State  aid  in
the  form  of  tax  measures

28.(cid:217)If  a  tax  measure  constitutes  aid  that  is  caught  by
Article  92(1),  it  can  nevertheless,  like  aid  granted  in
other  forms,  qualify  for  one  of  the  derogations  from
the  principle  of  incompatibility  with  the  common
in  Article  92(2)  and  (3).
market  provided 
Furthermore,  where  the  recipient,  whether  a  private
or  public  undertaking,  has  been  entrusted  by  the
State  with  the  operation  of  services  of  general
economic 
interest,  the  aid  may  also  qualify  for
application  of  the  provisions  of  Article  90  of  the
Treaty(cid:216)(˛(cid:212)).

for 

29.(cid:217)The  Commission  could  not,  however,  authorise  aid
which  proved  to  be  in  breach  both  of  the  rules  laid
down  in  the  Treaty,  particularly  those  relating  to  the
ban  on  discrimination  and  to  the  right  of  estab(cid:220)
lishment,  and  of  the  provisions  of  secondary  law  on
taxation(cid:216)(˛(cid:213)).  Such  aspects  may,  in  parallel,  be  the
object  of  a  separate  procedure  on  the  basis  of  Article
169.  As  is  clear  from  case(cid:220)law,  those  aspects  of  aid
which  are  indissolubly  linked  to  the  object  of  the  aid
and  which  contravene  specific  provisions  of  the
Treaty  other  than  Articles  92  and  93  must  however
be  examined  in  the  light  of  the  procedure  under
Article  93  as  part  of  an  overall  examination  of  the
compatibility  or  the  incompatibility  of  the  aid.

30.(cid:217)The  qualification  of  a  tax  measure  as  harmful  under
the  code  of  conduct  does  not  affect  its  possible
qualification  as  a  State  aid.  However  the  assessment
of  the  compatibility  of  fiscal  aid  with  the  common
market  will  have  to  be  made,  taking  into  account,
inter  alia,  the  effects  of  aid  that  are  brought  to  light
in  the  application  of  the  code  of  conduct.

in  particular)  and  where 

31.(cid:217)Where  a  fiscal  aid  is  granted  in  order  to  provide  an
incentive  for  firms  to  embark  on  certain  specific
projects  (investment 
its
intensity 
limited  with  respect  to  the  costs  of
is 
carrying  out  the  project,  it  is  no  different  from  a
subsidy  and  may  be  accorded  the  same  treatment.
lay  down
Nevertheless,  such  arrangements  must 
sufficiently  transparent  rules  to  enable  the  benefit
conferred  to  be  quantified.

(˛(cid:212))(cid:217)Judgment  of  the  Court  of  First  Instance  in  Case  T(cid:220)106/95
FFSA  and  others  v.  Commission  [1997(cid:129)  ECR  II(cid:220)229.  Order
of  the  Court  of  Justice  in  Case  C(cid:220)174/97  P  [1998(cid:129)  I(cid:220)1303.
(˛(cid:213))(cid:217)Case  74/76  Iannelli  v.  Meroni  [1977(cid:129)  ECR  557.  See  also
Cases  73/79 
"Sovraprezzo’  [1980(cid:129)  ECR  1533,  T(cid:220)49/93
"SIDE’  [1995(cid:129)  ECR  II(cid:220)2501  and  Joined  Cases  C  142  and
143/80  "Salengo’  [1981(cid:129)  ECR  1413.

C  384/8

EN

Official  Journal  of  the  European  Communities

10.12.98

in 

to 

linked 

including 

in  nature: 

for  example 

they  are  not 

32.(cid:217)In  most  cases,  however,  tax  relief  provisions  are
general 
the
carrying(cid:220)out  of  specific  projects  and  reduce  a  firm’s
it  being  possible  to
current  expenditure  without 
the
involved  when 
the  precise  volume 
assess 
Commission  carries  out  its  ex  ante  examination.  Such
measures  constitute  "operating  aid’.  Operating  aid  is
in  principle  prohibited.  The  Commission  authorises  it
at  present  only  in  exceptional  cases  and  subject  to
certain  conditions, 
shipbuilding,
certain  types  of  environmental  protection  aid(cid:216)(˛(cid:214))  and
in 
regions,
regions, 
covered  by 
the  Article  92(3)(a)  aid  derogation
provided  that  they  are  duly  justified  and  their  level  is
proportional  to  the  handicaps  they  are  intended  to
offset(cid:216)(ˇ˝).  It  must  in  principle  (with  the  exception  of
the  two  categories  of  aid  mentioned  below)  be
degressive  and  limited  in  time.  At  present,  operating
aid  can  also  be  authorised  in  the  form  of  transport
aid  in  ultra(cid:220)peripheral  regions  and  in  certain  Nordic
regions  that  are  sparsely  populated  and  are  seriously
handicapped  in  terms  of  accessibility.  Operating  aid
may  not  be  authorised  where  it  represents  aid  for
exports  between  Member  States.  As  for  State  aid  in
favour  of  the  maritime  transport  sector  the  specific
rules  for  that  sector  apply(cid:216)(ˇ˛).

ultra(cid:220)peripheral 

33.(cid:217)If  it  is  to  be  considered  by  the  Commission  to  be
compatible  with  the  common  market,  State  aid
intended  to  promote  the  economic  development  of
particular  areas  must  be 
"in  proportion  to,  and
targeted  at,  the  aims  sought’.  For  the  examination  of
regional  aid  the  criteria  allow  account  to  be  taken  of
other  possible  effects,  in  particular  of  certain  effects
brought  to  light  by  the  code  of  conduct.  Where  a
derogation 
the  basis  of  regional
criteria,  the  Commission  must  ensure  in  particular
that  the  relevant  measures:

is  granted  on 

-(cid:217)contribute  to  regional  development  and  relate  to
impact.  The  estab(cid:220)
local 
activities  having  a 
lishment  of  off(cid:220)shore  activities  does  not,  to  the
extent 
local
economy  are  low,  normally  provide  satisfactory
support  for  the  local  economy,

their  externalities  on 

that 

the 

-(cid:217)relate  to  real  regional  handicaps.  It  is  open  to
question  whether  there  are  any  real  regional
handicaps  for  activities  for  which  the  additional

(˛(cid:214))(cid:217)Community  guidelines  on  State  aid 
protection  (OJ  C  72,  10.3.1994,  p.  3).

for  environmental

(ˇ˝)(cid:217)Guidelines  on  national  regional  aid  (OJ  C  74,  10.3.1998,

p.  9).

costs  have  little  incidence,  such  as  for  example
the  transport  costs  for  financing  activities,  which
lend  themselves  to  tax  avoidance,

-(cid:217)are  examined  in  a  Community  context(cid:216)(ˇˇ).  The
Commission  must  in  this  respect  take  account  of
any  negative  effects  which  such  measures  may
have  on  other  Member  States.

D.  Procedures

34.(cid:217)Article  93(3)  requires  Member  States  to  notify  the
Commission  of  all  their  "plans  to  grant  or  alter  aid’
and  provides  that  any  proposed  measures  may  not  be
put 
the  Commission’s  prior
approval.  This  procedure  applies  to  all  aid,  including
tax  aid.

into  effect  without 

is 

therefore 

incompatible  with 

35.(cid:217)If  the  Commission  finds  that  State  aid  which  has
been  put  into  effect  in  breach  of  this  rule  does  not
qualify  for  any  of  the  exemptions  provided  for  in  the
Treaty  and 
the
common  market,  it  requires  the  Member  State  to
recover  it,  except  where  that  would  be  contrary  to  a
general  principle  of  Community  law,  in  particular
legitimate  expectations  to  which  the  Commission’s
behaviour  can  give  rise.  In  the  case  of  State  aid  in
the  form  of  tax  measures,  the  amount  to  be  covered
is  calculated  on  the  basis  of  a  comparison  between
the  tax  actually  paid  and  the  amount  which  should
have  been  paid  if  the  generally  applicable  rule  had
been  applied.  Interest  is  added  to  this  basic  amount.
The  interest  rate  to  be  applied  is  equivalent  to  the
reference  rate  used  to  calculate  the  grant  equivalent
of  regional  aid.

36.(cid:217)Article  93(1)  states  that  the  Commission  "shall  in
cooperation  with  Member  States,  keep  under
constant  review  all  systems  of  aid  existing  in  those
States’.  Such  review  extends  to  State  aid  in  the  form
of  tax  measures.  So  as  to  allow  such  review  to  be
carried  out,  the  Member  States  are  required  to
submit  to  the  Commission  every  year  reports  on
their  existing  State  aid  systems.  In  the  case  of  tax
relief  or  full  or  partial  tax  exemption,  the  reports
must  provide  an  estimate  of  budgetary  revenue  lost.
it
Following 

its  review,  the  Commission  may, 

if 

(ˇ˛)(cid:217)Community  guidelines  on  State  aid  to  maritime  transport

(ˇˇ)(cid:217)Case  730/79  Philip  Morris  v.  Commission  [1980(cid:129)  ECR

(OJ  C  205,  5.7.1997,  p.  5).

2671.

10.12.98

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Official  Journal  of  the  European  Communities

C  384/9

considers  that  the  scheme  is  not  or  is  no  longer
compatible  with  the  common  market,  propose  that
the  Member  State  amend  or  abolish  it.

E.  Implementation

publication,  examine  the  plans  for  tax  aid  notified  to
it  and  tax  aid  illegally  implemented  in  the  Member
States  and  will  review  existing  systems.  This  notice  is
published 
is  not
exhaustive.  The  Commission  will  take  account  of  all
the  specific  circumstances  in  each  individual  case.

for  guidance  purposes  and 

37.(cid:217)The  Commission  will,  on  the  basis  of  the  guidelines
set  out  in  this  notice  and  as  from  the  time  of  its

38.(cid:217)The  Commission  will  review  the  application  of  this

notice  two  years  after  its  publication.

Non(cid:220)opposition  to  a  notified  concentration

(Case  No  IV/M.1202  -  Renault/Iveco)

(98/C  384/04)

(Text  with  EEA  relevance)

On  22  October  1998,  the  Commission  decided  not  to  oppose  the  above  notified  concentration
and  to  declare  it  compatible  with  the  common  market.  This  decision  is  based  on  Article  6(1)(b)
of  Council  Regulation  (EEC)  No  4064/89.  The  full  text  of  the  decision  is  only  available  in
French  and  will  be  made  public  after  it  is  cleared  of  any  business  secrets  it  may  contain.  It  will
be  available:

-(cid:217)as  a  paper  version  through  the  sales  offices  of  the  Office  for  Official  Publications  of  the

European  Communities  (see  list  on  the  last  page),

-(cid:217)in  electronic  form 

in  the 

number  398M1202.  CELEX 
Community  law;  for  more  information  concerning  subscriptions  please  contact:

"CFR’  version  of  the  CELEX  database,  under  document
is  the  computerised  documentation  system  of  European

EUR(cid:220)OP,
Information,  Marketing  and  Public  Relations  (OP/4B),
2,  rue  Mercier,
L(cid:220)2985  Luxembourg.
Tel.  (352)  29(cid:216)29(cid:220)42455,  fax  (352)  29(cid:216)29(cid:220)42763.

Withdrawal  of  notification  of  a  concentration

(Case  No  IV/M.1246  -  LHZ/Carl  Zeiss)

(98/C  384/05)

(Text  with  EEA  relevance)

On  24  September  1998,  the  European  Commission  received  notification  of  a  proposed  concen(cid:220)
tration  between  LH  Systems  and  Carl  Zeiss  Stiftung.  On  1  December  1998,  the  notifying
parties  informed  the  Commission  that  they  withdrew  their  notification.