2002/894/EC: Commission Decision of 11 July 2001 on the State aid scheme implemented by Spain for firms in Guipúzcoa in the form of a tax credit amounting to 45 % of investments (notified under document number C(2001) 1764) (Text with EEA relevance)
Date: 2001-07-11
Institutions: European Commission
Subjects: Spain, State aid, aid system, control of State aid, infringement of EU law, investment, tax system

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COMMISSION DECISION

of 11 July 2001

on the State aid scheme implemented by Spain for firms in Guipœzcoa in the form of a tax credit
amounting to 45 % of investments

(notified under document number C(2001) 1764)

(Only the Spanish text is authentic)

(Text with EEA relevance)

(2002/894/EC)

(2)

(3)

(4)

(5)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European
Community, and in particular the first subparagraph of Article
88(2) thereof,

Having regard to the Agreement on the European Economic
Area, and in particular Article 62(1)(a) thereof,

Having,
in accordance with the abovementioned Articles,
called on interested parties to submit their comments (1), and
having regard to those comments,

Whereas:

I. PROCEDURE

(1)

SA (3),

the Commission learned of

As a result of the information received in response to
the proceedings initiated following complaints about
State aid granted to Daewoo Electronics Manufacturing
Espaæa SA (2) and to Ramond(cid:237)n SA and Ramond(cid:237)n
the
CÆpsulas
existence of a scheme of non-notified tax aid for
investments in Spain, in the province of `lava, in the
It also received informal
form of a 45 % tax credit.
existed in the
similar measures
information that
province of Guipœzcoa, since that territory enjoys the
same tax autonomy as `lava. The Commission therefore
sent a letter to the Spanish Permanent Representation
on 15 March 1999 requesting information on the
matter. By letters dated 13 April and 17 May 1999
from its Permanent Representation, Spain requested
successive extensions of the deadline for replying. By
letter of 25 May 1999 the Commission refused to grant
a second extension under Council Regulation (EC) No
659/1999 of 22 March 1999 laying down detailed rules

for the application of Article 93 of the EC Treaty (4).
Finally, by letter of 2 June 1999 from its Permanent
Representation, Spain provided information on the tax
incentive in question.

By letter SG(99) D/6871 dated 17 August 1999, the
Commission informed Spain of its decision to initiate in
respect of this aid the procedure laid down in Article
88(2) of the Treaty.

By letter from the Permanent Representation dated 9
November 1999, registered on 12 November 1999, the
Spanish authorities submitted their comments under the
abovementioned procedure.

The Commission’s decision to initiate the procedure was
the European
published in the Official
Communities (5). The Commission invited interested
parties to submit their comments on the aid within one
month of the date of publication.

Journal

of

received from:

Economists Association

the Autonomous
Comments were
Community of Castile-Leon, on 3 January 2000;
the
Basque Business Confederation (Confederaci(cid:243)n Empresarial
Vasca/Euskal Entrepresarien Konfederakuntza)
(hereinafter
Confebask), on 4 January 2000, plus, outside the time
supplementary comments by letter dated 29
limit,
December 2000, registered on 3 January 2001;
the
Rioja Regional Government, on 5 January 2000; the
Basque
de
Economistas/Ekonomilarien Euskal Elkargoa), on 5 January
2000; the Basque Business Circle (C(cid:237)rculo de Empresarios
Vascos), on 5 January 2000; and the Professional
the Autonomous
Association of Tax Advisers of
Community of the Basque Country (Asociaci(cid:243)n Profesional
de Asesores Fiscales de la Comunidad del Pa(cid:237)s Vasco), on 7
January 2000. By letter dated 1 March 2000 (D/50912),
the Commission sent these comments to Spain, asking
for observations; it received only a request for a 20-day
extension of the deadline for replying.

(Colegio Vasco

(1) OJ C 351, 4.12.1999, p. 29.
(2) Commission Decision 1999/718/EC (OJ L 292, 13.11.1999, p. 1).
(3) Commission Decision 2000/795/EC (OJ L 318, 16.12.2000, p. 36).

(4) OJ L 83, 27.3.1999, p. 1.
(5) See footnote 1.

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L 314/27

(6)

(7)

(8)

By letter from the Permanent Representation dated 22
informed the
the Spanish authorities
June 2000,
Commission that Provincial Law (Norma Foral) No
3/2000 (6) of 13 March 2000 had repealed, with effect
from 18 March 2000, the seventh additional provision
of Provincial Law No 7/1997 (7) of 22 December 1997,
which formed the legal basis for the 45 % tax credit.

II. DETAILED DESCRIPTION OF THE AID

According to the information at
the Commission’s
disposal, which has not been questioned by the Spanish
the tax incentive in
authorities or by third parties,
question entered into force on 1 January 1997 pursuant
to the 10th additional provision of Provincial Law No
7/1997 (8).

As regards the 45 % tax credit in force since 1 January
1997, the 10th additional provision of Provincial Law
No 7/1997 reads as follows:

(cid:145)Investments in new tangible fixed assets made after
1 January 1997 and exceeding ESP 2 500 million
shall, by decision of
the Guipœzcoa Provincial
Council, give rise to a tax credit equal to 45 % of
the amount of the investment, as determined by the
latter,
tax
payable.

to be deducted from the amount of

Any tax credit that is not used because it exceeds
the amount of tax payable may be carried over and
used within the five years immediately following the
year in which the decision granting the credit is
taken.

expenditure (9)

fixed assets made after 1 January 1997, as well as
investment
the
preparatory phase of
the project giving rise to the
investments, where such investments exceed ESP 2 500
million.

incurred

during

(10)

(11)

Since the scheme does not
require the investment
entitling firms to the aid to be located in Guipœzcoa, a
firm resident there for tax purposes could obtain a tax
credit equivalent to 45 % of the amount of investments
made outside Guipœzcoa.

The scheme is furthermore applicable to investments
made in any sector and is not subject to any sectoral
restriction such as those laid down in the Community
sectoral rules applicable to the production, processing
and marketing of the agricultural products in Article I
of
steelmaking,
transport, shipbuilding, synthetic fibres and the motor
industry.

the Treaty,

coalmining,

fisheries,

(12)

Furthermore, any firm may qualify for the 45 % tax
credit
its economic and
financial position, even if it is a firm in difficulty.

in question irrespective of

(13) Although the 45 % tax credit may not be combined
with any other tax concessions that may be granted in
respect of the same investment, combination with other,
non-tax
loans,
guarantees, equity purchases, etc., relating to the same
investments is not ruled out.

subsidised

including

grants,

aid,

The date from which the time limit for using the tax
credit starts to run may be postponed until the first
year during the limitation period in which profits
are made.

(14)

The decision referred to in the first paragraph shall
lay down the time limits and restrictions applicable
in each case.

said procedure,

In its decision initiating the
the
Commission pointed out that as far as the application of
the Community State aid rules is concerned, the tax
nature of the measures in question is irrelevant, since
Article 87 of the Treaty applies to aid measures (cid:145)in any
form(cid:146). The Commission also emphasised, however, that,
to be regarded as aid, the measures must meet all four
of the criteria set out in Article 87 and explained below.

Concessions granted under this provision may not
be
tax concessions
available in respect of the same investments.

combined with any other

(15)

Provincial Council

The Guipœzcoa
also
determine the duration of the investment process,
which may include investments made during the
preparatory phase of the project giving rise to the
investments.(cid:146)

shall

Firstly, the Commission pointed out, at that stage, that
the tax credit confers on the recipients an advantage
amounting to 45 % of the amount of the investments
and relieves them of charges that are normally borne
from their budgets through a partial reduction in their
normal tax liability.

(9)

It is clear from the above provisions, in short, that the
aid is granted in respect of investments in new tangible

(16)

Secondly, the Commission provisionally considered that
the tax credit
tax revenue and is
to the consumption of public
therefore equivalent
resources in the form of fiscal expenditure.

involves a loss of

(6) Bolet(cid:237)n Oficial de Guipœzcoa, 17.3.2000.
(7) Tenth additional provision.
(8) Bolet(cid:237)n Oficial de Guipœzcoa, 31.12.1997.

(9) No precise definition is given of what

the Spanish authorities
understand by (cid:145)investments made during the preparatory phase(cid:146) for
the purposes of applying the tax aid in question.

(17)

(18)

(19)

(20)

(21)

(22)

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(23)

the

aid strengthens

Thirdly, the Commission considered at that stage that
the 45 % tax credit affects competition and trade
between Member States. Since the recipients conduct
business, which may be the subject of intra-Community
trade,
their position vis-(cid:224)-vis
competitors who are also involved in intra-Community
trade and therefore affects such trade. Furthermore, the
increase in recipient firms’ net profit (profit after tax)
improves their profitability. In this way they are more
able to compete with firms which are not eligible for
the aid.

a precise

The Commission also found that the 45 % tax credit is
aid conditional on investment (11). However,
in the
absence of
eligible
the
expenditure, the Commission could not rule out at that
stage the possibility that
the investment
expenditure qualifying for the 45 % tax credit might fall
within the scope of the Community definition of initial
investment (12).

definition of

some of

Lastly, the Commission considered, at that stage, that
the 45 % tax credit is specific or selective in that it
favours certain firms, being available only to firms
investing more
(EUR
ESP
15 025 303). All other firms whose investments do not
exceed the ESP 2 500 million threshold are excluded.

2 500 million

than

Furthermore, the Commission considered, at that stage,
that the selective nature of the concession is also due to
a discretionary power of
the
Guipœzcoa provincial authorities have the power to
determine, at
the
investment process and that of the preparatory phase of
the investment qualifying for the aid.

the duration of

their discretion,

tax authorities:

the

In short, the Commission considered, at that stage, that
the 45 % tax credit is State aid within the meaning of
Article 87(1) of
the Treaty and Article 61(1) of the
Agreement on the European Economic Area, since it
an
meets
advantage, being granted by the State from State
resources, affecting trade between Member States and
distorting competition in favour of certain firms.

constituting

criteria of

cumulative

the

Since the tax incentive in question is not subject, among
other requirements, to the condition that it does not
exceed EUR 100 000 over a period of three years, the
Commission considered, at that stage, that it cannot be
regarded as subject to the de minimis rule (10).

The Commission stated provisionally that State aid,
which is not governed by the de minimis rule, is subject
to the obligation of prior notification laid down in
Article 88(3) of the Treaty and Article 62(1)(a) of the
EEA Agreement. However, the Spanish authorities had
not met that obligation, and the Commission therefore
considered at that stage that the aid could be regarded
as unlawful.

(28)

(24) As regards the investment expenditure falling within the
scope of
the Commission
the Community definition,
took the view at that stage that the 45 % tax credit
aid and
wholly or partly
therefore has
the
Community rules on investment aid. On the other hand,
any aid to defray investment expenditure which does
not
fall within the Community definition cannot be
regarded as investment aid and has to be considered as
aid for other purposes, for example operating aid.

to be examined in the light of

investment

constitutes

(25)

(26)

restricted to a
The 45 % tax credit, which is not
particular sector, may be granted to firms that are
subject to Community sectoral rules. The Commission
therefore questioned at that stage whether the aid was
compatible where the recipient belongs to a sector
subject to special Community rules.

in difficulty within the meaning of

The same applies where the 45 % tax credit is granted
to firms
the
Community guidelines on State aid for rescuing and
restructuring firms in difficulty. Since the grant of the
tax credit to such firms is not subject to the conditions
laid down in those guidelines, the Commission doubted
at that stage whether the aid was compatible with the
common market when granted to firms in difficulty.

(27) On the question of whether

investment

aid in
Guipœzcoa qualifies for the derogation under Article
87(3)(c) of the Treaty, the Commission noted that, in its
decision of 26 July 1995 amending Spain’s regional aid
map, it found the whole of Guipœzcoa to be a region
where
regional
in
development could be deemed compatible with the
common market under the Article 87(3)(c) derogation,
provided that it did not exceed the ceiling of 25 % net
grant equivalent (nge) in the case of large firms.

investment

support

aid

of

The Commission also pointed out at that stage that the
in question apply only to certain eligible
ceilings
and
expenditure

standard

included

in the

base

(10) See point 3.2 of the Community guidelines on State aid for small
and medium-sized enterprises (OJ C 213, 19.8.1992) and the
Commission notice on the de minimis rule for State aid (OJ C 68,
6.3.1996).

(11) See the Annex to the Commission communication on regional aid

systems (OJ C 31, 3.2.1979).

(12) See point 18 of the Annex to the Commission communication on
regional aid systems (OJ C 31, 3.2.1979) or point 4.4 of the
guidelines on national regional aid (98/C 74/06).

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inter alia,

initial
complying with the Community definition of
replacement
investment, which excludes,
investments.
It stressed that aid granted between 1
January and 31 December 1999 is subject to the above
investment aid not
regional aid guidelines,
to certain
ceilings
exceeding the
additional conditions laid down in those guidelines.

so that
is

also subject

(29) However, the Commission stated provisionally that the
tax aid in the form of the 45 % tax credit was not
limited to 25 % nge in the case of large firms and 30 %
nge in the case of small and medium-sized firms, and
also that the eligible expenditure might not correspond
to the standard base. Under such circumstances, it could
not rule out the possibility at that stage that the aid
could rank as operating aid, since it was intended to
firms’ current expenditure. The
reduce the recipient
Commission therefore provisionally found that
there
were doubts as to the compatibility of the tax aid in
question in the light of the rules on regional aid.

(32) As well as inviting them to submit

all

to supply

their comments
under the Article 88(2) procedure, the Commission also
asked the Spanish authorities
the
information necessary for assessing the tax aid in the
form of a 45 % tax credit in Guipœzcoa. The relevant
information requested related in particular to: any tax
aid in the form of a tax credit for investments available
in any year during the period 1986 to 1994, copies of
all decisions granting the aid during the period 1995 to
1997 and copies of the declarations made by the firms
concerned to the Provincial Council in 1998 and 1999,
on the official form, setting out, at least, the nature of
the investment expenditure qualifying for the aid, the
amount of the tax credit granted to each recipient, the
aid actually paid to each recipient and any balance still
outstanding, whether the recipient constitutes a firm in
difficulty within the meaning of
the Community
guidelines on State aid for rescuing and restructuring
firms in difficulty, the details of any combination of aid
(amount, eligible expenditure, where appropriate the aid
detailed
schemes
definitions
and
(cid:145)investments made during the preparatory phase(cid:146).

and
(cid:145)investments(cid:146)

and precise

constitute

of what

applied,

etc.),

(30) As regards the period after 1 September 1998,

the
Commission further took the view at that stage that the
possibility of the investment for which aid is granted
framework on
being covered by the multisectoral
regional aid for large investment projects (98/C 107/05)
could not be ruled out. The tax aid in question is not
subject
to the notification requirement where large
projects are concerned or to a possible reduction in aid
from the Commission’s
intensity that might
therefore
assessment.
stated
provisionally
to the
as
compatibility of the tax aid where large projects were
concerned.

Commission
there were doubts

The
that

result

(31)

to

concerns

facilitate
(cid:145)aid
[(cid:133)] of certain economic areas

To sum up, the Commission questioned at that stage
the compatibility of the tax aid in question with the
common market in the light of the derogation in Article
the
87(3)(c), which
[(cid:133)](cid:146).
development
Neither did it appear that
the other derogations in
Article 87(2) and (3) of the Treaty could apply. The tax
credit cannot be regarded as aid having a social
character under Article 87(2)(a), is not intended to make
good the damage
caused by natural disasters or
exceptional occurrences under Article 87(2)(b) and is
not
to the provisions of Article 87(3)(c)
concerning (cid:145)aid to facilitate the development of certain
economic activities [(cid:133)](cid:146). Nor is it designed to promote
the execution of an important project of common
European interest or to remedy a serious disturbance in
the economy of a Member State under Article 87(3)(b).
Lastly, it is not intended to promote culture or heritage
conservation within the meaning of Article 87(3)(d).

subject

III. COMMENTS OF THE SPANISH AUTHORITIES

(33)

The Spanish authorities submitted their comments by
letter
from the Permanent Representation dated 9
November 1999. Essentially, they take the view that the
tax credit does not constitute State aid within the
meaning of Article 87 of the Treaty. In support of their
view, they challenge the Commission’s assumption that
trade will be affected because the companies benefiting
from the incentive carry out economic activities which
may involve trade between Member States.
In their
opinion, it cannot be established, pace the Commission
that trade is affected generally, but only in specific cases,
since there is a possibility that in some cases it will not
be affected.
the
prerequisites for classifying an official measure as State
aid is missing.

therefore, one of

In such cases,

(34)

the measure is not specific or
They also argue that
selective in character. In their opinion, the opening of
the measure to all sectors and to all taxpayers that meet
the appropriate criteria removes any specific character.
Furthermore, since there are five separate tax systems in
Spain, one of which in Guipœzcoa,
the tax rules
applicable in that territory have the status of general
measures for the taxpayers to whom they apply. The
measure therefore has no regional specificity.

(35) As to specificity of scope, this does not exist, since the
measure is open to all sectors and to all taxpayers. The

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the requirement

system applicable
and derives

Spanish authorities maintain that
to
invest ESP 2 500 million is not discriminatory, but an
objective condition deriving from the need to ensure the
effectiveness of
the measure and thus achieve the
proposed objective. However, even if the Commission
were to consider that the measure was specific, it would
be justified by the nature and general scheme of the
system, as provided for in Commission Notice 98/C
384/03 (13). The measure in question is justified by the
nature of the tax system, since it forms part of the
territory of
tax
single
Guipœzcoa
the
Provincial Council’s powers to adopt measures in the
tax field; it is also justified by the general scheme of the
tax system since its objective is to promote economic
the incentive
activity.
it is
should be targeted at large investments since (i)
large investments
to
that will be of
Guipœzcoa in the long run, enabling the tax authorities
the tax
tax receipts that more than offset
to collect
expenditure
the
of
investments, and (ii) the investment threshold does not
penalise small and medium-sized enterprises, which
already
funding
programmes.

from many Community

is furthermore logical

real benefit

exercise of

from the

beginning

incurred

in the

benefit

that

the

at

It

(38)

(39)

In view of the above arguments, the Spanish authorities
the Commission should terminate the
consider that
procedure by a decision finding that the tax measures in
question do not meet the criteria for being regarded as
State aid.

For the rest, the Spanish authorities do not consider it
necessary to supply the information requested by the
Commission concerning, in particular, decisions to grant
the
involved.
since no State
tax
the
Consequently,
information requested in the decision initiating the
procedure.

they are not providing any of

aid is

credit,

IV. OTHER COMMENTS RECEIVED
BY THE COMMISSION

(40)

The Commission emphasises that the comments set out
below are without prejudice to the question of whether
the parties, which submitted them, can be considered
interested parties within the meaning of Article 88(2) of
the Treaty.

(36)

(37)

is

granted

incentive

automatically once

Furthermore,
the Spanish authorities dispute that the
measure in question is of a discretionary nature, since
the
the
condition of investing a minimum of ESP 2 500 million
is satisfied. The Guipœzcoa Provincial Council can thus
check only that all the conditions are satisfied; it cannot
alter or add any conditions. The Spanish authorities also
stress that Spanish tax law does not allow arbitrary
decisions to be taken when it comes to determining the
essential features of taxpayers’ tax liabilities.

to determine what

the tax rules do not

The Spanish authorities reject the view expressed by the
satisfy the
Commission that
In their opinion, the
conditions of the sectoral rules.
the specific
Commission ought
conditions are that are infringed by the said tax rules.
As regards the application of the tax rules to firms in
difficulty, they consider that the condition of investing
at least ESP 2 500 million makes it extremely difficult
it should be
for such firms to obtain the tax credit;
regarded more as a guarantee that firms in difficulty will
not qualify for the incentive. The Spanish authorities
consider that the application of the rules on regional aid
is inappropriate, since in this specific case no State aid
is involved.

(13) Commission notice on the application of the State aid rules to
taxation (OJ C 384,

relating to direct business

measures
10.12.1998).

(41)

(42)

(43)

(44)

(45)

Comments by the Autonomous Community of
Castile-Leon

The Autonomous Community of Castile-Leon points out
first of all that the tax measures in question are part of
tax measures adopted by the Guipœzcoa
a set of
Provincial Council
that have been contested both in
Spain and at Community level.

The Autonomous Community of Castile-Leon goes on
to state that the tax measures in question constitute
State aid, since they satisfy all four criteria laid down in
Article 87 of the Treaty. In support of this contention it
basically puts forward the same arguments as those
given in the decision initiating the procedure.

the

rest,

the Autonomous Community

For
of
Castile-Leon considers that the tax incentive cannot be
regarded as compatible by virtue of the derogations in
Article 87 of the Treaty. Furthermore, the obligation to
notify laid down in Article 88(3) of the Treaty has not
been complied with.

The Autonomous Community of Castile-Leon takes the
view therefore that the tax measures in question should
be regarded as State aid which is unlawful, since the
notification procedure laid down in Article 88(3) has
not been followed, and which is incompatible with the
common market.

Comments from the Basque Business Confederation
(Confederaci(cid:243)n Empresarial Vasca/Euskal
Entrepresarien Konfederakuntza ((cid:145)Confebask(cid:146)))

started

attention
the
Confebask
the tax autonomy
underlying historical
enjoyed
substance,
regards
by Guipœzcoa. As
Confebask’s views are essentially as follows:

by
reasons

drawing
for

to

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(a)

the

tax debt:

the presumed reduction of
the
Commission is wrong to think that there is a tax
debt whose reduction involves a loss of tax revenue.
If
this argument were sound, any tax deduction
would always involve a loss of revenue compared
with the amount initially due. Confebask therefore
requests the Commission to reconsider its position,
since otherwise it could be argued that taxes were
being unlawfully harmonised by establishing a
normal amount in relation to which any losses of
tax revenue would have to be determined;

Similarly, according to the first paragraph of the
Commission’s letter to the Member States (14) a
general provision conferring relief is regarded as
aid only if (cid:145)legislative machinery enabling it to
be granted without further formality has been
set up(cid:146). By contrast, because it is abstract, an
enabling rule cannot be regarded as State aid
and, hence, cannot be assessed for its effect on
competition and trade between Member States,

trade. To determine the extent

(b) the effect on trade: according to the Commission,
where the recipients participate in intra-Community
trade,
that
the tax measures in question distort
trade. However, differences between tax systems
always affect
to
which trade is affected,
the Commission should
therefore analyse the entire tax system and not
specific provisions. Confebask emphasises in this
respect that, according to one study, the tax burden
in the Basque Country is greater than in the rest of
Spain. The Commission should explain why these
specific measures and not other tax differences affect
trade. In any event, even if such an effect did exist,
through
to
the way
harmonisation, not State aid;

it would

remove

be

(c)

the aid:

the selective character of
in Confebask’s
opinion, the selective nature of the tax measures
should be assessed in one of two ways: either as an
enabling rule conferring power on the tax authority
subsequently to grant a specific relief, or as a rule
directly granting the tax relief without requiring
subsequent specification. The Commission, however,
is using one argument, which fits the first category,
and another, which fits the second. Given that the
two are mutually exclusive, the Commission should
explain in which category the tax measures question
fall, since otherwise it would be contradictory to try
and use both:

(cid:151) Confebask questions the approach whereby the
tax measures are regarded as enabling rules,
since the reduction is granted automatically and
the authorities, accordingly, had no discretionary
power either before 1997 or thereafter. The
authorities are restricted to checking that
the
satisfies
applicant
eligibility.
tests
if the tax measures are regarded as
Moreover,
enabling rules which subsequently make
it
possible to grant the aid, it has to be concluded
that the current procedure, in so far as it is the
rules that are being questioned and not specific
is meaningless.
instances of

their application,

the

of

(cid:151) as

for

since

types

public

certain

thresholds

undertakings,

is normal practice

regarding the tax measures as
rules
granting aid directly, Confebask points out that,
according to points 19, 20 and 17 of notice
98/C 384/03, a tax measure may be specific
and, hence, may be State aid, if it is aimed solely
at
of
undertaking or undertakings in a given region.
However,
the tax measures in question have
none of these characteristics, not even territorial
specificity,
they apply to the whole
territory for which the regional authorities that
to the
introduced them are competent. As
specific character of the threshold of ESP 2 500
the use of
million, Confebask considers that
objective
in
national and Community tax rules. Confebask
also draws attention to the basis of various
Justice
judgments
and
of
the Court
it has never
Commission decisions: hitherto,
been held that
imply specificity.
thresholds
Moreover, the Commission itself acknowledges,
in point 14 of the above notice, that the effect
of
not
necessarily mean that the measures are specific
and,
the 1998 competition
a
report,
cross-sectoral impact and are intended to favour
the whole of the economy are general measures
and do not involve State aid. In short, the tax
measures in question are not specific, since they
do not promote a particular sector or particular
undertakings. On the contrary, they are open to
all sectors and to all undertakings established in
the territory for which the provincial authorities
are competent;

in point 207 of

that measures

promoting

sectors

certain

which

have

does

of

(d)

illegality of the 45 % tax credit: while still disputing
that the tax credit constitutes State aid, something

(14) Commission letter to Member States SG(89) D/5521 of 27 April

1989.

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as

the

the

legal

institutions,

that
tax credit

illegal, Confebask argues

expectations,
by

that has to be proven in order to classify the
the
measure
Commission’s description of
as
unlawful aid calls into question the principles of
ban on arbitrary
legitimate
and
certainty
decisions
proportionality, since the Commission regarded the
Basque tax arrangements as lawful
in its 1993
decision (15). In any event, the Commission could
change its position as regards future cases but not as
regards past ones. Confebask furthermore regards
the tax measures in question as existing aid.
In
1983 there were
rules providing for
already
concessions of the same type (deduction of 65 % of
the tax payable where new investments were made).
In 1984 a threshold of ESP 500 million was
introduced as a qualifying condition for a tax credit
amounting to 50 % of investments. According to the
definition given in Article 1(a) of Regulation (EC)
(cid:145)existing aid(cid:146) means (cid:145)all aid which
No 659/1999,
existed prior to the entry into force of the Treaty in
is to say, aid
the respective Member States,
schemes and individual aid which were put
into
effect before, and are still applicable after, the entry
into force of the Treaty(cid:146). The aid under examination
here is therefore legal for the purposes of Article
88(3) of the Treaty;

that

(e)

if

The

decision.

procedure

incompatibility with the common market: if the tax
measures in question are regarded as enabling rules,
Confebask considers that their compatibility cannot
be assessed while the aid is not granted through an
administrative
is
meaningless and incapable by definition of yielding
any results as to the compatibility of the aid. On the
other hand,
the tax measures in question are
regarded as rules granting aid directly, Confebask
takes the view that the practice of the Commission
and the Court requires that measures have to have
sectoral specificity before the compatibility of the
it would be
aid can be assessed. Furthermore,
tax burden on
necessary to establish the overall
firms and the reference tax burden. Lastly,
this
approach would lead to the absurd conclusion that
any tax burden lower than the highest tax burden in
all the Member States would constitute State aid.
Confebask also rejects the Commission’s argument
that the said tax measures are incompatible since
they do not contain specific provisions on sectoral
or regional aid, or aid for large investment projects,
etc.: tax measures may not and should not contain

(15) Decision 93/337/EEC (OJ L 134, 3.6.1993).

this type of provision. According to the Court of
Justice (16),
the Commission should specify in its
decisions what the adverse effects on competition
are, determining the real effect of
the measures
examined.
Incompatibility cannot be determined,
in abstract situations specific to a tax
therefore,
system, since in that case any differences between
tax systems would necessarily become aid. This
leads Confebask to repeat that there is no normal
tax debt, which has been reduced by the tax,
measures in question;

(f) Confebask therefore asks the Commission to adopt a
final decision terminating the procedure and finding
that
the tax measures in question comply with
Community law.

Confebask’s additional comments, communicated by
letter dated 29 December 2000, registered on 3 January
2001, were not taken into account, as they reached the
expired (17).
Commission
Furthermore, Confebask did not apply for an extension
of the time limit pursuant to Article 6(1) of Council
Regulation (EC) No 659/1999.

deadline

after

had

the

Comments from the Rioja Regional Government

the 45 % tax credit

The Rioja Regional Government states that
the tax
measures constitute State aid, since they satisfy all four
criteria set out in Article 87 of the Treaty. In support of
this contention, it argues in particular that the purpose
and effect of
is to relieve the
recipient of part of
the tax burden, which would
otherwise have been imposed on its profits. It therefore
constitutes a financial advantage for recipient
firms,
which, because there are no quid pro quos for the
authorities, involves a loss of tax revenue. This means
the recipients’ business benefits, as they have a
that
competitive advantage over all other firms. In addition
to the specificity of scope, in the form of a minimum
investment of ESP 2 500 million, the Rioja Regional
Government states that the discretionary nature of the
45 % tax credit is due partly to the authorities’ ability to
determine firms eligible for aid, deadlines and maximum
limits and partly to the fact that the granting of the tax
credit is not automatic.

(46)

(47)

(48) Moreover,

the Rioja Regional Government considers
that the tax measure cannot be justified on the grounds

(16) See Joined Cases C-278/92, C-279/92 and C-280/92 dated 14

September 1994, Spain v Commission, [1994] ECR I-4103.

(17) The deadline for submitting comments was one month from the
the

date of publication of the notice in the Official
European Communities, i.e. 26 February 2000.

Journal of

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(50)

(51)

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L 314/33

tax matters

that there are five tax systems in Spain. It points out
in the opinion on Joined Cases C-400/97,
that,
C-401/97 and C-402/97, Advocate General Saggio
considered that the nature of the competent authorities
for
justify
firms established in that
discrimination in favour of
territory. Furthermore, the measures are not justified by
the tax system in
the nature or general scheme of
Guipœzcoa,
to improve the
competitiveness of recipient firms.

since their purpose is

territory does not

in a

In short, the Rioja Regional Government considers that
the tax incentive cannot be considered compatible with
the common market by virtue of the derogations in
Article 87 of
the Spanish
authorities did not fulfil the obligation to notify the
incentive under Article 88(3) of the Treaty.

the Treaty. Moreover,

The Rioja Regional Government therefore takes the view
that the tax measures should be regarded as State aid
which is unlawful, since the Article 88(3) notification
procedure was not complied with, and incompatible
with the common market.

implies

present case, it takes the view that the 45 % tax credit is
not so caught, since it only meets the criterion of being
It does not distort
granted from State resources.
the
competition, because its payment
that
its
recipient company has made profits. Moreover,
for
amount cannot be determined in advance, since,
example, if there were no profits, the aid would not be
paid and if the profits were insufficient, it would be less
than 45 %. The same applies as regards the effect on
trade. This should be established in each specific case: it
is not sufficient that trade might be affected. For the
rest, the CVE examines whether there is any specificity
deriving from the threshold of ESP 2 500 million or the
in
need to obtain the Provincial Council’s approval
order to apply the tax credit.
they
consider that the threshold does not involve specificity,
since it is objective and non-discriminatory. As for the
determination by the Provincial Council of
the
investments qualifying for the 45 % tax credit; (ii) the
deadlines and limitations applicable to the deduction;
and (iii) the duration of the investment process, which
may include investments made during the preparatory
phase of the project giving rise to the investments, the
CVE takes the view that
involve the
exercise of a discretionary power, but is governed by
rules and, ultimately, subject to judicial review.

In this respect,

this does not

(i)

Comments from the Basque Economists Association
(Colegio Vasco de Economistas/Ekonomilarien Euskal
Elkargoa) (hereinafter the (cid:145)CVE(cid:146))

(53)

The CVE concludes that the 45 % tax credit, which is a
general measure adopted under the tax powers of the
Provinces in question, is not caught by Article 87 of the
Treaty.

that

The CVE considers that the tax system of each Basque
province does not meet
the specificity criterion in
Article 87(1) of the Treaty merely because it applies
only in part of a Member State. In support of this view,
it argues
the Commission’s usual practice of
considering that there is specificity when a tax measure
is applied to part of the Member State is appropriate
where there is a single tax system. However, it is not
relevant where there are various tax systems in the same
Member State. The practice, furthermore, is contrary to
the coherence of
the Spanish tax system, which is
multiple by nature. Each system is applied exclusively in
one part of the territory. Thus, each one of the systems
is not a regional system, but a unique system applicable
to the territory concerned. Moreover, the losses of tax
revenue which result from certain tax measures are not
the subject of a transfer from the central government.
On the contrary,
they have to be offset, either by
increasing the revenues from other taxes or by cutting
public expenditure. In addition, the specific nature of
the Spanish tax system should not be penalised through
the application of Community law. For the rest, any
distortions of competition resulting from the existence
of
five tax systems should be tackled through the
Community rules on tax harmonisation.

(54)

(55)

(52) Nonetheless, the CVE does not rule out the possibility
that,
the
Provincial Councils may adopt tax measures that are
caught by Article 87(1) of the Treaty. However, in the

in the exercise of

tax autonomy,

their

Comments from the Basque Business Circle (C(cid:237)rculo
de Empresarios Vascos) and the Professional
Association of Tax Advisers of the Autonomous
Community of the Basque Country (Asociaci(cid:243)n
Profesional de Asesores Fiscales de la Comunidad
del Pa(cid:237)s Vasco) (hereinafter the CEV and the
APCPV)

Since these associations
identical
together.

comments,

submitted similar or even
summarised

views

are

their

the 45 % tax credit has

the Commission’s
The CEV and the APCPV reject
that
regional
assessment
In their view, any provision, such as the
specificity.
45 % tax credit, adopted by the Provincial Councils
within the scope of their powers has the status of a
general measure. The tax credit
is also non-specific
because of the threshold of ESP 2 500 million or the
in
need to obtain the Provincial Council’s approval
order to apply the credit. The threshold is an objective
criterion, which is, moreover, much used in the tax
sphere and the Community rules on VAT or
the
taxation of SMEs. As
to the Provincial Council’s
approval before the tax credit can be applied, this is a

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need

purely administrative act of prior verification deriving
sound
legal
from the
administration of the tax system. The authorities cannot
select the recipients or determine the amount of the
45 % tax credit or the time limit for its application.

certainty

and

for

(56) As regards the issue of whether trade is affected, the
CEV and the APCPV emphasise that
this should be
assessed on a case-by-case basis and not in a general
way, as the Commission has done. For instance, there
may be recipients, which only produce for
local
markets. In such a case, the tax measure does not affect
intra-Community trade. The same applies to its impact
on competition. Moreover, where the recipients carry
on their business on markets that have not yet been
liberalised,
distort
the
competition. For the rest,
tax revenues
cannot be assessed if only a single measure is examined
(cid:151) in this case the 45 % tax credit (cid:151) while ignoring the
overall tax burden.
In this respect, the CEV and the
APCPV state that the overall tax burden in the Basque
Country is greater than in the rest of Spain.

credit
the loss of

45 % tax

cannot

(57)

(58)

Furthermore,
in its decision of 10 May 1993 on
Provincial Law No 8/1988 of 5 July 1988 the
Commission did not call into question the aid measures
they required a
concerned on the grounds
minimum amount of
therefore cannot
investment.
challenge the 45 % tax credit without violating the
legitimate expectations deriving from that Decision.

that

It

For the rest, the CEV and the APCPV consider that the
in initiating the procedure
Commission’s objective
against
tax harmonisation.
However, for this it is using Articles 87 and 88 of the
Treaty, and for this reason there is a misuse of powers.

the 45 % tax credit

is

(59)

In view of the above, the CEV and the APCPV conclude
that the 45 % tax credit is not caught by Article 87 of
the Treaty.

V. TRANSMISSION OF THE THIRD PARTIES’
COMMENTS TO SPAIN

(60)

By letter of 1 March 2000 to the Spanish Permanent
Representation the Commission sent, pursuant to Article
6(2) of the aforesaid Regulation (EC) No 659/1999, the
third parties’ comments to Spain, inviting it to submit
its observations within one month of the date of the
letter. It received only a request for a 20-day extension
of the deadline for replying. Consequently, Spain has
not submitted any such observations.

(61)

(62)

(63)

(64)

VI. ASSESSMENT OF THE AID

VII. CLASSIFICATION AS STATE AID

The Commission would point out that, for the purpose
of applying the Community rules on State aid, the tax
nature of the measures in question does not matter,
since Article 87 of the Treaty applies to aid measures (cid:145)in
any form(cid:146). Nevertheless,
the Commission emphasises
that, to be regarded as aid, the measures in question
must satisfy every one of the four criteria set out in
Article 87 and explained below.

in particular,

tax burden and,

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 different types of reduction in the
through an
firm’s
exemption from or reduction in tax liability. The 45 %
tax credit meets this criterion, since it reduces the
recipient firms’ tax burden by an amount equivalent to
45 % of the amount of the eligible investment. In the
absence of the tax credit, the recipient firm would have
to pay its full
final tax liability. The tax credit thus
implies an exception to the common tax system
applicable.

Secondly, the Commission considers that the said tax
credit involves a loss of tax revenue and is therefore
equivalent to the consumption of public resources in
the form of
fiscal expenditure. This principle also
applies to aid granted by regional or local bodies in the
Member States (18). Furthermore, the intervention of the
State can be effected both through tax provisions of a
statutory, regulatory or administrative kind and through
the practices of the tax authorities. In this specific case,
State intervention is effected through the Guipœzcoa
Provincial Council on the basis of a statutory provision.

tax system in question and not

The argument put forward in certain comments by third
parties, to the effect that it would be wrong to regard
the 45 % tax credit as involving a loss of tax revenue
compared to the normal amount (determined by the
Commission) of the tax due, is a fallacious one. It has to
be pointed out that the normal level of tax derives from
the
from any
Commission decision allegedly pursuing a hidden
agenda of tax harmonisation. Furthermore, according to
the second indent in point 9 of notice 98/C 384/03, to
qualify as State aid, (cid:145)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

(18) See Case 248/84 dated 14 October 1987, Germany v Commission,

[1987] ECR 4013.

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firm’s tax burden in various ways, including: [(cid:133)] a total
tax (such as
or partial reduction in the amount of
exemption or a tax credit)(cid:146). This is the case with the
relief in the form of the 45 % tax credit. The comment
is therefore without foundation.

market, sector or specific product, as is stated in the
third parties. This
abovementioned comments by
position has been confirmed on a number of occasions
by Court of Justice case-law (22).

(65)

(ratio of exports to GDP)

Thirdly, the measure must affect competition and trade
between Member States. It should be pointed out in this
respect that, according to a report (19) on the external
dependency of the Basque economy in the period 1990
to 1995, exports abroad went up (20), not only in
absolute terms but,
in relative terms as
in particular,
well, to the detriment of exports to the rest of Spain.
thus partly replaced the market,
The foreign market
which is the rest of Spain. Furthermore, according to
another statistical report (21) on the foreign trade of the
Basque Country, at 28,9 % the Basque economy’s
is
(cid:145)propensity to export(cid:146)
greater than that of Germany and the other Member
States, where it is about 20 %. According to this report,
the Basque trade balance was clearly in surplus during
the period 1993 to 1998. In particular,
in 1998, for
each ESP 100 of imports there were ESP 144 of exports.
In short,
the Basque economy is very open to the
outside, and its production is very much geared to
exporting. Given these characteristics of
the Basque
economy,
it may be deduced that recipient firms are
engaged in economic activities, which are likely to
include
aid
strengthens their position vis-(cid:224)-vis their competitors in
intra-Community trade,
thereby affecting such trade.
Furthermore, the increase in recipient firms’ net profit
(profit after
their profitability. This
enables them to compete with firms which are not
eligible for the tax credit, either because they have not
invested, or because their investments have not reached
the threshold of ESP 2 500 million following the
introduction of the 45 % tax credit.

trade. Consequently,

intra-Community

improves

tax)

(66)

Since, in this case, the tax rules under examination are
general and abstract
the Commission
would point out that the analysis of their impact on
trade can only be carried out at a general, abstract level;
it is not possible to specify to what extent they affect a

in character,

(19) Patxi Garrido Espinosa and Maria Victoria Garc(cid:237)a Olea,

dependencia exterior
Estatistika-Erakundea/Instituto Vasco de Estad(cid:237)stica (Eustat),
statistical office of the Basque Government.

(cid:145)La
vasca en el periodo 1990(cid:151)1995(cid:146), Euskal
the

(20) Exports abroad accounted for 28,5 % of total exports (including
sales to the rest of Spain) in 1990, and for 40,8 % five years later
in 1995.
(cid:145)Estad(cid:237)stica de Comercio Exterior para la Comunidad Aut(cid:243)noma de
Euskadi en el aæo 1998(cid:146), prepared by Eustat.

(21)

(67) As regards the comment that the effect on trade should
be assessed by the Commission on the basis of a
comparison of all tax systems, the Commission would
point out that the distortions of competition which are
the subject of this procedure under Articles 87 and 88
of the Treaty are due to a derogating rule which favours
certain firms vis-(cid:224)-vis other taxpayers in Guipœzcoa;
they are not possible distortions of competition which
are due to differences between the tax systems of the
Member States, which might, as appropriate, be caught
by the provisions of Articles 93 to 97 of the Treaty.

since only

firms which make

(68) As regards the specific character which State aid must
have, the Commission takes the view that the 45 % tax
credit is specific or selective in that it favours certain
firms,
investments
exceeding the ESP 2 500 million (EUR 15 025 303)
threshold after 1 January 1997 are eligible. All other
firms whose investments do not exceed that threshold
are ineligible. The objective character of the threshold
cited does not prevent it, as the Spanish authorities and
some of the third-party comments claim, from being
selective and excluding firms which do not satisfy the
conditions in question.

(69)

The Commission is of the opinion,
in the alternative,
that the 45 % tax credit is specific on the grounds of the
discretionary power of
authorities. The
Guipœzcoa Provincial Council has a discretionary power
to determine,
the
investment process and that of the preparatory phase of
It should be
the investment qualifying for the aid.

the duration of

in particular,

the

tax

(22) See judgment by the Court of Justice on 17 June 1999 in Case
C-75/97 ((cid:145)Maribel(cid:146)), Belgium v Commission, paragraphs 48 and 51;
the judgment rendered by the Court of First Instance on 15 June
2000 in Case T-298/97, Alzetta Mauro and others v Commission,
the opinion of Advocate General
paragraphs 80 to 82;
Ru(cid:237)z-Jarabo dated 17 May 2001 in Case C-310/99,
Italy v
Commission, paragraphs 54 and 55; and the opinion of Advocate
General Saggio, dated 27 January 2000,
in Case C-156/98,
Germany v Commission, paragraph 31, which ran thus: (cid:145)It should be
pointed out in this respect that, with regard to a general aid
scheme, to be able to determine the effect of that scheme on
trade,
it can
reasonably be considered that the said effect may come about.(cid:146) If
the position of a firm (or, as in the present case, an indefinite
number of firms) is reinforced by an aid scheme, this privilege
may in principle affect competition between Member States.

from an ex ante assessment,

is sufficient

if,

it

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stressed here that the Provincial Law introducing the
notions of (cid:145)investment process(cid:146) and (cid:145)preparatory phase
of the project giving rise to the investments(cid:146) does not
define those terms. Unlike the concept of (cid:145)investments
in tangible fixed assets(cid:146), which is defined in accounting
rules (23) and other provisions (24) there is no precise
and generally accepted definition of
the (cid:145)investment
process(cid:146) or the (cid:145)preparatory phase(cid:146). In the absence of a
precise definition,
the regional authorities
have some leeway in determining exactly what is meant
by the (cid:145)investment process(cid:146) or the investment in the
(cid:145)preparatory phase(cid:146) in the case of each recipient.

therefore,

(72)

The effects of more than one distortion of competition
on trade between Member States do not cancel one
another out
damaging
accumulate
consequences to the common market (25) are increased(cid:146).

and

but

the

the
Concerning the question raised in some of
third-party comments about whether the Provincial Law
in question has the character of an enabling rule or a
rule granting aid directly, the Commission would point
out that,
in this case, the rules which introduced the
45 % tax credit have the character of an aid scheme. In
support of this assessment, it is sufficient to point out
that under Article 1(d) of Regulation (EC) No 659/1999
an aid scheme is defined as (cid:145)a system on the basis of
further implementing measures being
which, without
required,
to
undertakings defined within the act in a general and
abstract manner [(cid:133)](cid:146). However, this character of an aid
scheme does not predetermine, as certain third-party
comments claim, whether there is any discretionary
power
scheme or not.
Discretionary power in regard to the granting of the aid
will depend on the specific characteristics of
the
scheme.

individual aid awards may be made

execution of

in the

the

seek to do,

(73) As regards invoking the nature or general scheme of the
tax system as justification for the 45 % tax credit, as the
Spanish authorities
the Commission
emphasises that what matters is determining whether
the tax measures involved meet the objectives inherent
in the tax system itself, or whether, on the contrary,
they pursue other, possibly legitimate, objectives outside
the tax system. In the case at issue, the 45 % tax credit
does not fulfil the internal objectives of the Spanish tax
system, which, apart
from the principal objective
inherent in any tax system of collecting revenue for
founded on the
financing public
principles of equality and progressiveness (26).
In this
regard the 45 % tax credit (27)
said to
discriminate in favour of large economic units at the
expense of other
smaller and less powerful units,
without
such discrimination being justified by the
internal logic of the tax system. In short, because it does
not comply with the internal principles inherent in the

expenditure,

can be

is

(25) See the judgment dated 22 March 1977 in Case C-78/76, Steinike
& Weinlig v Federal Republic of Germany, paragraph 24. On the
other hand, Case C-313/90, ComitØ international de la rayonne et des
fibres synthØtiques and others v Commission, paragraph 45 of the
judgment dated 24 March 1993, states that (cid:145)neither the principle
of equal
legitimate
expectations may be relied upon in order to justify the repetition
of an incorrect interpretation of a measure(cid:146).

the protection of

treatment nor

that of

(26) Article 31 of the Spanish Constitution.
(27) See the sixth paragraph of judgment 411/99 of 17 May 1999 of
the High Court of the Basque Country (Tribunal Superior de Justicia
del Pa(cid:237)s Vasco) in Case C-907/98, Administraci(cid:243)n del Estado v Juntas
Generales de `lava.

(70)

It
should also be stressed that, while in Decision
93/337/EEC the Commission used only the criterion of
territorial or sectoral specificity in order to demonstrate
the specific or selective nature of the aid under the
scheme in question, this does not mean that the aid
could not have displayed other types of specificity in
relation to other criteria. For an official measure to be
classed as selective or specific, in relation to State aid, it
is enough to identify a single feature. There is therefore
no need for each Commission decision to examine
exhaustively every specific feature that may be displayed
by the official measures under consideration in order to
demonstrate that they are selective. Consequently, the
argument put forward in some third-party comments, to
the effect that because the Commission did not mention
the
the minimum investment
threshold as a condition of eligibility for the aid, it did
not deem it to be selective, cannot be accepted.

selective nature of

(71) As regards the existence of tax measures in the form of
tax credits for investments above a given threshold in
other Member States, which the Commission did not
consider selective in scope because of the threshold (cid:151)
according to certain comments by third parties,
this
leads to a legitimate expectation concerning all similar
tax credits (cid:151) the Commission would point out that the
schemes mentioned
third-party
comments are very different from the 45 % tax credit.
Furthermore, even supposing that certain schemes were
similar and that the Commission had not reacted,
it
would not be justified in taking this misguided approach
that,
in the present case.
It should be pointed out
according to the case-law of the Court of Justice,
(cid:145)any
breach by a Member State of an obligation under the
Treaty in connection with the prohibition laid down in
Article 87 cannot be justified by the fact that other
Member States are also failing to fulfil this obligation.

in some of

the

(23) For example, the (cid:145)Plan General de Contabilidad(cid:146).
(24) For example, the (cid:145)Ley de Sociedades An(cid:243)nimas(cid:146).

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tax system, the 45 % tax credit cannot be justified by
the nature or general scheme of that system. Neither
does the fact that the tax credit was introduced by the
regional authorities with powers
tax field
demonstrate, contrary to what the Spanish authorities
claim in their comments, that it is consistent with the
nature of the tax system.

in the

VIII. THE UNLAWFUL NATURE OF THE 45 % TAX
CREDIT

(74) Moreover,

the

state

for boosting economic development

in their
Spanish authorities
comments that the aim of the 45 % tax credit is to
promote economic activity, and that it therefore fulfils
the industrial policy objectives pursued by the Basque
Government. According to the Basque Government
document entitled Industrial Policy: General Framework
of Activities 1996 to 1999 (Pol(cid:237)tica Industrial. Marco
(cid:145)[(cid:133)] tax policies are
General de Actividades 1996-1999),
essential
and,
similarly, for promoting industrial projects based on the
industrial development of the (Basque) Country(cid:146)
(page
131), and in the chapter (cid:145)Tax policy instruments(cid:146) one
reads:
(cid:145)[(cid:133)] the tax autonomy which we have (in the
Basque Country) enables us to search for imaginative
made-to-measure tax solutions, e.g. for priority projects
or even tax incentives for large firms(cid:146) (page 133). The
is part of an
45 % tax credit
industrial policy whose objectives are not inherent in
the tax system.

in question,

therefore,

(75)

the Commission finds that, as the Spanish
In short,
authorities have pointed out,
the 45 % tax credit
pursues an economic policy objective, which is not
inherent in the tax system. It is therefore not justified by
the nature or general scheme of the system.

(76) As to the argument put forward in certain third-party
comments concerning the existence of a higher overall
tax burden in the Basque Country,
the Commission
repeats that this is not relevant in the case at issue,
since the procedure was initiated in respect of a specific
measure and not the whole of the tax system in each of
the three Basque provinces.

(78) Given that

the said scheme does not comprise a
commitment from the Spanish authorities to grant the
aid in accordance with the conditions for de minimis
aid (28), the Commission considers that the aid cannot
to those rules.
It should be
be regarded as subject
that
the Spanish authorities
stressed in this respect
never maintained,
the aid in
in the procedure,
question should be classed as de minimis aid, either in
full or in part. Moreover, it could not comply with the
de minimis rules, since in particular there is no guarantee
that the ceiling of EUR 100 000 would not be exceeded.
The incentive does not qualify as existing aid, either,
since it does not meet
the conditions laid down in
Article 1(b) of Regulation (EC) No 659/1999.

that

(79)

two schemes
from the

reveals
that
45 % tax
scheme did not

The claim made by some third parties that the 45 % tax
credit constitutes existing aid must be rejected.
In
support of that argument, some third-party comments
mention the existence of two tax credits prior to the
introduction of the 45 % tax credit. However, scrutiny
they differed
of
those
substantially
under
credit
specify any
examination. The first
threshold and the second one established a threshold of
ESP 500 million, which is much lower than the ESP
2 500 million threshold in the case at issue. In Article
1(c) of Regulation (EC) No 659/1999, new aid is defined
as (cid:145)all aid, that is to say, aid schemes and individual aid,
which is not existing aid,
to
existing aid(cid:146). The tax credit in question, which involves
substantial changes with respect to those schemes,
is
therefore to be classed as new aid and, in accordance
with Article 2(1) of the Regulation, should be notified,
save as otherwise provided in regulations (29) adopted
pursuant to Article 89 of the Treaty. In any case, even
the two earlier schemes did not qualify as existing aid
since they were apparently not in force on 1 January
1986, when Spain acceded to the European Union.
They therefore did not meet the aforesaid criterion laid
down in Article 1(b)(i) of Regulation (EC) No 659/1999
of having been put into effect before, and being still
applicable after, the date of accession.

including alterations

(77)

To sum up, the Commission finds that the 45 % tax
credit in question is State aid under Article 87(1) of the
Treaty and Article 61(1) of the EEA Agreement, since it
involves aid granted by a State, from State resources,
which favours certain undertakings, distorts competition
and affects trade between Member States.

(28) The result of the assessment of the aid is the same, whether that
assessment is based on the Commission notice on the de minimis
rule for State aid (OJ C 68, 6.3.1996) or on Commission
Regulation (EC) No 69/2001 of 12 January 2001 on the
application of Articles 87 and 88 of the Treaty to de minimis aid
(OJ L 10, 13.1.2001, p. 3).

(29) At no time during the period of validity of the scheme in question

was any such exemption regulation in force.

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(80)

The Commission would point out that State aid which
is not covered by the de minimis rule and is not existing
aid is subject to the obligation of prior notification laid
down in Article 88(3) of the Treaty and Article 62(1)(a)
of the EEA Agreement. However, the Spanish authorities
fulfilled this obligation, which is why the
have not
Commission considers that the aid should be regarded
as unlawful. The Commission regrets this failure by the
Spanish authorities to fulfil their obligation to notify the
aid in advance.

(81) As regards the argument

in some of

tax concessions

the third-party
comments that basically there is a violation of legitimate
expectations and legal certainty, the Commission feels
bound to reject this, since firstly the 45 % tax credit is
not existing aid and, secondly, as it was not notified
under Article 88(3) of the Treaty, the Commission was
not able to determine whether it is compatible with the
common market. Neither can it be accepted that there is
a legitimate expectation of the 45 % tax credit being
compatible with the common market on the grounds
that, as claimed in some of the third-party comments,
the Basque tax system was already deemed compatible
by Commission Decision 93/337/EEC concerning a
In that
scheme of
for
Decision the Commission in fact
the tax
measures concerned were to be classed as State aid and,
as such, were subject to the Community rules on State
aid (rules on regional aid or aid for SMEs, rules on
combination of aid and sectoral rules). Therefore, if as
claimed in some third-party comments the 45 % tax
credit was a measure similar to the scheme examined in
in the first place, have
it should,
the 1993 Decision,
been notified as it
is new State aid and, secondly,
comply in particular with the rules on regional aid or
aid for SMEs, the rules on combination of aid and the
sectoral rules.
the recipients
In these circumstances,
cannot rely on any legitimate expectations or legal
certainty as regards the State aid nature of the 45 % tax
credit.

investment.
found that

as

and

legal

regards

invoked

certainty

the principles of

legitimate
In short,
expectations
in the
third-party comments, the Commission gave no specific
assurances either to the Spanish authorities or to third
parties, who could not therefore harbour any legitimate
expectations with regard to the legality or compatibility
of the aid in question. It should be pointed out in this
connection that (cid:145)it is settled case-law that the right to
protection of legitimate expectations may be claimed by
any individual who finds himself in a position in which
it is shown that the Community administration gave rise
to justified hopes on his part [(cid:133)]. However, no one
may plead infringement of
the
protection of legitimate expectations in the absence of

the principle of

assurances

specific
administration(cid:146) (30). This
legitimate expectations or
violated is without foundation in this case.

him by
is why the argument

the
that
legal certainty have been

given

to

(82)

In this context, moreover, the Commission recalls that
in its Decision 93/337/EEC it already deemed certain tax
credits introduced in 1988 by the Provinces of `lava,
Guipœzcoa and Vizcaya to be State aid.

IX. ASSESSMENT OF COMPATIBILITY WITH THE
COMMON MARKET

In this context

from aid that
directives,

(83) As a preliminary, the Commission would repeat that the
45 % tax credit has to be classed as an aid scheme.
Given the general, abstract nature of an aid scheme, the
Commission does not know the circumstances of
existing or possible future recipient firms and is not,
therefore, able to examine the exact repercussions on
competition for specific firms.
is
to ascertain that potential recipients could
sufficient
is not consistent with the
benefit
Community
frameworks
and
guidelines
applicable on this subject. Moreover, the Commission
would emphasise that,
in its decision initiating the
procedure, it asked for all relevant information relating
to the aid and the particular circumstances of each
the Spanish authorities have not
recipient. However,
provided any such information. This
is
contradictory to criticise the Commission, as certain
third-party comments do, for providing only a general
assessment while at the same time refusing to supply
the detailed data requested.

is why it

it

(84)

The State aid in the form of a 45 % tax credit has the
effect of encouraging large investments costing more
than ESP 2 500 million. According to Annex I to the
guidelines on national regional aid (98/C 74/06), (cid:145)tax aid
may be considered to be aid connected with an
investment where it is based on an amount invested in
the region. In addition, any tax aid may be connected
with an investment if one sets a ceiling expressed as a
percentage of the amount invested in the region(cid:146). In the
these
case
conditions,
is based on
investment expenditure and its amount does not exceed
45 % of the investment. The Commission accordingly
takes the view that the 45 % tax credit should be classed
as investment aid to the extent that it fulfils the above
criteria. It must therefore be examined in the light of
the Community rules on investment aid.

the 45 % tax credit

least partly,

in point,

fulfils

since

at

it

(30) See paragraph 300 of the judgment rendered by the Court of First
Instance of 15 December 1999 in joined Cases T-132/96 and
T-143/96, Freistaat Sachsen and others v Commission, [1999] ECR
II-3663.

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Official Journal of the European Communities

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(85)

If State aid for investment is to qualify for one of the
regional derogations in Article 87(3)(a) or (c) of the
Treaty, the region in which the scheme is applied must
have been recognised as eligible for one of
those
derogations on the regional aid map. As regards the
the Commission would
admissibility of Guipœzcoa,
point out that the territory has never been eligible for
the Article 87(3)(a) derogation, since the per capita
GDP (31) of
the Basque
Country, of which it forms part, has always been higher
than 75 % of the Community average. According to the
rules on regional aid (33), the conditions of eligibility for
the derogation in Article 87(3)(a) of the Treaty (34) are
met only if the region, at NUTS level II, has a per capita
GDP of not more than 75 % of the Community average.

the NUTS (32)

II region of

(86) As

regards

the admissibility of Guipœzcoa for

the
derogation in Article 87(3)(c), the Commission would
point out that, during the period from 1 January 1997
to 18 March 2000, two successive regional aid maps
were in force. The first one, adopted by its Decision of
26 July 1995 (35), applied from 26 September 1995
until 31 December 1999 and provided that the whole
of Guipœzcoa was a region in which investment aid for
regional development could be regarded as compatible
with the common market under
the derogation in
it did not exceed the
Article 87(3)(c), provided that
ceiling of 25 % nge in the case of large firms. As regards
the subsequent period, the Commission would point out
that, in its decision of 11 April 2000, it approved the
Spanish regional aid map for the period 2000 to 2006.
According to this map, Guipœzcoa continues to be a
region in which regional development aid may be
considered compatible with the common market
in
accordance with the derogation in Article 87(3)(c) of the
Treaty, provided that it does not exceed the ceiling of
20 % nge in the case of large firms, instead of 25 % nge
under the previous map.

(31) Per capita gross domestic product (GDP) measured in purchasing

power standards (PPS).

(32) Nomenclature of territorial units for statistics.
(33) The references to the regional rules are, in some of the subsequent
recitals, to the guidelines on national regional aid (98/C 74/06) or
to the earlier rules. In any event, the result of the assessment is
the same in all cases.

(34) See point 1 of the Commission communication to the Member
States on the method for the application of Article 92(3)(a) and (c)
to regional aid (OJ C 212, 12.8.1988) and point 3.5 of
the
guidelines on national regional aid (98/C 74/06).

(35) See 96/C 25/03.

(87)

The Commission would also point out that, in the case
of SMEs (36), the intensity of investment aid may,
in
SME guidelines (37), be 10
accordance with the
percentage points higher than the regional ceiling for
large firms, provided that
the total does not exceed
30 % nge.

(88)

initial

and the

investment

investments

should also be stressed that,

to be eligible for
It
investment aid,
in tangible assets must
correspond, in particular, to the Community definitions
standard base (38).
of
Conversely, all other investment expenditure that does
not correspond to those definitions, such as replacement
investments or expenditure on items other than land,
buildings or plant/machinery,
is not deemed eligible.
Although there is no doubt that the 45 % tax credit is
aid granted subject to the carrying-out of a tangible
investment (39) in new tangible fixed assets, it does not
investments (40) or expenditure
exclude replacement
related to the (cid:145)investment process(cid:146) and (cid:145)investments
made during the preparatory phase(cid:146). In the absence of a
precise definition of those terms, the possibility cannot
be ruled out that the 45 % tax credit could be applied
not only to expenditure included in the standard base
but
replacement
investments or other items of expenditure lying outside

expenditure

linked

also

to

to

(36) For the purposes of the Community guidelines on State aid for
small and medium-sized enterprises (OJ C 213, 19.8.1992) or the
Commission recommendation of 3 April 1996 concerning the
definition of small and medium-sized enterprises (96/C 213/04).
(37) Community guidelines on State aid for small and medium-sized
enterprises (OJ C 213, 19.8.1992) or Community guidelines on
State aid for small and medium-sized enterprises (96/C 213/04)
(OJ C 213, 23.7.1996).

investment means an investment

(38) See the Annex to the Council resolution of 20 October 1971
(OJ C 111, 4.11.1971), point 5(c); the Annex to the Commission
communication on regional aid systems (OJ C 31, 3.2.1979),
point 18; the Community guidelines on State aid for small and
medium-sized enterprises, point 4.2.1; or
the guidelines on
national regional aid (98/C 74/06) (OJ C 74, 10.3.1998), point
in fixed capital
4.4 ((cid:145)initial
relating to the setting-up of a new establishment, the extension of
an existing establishment, or
the starting-up of an activity
involving a fundamental change in the product or production
(through rationalisation,
process of an existing establishment
initial
diversification or modernisation)(cid:146)), point 4.5 ((cid:145)aid for
investment is calculated as a percentage of the investment’s value.
This value is established on the basis of a uniform set of items of
expenditure
following
elements of the investment: land, buildings and plant/machinery(cid:146))
and footnote 23 ((cid:145)in the transport sector, expenditure on the
(movable assets) cannot be
purchase of
included in the uniform set of
items of expenditure (standard
base). Such expenditure, therefore, is not eligible for aid for initial
investment(cid:146)).

corresponding to the

transport equipment

(standard base)

(39) See the Annex to the Commission communication on regional aid

systems (OJ C 31, 3.2.1979).

(40) Footnote 21 in the guidelines on national regional aid (98/C
74/06) states that (cid:145)replacement investment is thus excluded from
the concept. Aid for this type of
falls within the
category of operating aid, to which the rules described at points
4.15 to 4.17 apply(cid:146).

investment

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the standard base. The Commission consequently takes
the aid may be applied to initial
the view that
investment but also to other items of expenditure that
cannot be deemed compatible with the
relevant
Community rules, such as replacement investments.

nature such as that linked to replacement investments.
Such current or periodic expenditure is the type of
expenditure that has to be incurred by a firm as part of
its day-to-day operations or its normal activities. Aid for
this type of investment therefore has to be classed as
operating aid and as such is subject to specific rules.

(89)

(90)

(91)

the

abovementioned

The Commission notes that, since the entry into force
of the guidelines on national regional aid (98/C 74/06),
aid that may qualify for
the derogation in Article
the Treaty in Guipœzcoa must not only
87(3)(c) of
comply with
Community
definitions of initial
investment and the standard base
and observe the applicable ceilings; it must also satisfy
other requirements. In the case in point, the aid must be
subject to certain conditions: the recipient’s contribution
to the investment must be at least 25 % (point 4.2); the
application for aid must be submitted before the
investment projects begin to be implemented (point
4.2); the investment must be maintained for a minimum
period of five years (point 4.10); and the respective aid
intensity ceilings must be complied with where different
types of aid are combined (points 4.18 to 4.21).

In this specific case, the Commission points out that the
tax aid in the form of a 45 % tax credit is not limited
(during the period 1 January 1997 to 31 December
1999) to 25 % nge in the case of large firms or to 30 %
nge in the case of SMEs. Neither, as regards the period
after 1 January 2000, is it limited to 20 % nge in the
case of large firms or to 30 % in the case of SMEs.
Furthermore, the costs that may be accepted for aid
fully correspond to those included in the
may not
investments are not
standard base since replacement
excluded and other
items of expenditure may be
accepted. In these circumstances, the Commission finds
that a tax credit amounting to 45 % of
investments
which does not comply with the Community rules on
regional aid cannot be deemed compatible with the
common market under
the regional derogation in
Article 87(3)(c) of the Treaty.

The aid for investment expenditure (41) that does not
correspond to the Community definition cannot be
regarded as investment aid. In accordance with Annex I
to the regional aid guidelines (98/C 74/06), any tax aid
may be classed as investment aid where its amount is
to a ceiling expressed as a percentage of
subject
investment
the
in
in the case in point, the
Community rules. However,
amount of the aid represents a percentage of investment
expenditure that does not comply with the Community
rules. That is why, under those rules, the aid cannot be
regarded as investment aid. On the contrary, the aid
may finance expenditure of a periodic and necessary

accordance with

expenditure

(41) It should be stressed that neither the Spanish authorities nor the
third parties, which submitted comments, denied the existence of
this type of investment expenditure.

(92)

(93)

the

with

Commission’s

In this respect, the Commission would point out that, in
accordance
1988
communication (42) and the regional aid guidelines
(98/C 74/06), regional aid which is classed as operating
aid is normally prohibited. Exceptionally, however, such
aid may be granted in regions eligible under
the
derogation in Article 87(3)(a) of the Treaty, provided
that it meets certain conditions laid down in point 6 of
the
the communication and points 4.15 to 4.17 of
guidelines, or in the outermost regions or regions of
low population density if
intended to offset
additional transport costs. However, the NUTS level III
territory of Guipœzcoa is not eligible for the derogation
in Article 87(3)(a) of the Treaty, and the grant of the
said operating aid does not meet
conditions
described. The NUTS level III territory of Guipœzcoa is
neither an outermost region (43) nor a region of low
population density (44). This is the reason why the
operating aid elements
in the 45 % tax credit are
prohibited, in particular because they are not granted in
a region that is eligible for the derogation in Article
87(3)(a) of
in an outermost region or a
region of low population density. The aid is therefore
incompatible in this case.

the Treaty,

the

is

it

considers

The Commission therefore
tax
incentive scheme in question cannot be regarded as
compatible with the common market under the regional
derogations in Article 87(3)(a) and (c) of the Treaty,
since it does not comply with the rules on regional aid.

that

the

(94) As far as investments made by SMEs outside Guipœzcoa
are concerned, the Commission would point out that, in
such cases, the corresponding aid cannot be regarded as
regional aid and therefore does not qualify for the
regional derogation in Article 87(3)(c) of the Treaty. The
same applies where such investments are made by large
in accordance with the
firms. On the other hand,

(42) Commission communication to the Member States on the method
to regional aid

for the application of Article 87(3)(a) and (c)
(OJ C 212, 12.8.1988).

(43) It is not in the list of outermost regions in Article 299 of the

Treaty.

(44) According to point 3.10.4 of the guidelines on national regional

aid (98/C 74/06).

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state that

is an SME,

small and
Community guidelines on State aid for
(96/C 213/04), where the
medium-sized enterprises
recipient
the other derogation in Article
87(3)(c), for aid to facilitate the development of certain
economic activities, may apply. In addition to requiring
compliance with the definition of initial investment and
the rules on eligible expenditure forming part of the
standard base,
the
the above guidelines
exception will apply to aid for tangible investments up
to a ceiling of 15 % gross grant equivalent (gge) in the
case of small enterprises and 7,5 % gge in the case of
medium-sized enterprises. The Commission notes that
the tax aid in the form of a 45 % tax credit is not
limited to 15 % gge in the case of small enterprises and
7,5 % gge in the case of medium-sized enterprises.
Neither are the eligible investments fully in line with the
definition of initial investment given in point 4.2.1 of
the guidelines, nor are the costs that may be accepted
compatible with those forming part of the standard base
also laid down in point 4.2.1, since the scheme does
not rule out replacement
investments or expenditure
items other than those covered by the standard base.
The Commission accordingly finds that
the tax aid
under examination cannot be deemed compatible with
the common market under the derogation in Article
87(3)(c) of
the
development of certain economic activities.

aid to facilitate

the Treaty

for

Furthermore, the scope of the regional aid guidelines
(98/C 74/06) excludes the production, processing and
marketing of the agricultural products listed in Annex I
to the Treaty, fisheries and the coal industry. Transport,
synthetic
steelmaking,
and the
shipbuilding,
fibres
motor industry are subject
to special rules over and
above those set out in the abovementioned guidelines,
while specific rules apply to investments covered by the
multisectoral
large
investment projects (98/C 107/05). Those rules must
therefore be
in assessing the
compatibility of the aid in question where the recipient
company belongs to one of those sectors or where the
investment falls within the scope of the multisectoral
framework.

framework on regional aid for

taken into account

cases,

for other purposes

The derogation in Article 87(3)(c) of the Treaty has to
be examined to see whether it might not apply, in the
the
above
development of certain economic activities. It should be
noted in this respect that the aim of the 45 % tax credit
is not
to develop an economic activity within the
meaning of Article 87(3)(c) of the Treaty, such as the
and
development

of measures

as well

small

assist

to

as

(95)

(96)

medium-sized enterprises,
research and development,
job creation or training in
environmental protection,
accordance with the appropriate Community rules.
the tax incentive in question cannot
Consequently,
qualify for the derogation in Article 87(3)(c) of
the
Treaty in respect of the said purposes.

(97)

Similarly, the 45 % tax credit, which is not subject to
any sectoral
limitation, may be granted without any
restriction to undertakings in sensitive sectors subject to
specific Community rules, such as those applicable to
the production, processing and marketing of
the
agricultural products in Annex I to the Treaty, fisheries,
coalmining, steelmaking, shipbuilding, synthetic fibres
and the motor industry (45). In the circumstances, the
Commission considers that the tax incentive in the form
of a 45 % tax credit cannot comply with the said
sectoral rules. In this particular case, the 45 % tax credit
does not meet the condition that it should not promote
new production capacity so as not to exacerbate the
sectors
overcapacity problems
recipient
traditionally suffer. Therefore, where
belongs to one of
the
Commission considers that, since it is not subject to the
sectoral rules mentioned, the aid is incompatible with
the common market and the derogation in Article
87(3)(c) of
the Treaty on the promotion of certain
activities does not apply.

the abovementioned sectors,

from which these

the

(98) As

far as

the period after 1 September 1998 is
concerned, the Commission further takes the view that
the aided investment may possibly fall within the scope
of the multisectoral framework on regional aid for large
investment projects (98/C 107/05) (46). All
investment
projects costing at
least EUR 50 million (EUR 15
million in the case of the textile and clothing sector),
with an aid intensity of at least 50 % of the regional aid
ceiling and involving aid per job of at least EUR 40 000
(EUR 30 000 in the case of the textile and clothing
sector), as well as investment projects for which the
total aid is at least EUR 50 million, are subject to the
framework. Each such
conditions laid down in that
investment project must be notified in advance,
in
accordance with Article 88(3) of the Treaty, to enable
the Commission to determine
the maximum aid
intensity that is compatible with the common market.
However, the tax aid in question is not subject either to
prior notification in the case of the abovementioned
to possible reduction in intensity
large projects or

(45) For the sectoral rules currently in force see,

Journal of

Official
Directorate-General for Competition
http://europa.eu.int/comm/competition/state_aid/legislation/

the European Communities, the website of

in addition to the
the

(46) OJ C 107, 7.4.1998.

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the

following
Commission’s
assessment.
The
the tax aid under
Commission therefore finds that
examination is not compatible with the common
market under the derogation in Article 87(3)(c) of the
Treaty, since the derogation in Article 87(3)(a) does not
apply in Guipœzcoa.

economy of a Member State, as provided for in Article
87(3)(b). Nor does it qualify for the derogation in
Article 87(3)(d) as its purpose is not to promote culture
or heritage conservation.

(99)

Since the tax aid in question is granted irrespective of
the economic and financial position of
the recipient
firms, the Commission considers that there is no way of
ruling out the possibility that the recipient may be a
firm in difficulty within the meaning of the Community
guidelines on State aid for rescuing and restructuring
in difficulty (1999/C 288/02) (47) despite the
firms
Spanish authorities’ claim that the tax credit, as it has
is unlikely to be applied to firms in
been designed,
difficulty. The Commission would point out
in this
connection that the grant of the tax aid in question is
not subject to the conditions (48)
laid down in those
guidelines. As stated in point 20 of the abovementioned
rescue and restructuring aid guidelines (1999/C 288/02),
(cid:145)the Commission considers
rescue and
restructuring may contribute to the development of
economic activities without adversely affecting trade to
an extent contrary to the Community interest if the
conditions set out in these guidelines are met.(cid:146) If those
conditions are not met, the aid is incompatible with the
common market where it
firms in
difficulty. The Commission therefore finds that the tax
aid in question, where granted to firms in difficulty, is
not compatible with the common market under the
derogation in Article 87(3)(c) of
the Treaty on the
promotion of certain activities.

is intended for

that aid for

Application of the other exceptions

(100) The aid in question, which cannot qualify for

the
derogations in Article 87(3)(a) and (c) of the Treaty,
cannot qualify either for other derogations in Article
87(2) and (3). It cannot be regarded as aid of a social
nature under Article 87(2)(a); it is not intended to make
good the damage
caused by natural disasters or
exceptional occurrences within the meaning of Article
87(2)(b). Furthermore, its object is not to promote the
execution of an important project of common European
interest, nor to remedy a serious disturbance in the

(47) OJ C 288, 9.10.1999. These guidelines have since 1999 replaced
a previous version (94/C 368/05) of the same guidelines (OJ C
368, 23.12.1994).

(48) Among

other

things,

implementation of a
long-term viability of the firm to be restored.

that

conditional
restructuring plan which enables

the

aid

is

on
the

Summary

[(cid:133)] of

(101) The Commission finds that the State aid in question in
the form of a 45 % tax credit does not qualify for the
since
derogation in Article 87(3)(a) of
the Treaty,
that
Guipœzcoa is not eligible for assistance under
provision, or for the derogation in Article 87(3)(c) for
(cid:145)aid to facilitate
certain
the development
economic areas(cid:146), since it does not comply with the
Community rules on regional aid. Neither does it qualify
for the derogation in Article 87(3)(c) for (cid:145)aid to facilitate
the development of certain economic activities(cid:146), since,
on the one hand,
it does not comply with the
Community rules applicable to SMEs in this context
and, on the other hand, as far as large firms are
concerned, it does not relate to certain activities. The aid
cannot qualify either for other derogations in Article
87(2) and (3). It cannot be regarded as aid of a social
nature under Article 87(2)(a); it is not intended to make
caused by natural disasters or
good the damage
exceptional occurrences within the meaning of Article
87(2)(b). Furthermore, its object is not to promote the
execution of an important project of common European
interest, nor to remedy a serious disturbance in the
economy of a Member State, as provided for in Article
87(3)(b). Nor does it qualify for the derogation in
Article 87(3)(d) as its purpose is not to promote culture
or
therefore
aid
incompatible with the common market.

conservation.

heritage

The

is

(102) Since any tax credit that is not used because it exceeds
the final amount of tax payable may be carried over and
used for several years following adoption of the decision
granting the tax credit (49), there could still be some tax
this aid is unlawful and
aid left
incompatible. The Spanish authorities should therefore
cancel the payment of any balance from the 45 % tax
credit, which could still be due to certain recipients.

to pay. However,

(103) As regards incompatible aid already paid, it should be
above

in accordance with the

pointed out

that,

(49) In the case of

tax credits granted under Provincial Law No
22/1994 of 20 December 1994, the period in which they may be
used is limited to nine years. Tax credits granted under subsequent
provincial laws are no longer subject to any such limitation.

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Official Journal of the European Communities

L 314/43

law such as

the recipients may not

arguments,
rely on general
legitimate
principles of Community
expectations or legal certainty. Consequently, there is
nothing to prevent the application of Article 14(1) of
Regulation (EC) No 659/1999, according to which
(cid:145)where negative decisions are taken in cases of unlawful
aid, the Commission shall decide that the Member State
concerned shall take all necessary measures to recover
the aid from the beneficiary(cid:146). In this case, therefore, the
Spanish authorities should take all necessary measures
to recover the aid already paid in order to restore the
economic situation, which the recipient firms would be
in without the unlawful grant of the aid. The aid should
be recovered in accordance with the procedures and
provisions of Spanish law and should include all interest
due, calculated from the date the aid was granted until
the date of actual
the
reference rate used at that date to calculate the net grant
equivalent of regional aid in Spain (50).

repayment on the basis of

(104) The State aid in question does not qualify for the
derogation in Article 87(3)(a) of the Treaty or for the
derogation in Article 87(3)(c) for (cid:145)aid to facilitate the
development [(cid:133)] of certain economic areas(cid:146), since it
does not comply with the Community rules on regional
aid. Neither does it qualify for the derogation in Article
87(3)(c) for (cid:145)aid to facilitate the development of certain
economic activities(cid:146), since, on the one hand, it does not
comply with the Community rules applicable to SMEs
in this context and, on the other hand, as far as large
relate to certain
firms are concerned,
for other
activities. The aid cannot qualify either
derogations
It cannot be
regarded as aid of a social nature under Article 87(2)(a);
it is not intended to make good the damage caused by
natural disasters or exceptional occurrences within the
meaning of Article 87(2)(b). Furthermore,
its object is
not to promote the execution of an important project of
common European interest, nor to remedy a serious
disturbance in the economy of a Member State, as
provided for in Article 87(3)(b). Nor does it qualify for
the derogation in Article 87(3)(d) as its purpose is not
to promote culture or heritage conservation. The aid is
therefore incompatible with the common market.

in Article 87(2) and (3).

it does not

used for several years following adoption of the decision
granting the tax credit (51), there could still be some tax
aid left
this aid is unlawful and
incompatible. The Spanish authorities should therefore
cancel the payment of any balance from the 45 % tax
credit, which could still be due to certain recipients.

to pay. However,

that,

law such as

the recipients may not

in accordance with the

(106) As regards incompatible aid already paid, it should be
above
pointed out
rely on general
arguments,
principles of Community
legitimate
expectations or legal certainty. Consequently, there is
nothing to prevent the application of Article 14(1) of
Regulation (EC) No 659/1999, according to which
(cid:145)where negative decisions are taken in cases of unlawful
aid, the Commission shall decide that the Member State
concerned shall take all necessary measures to recover
the aid from the beneficiary(cid:146). In this case, therefore, the
Spanish authorities should take all necessary measures
to recover the aid already paid in order to restore the
economic situation which the recipient firms would be
in without the unlawful grant of the aid. The aid should
be recovered in accordance with the procedures and
provisions of Spanish law and should include all interest
due, calculated from the date the aid was granted until
the
the date of actual
reference rate used at that date to calculate the net grant
equivalent of regional aid in Spain (52).

repayment on the basis of

aid

granted

(107) This Decision relates to the scheme and should be
implemented immediately, including the recovery of any
individual
scheme. The
Commission would also point out that, as usual, this
Decision is without prejudice to whether individual aid
may be regarded, in full or in part, as compatible with
the common market on its own merits, either in a
subsequent Commission decision or under exempting
regulations.

under

that

X. CONCLUSIONS

(108)

In view of the above, the Commission concludes that:

(105) Since any tax credit that is not used because it exceeds
the final amount of tax payable may be carried over and

(50) Commission letter to Member States SG(91)D/4577 of 4 March
1991. See also Case 142/87, Belgium v Commission, [1990] ECR
I-950.

(51) In the case of

tax credits granted under Provincial Law No
22/1994 of 20 December 1994, the period in which they may be
used is limited to nine years. Tax credits granted under subsequent
provincial laws are no longer subject to any such limitation.
(52) Commission letter to Member States SG(91) D/4577 of 4 March
1991. See also Case 142/87, Belgium v Commission, [1990] ECR
I-950.

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(cid:151) Spain has unlawfully put into effect, in Guipœzcoa,
thereby

the 45 % tax credit
infringing Article 88(3) of the Treaty,

investments,

for

(cid:151) the 45 % tax credit for investments is incompatible

with the common market,

certain
aid

(cid:151) the Spanish authorities must cancel the payment of
any balance of the tax credit, which could still be
the
to
due
Spanish
incompatible
authorities must
to
recover it, so as to restore the economic situation
which the recipient firms would be in without the
unlawful grant of the aid,

recipients. As
paid,
already
take all necessary measures

regards
the

Article 3

1.
Spain shall take all necessary measures to recover from
the recipients the aid referred to in Article 1, which has been
unlawfully made available to them.

Spain shall cancel all payment of outstanding aid.

2.
Recovery shall be effected without delay in accordance
with the procedures of national law, provided these allow the
immediate and effective implementation of this Decision. The
sums to be recovered shall bear interest from the date on
which they were available to the recipients until their actual
recovery.
the
reference rate used for calculating the grant equivalent of
regional aid.

Interest shall be calculated on the basis of

HAS ADOPTED THIS DECISION:

Article 4

Article 1

Spain shall inform the Commission, within two months of the
date of notification of this Decision, of the measures taken to
comply with it.

The State aid in the form of a 45 % tax credit for investments,
unlawfully put
into effect by Spain in the Province of
Guipœzcoa, in breach of Article 88(3) of the Treaty, through
the 10th additional provision of Provincial Law No 7/1997 of
22 December 1997, is incompatible with the common market.

Article 5

This Decision is addressed to the Kingdom of Spain.

Done at Brussels, 11 July 2001.

Article 2

Spain shall abolish the aid scheme referred to in Article 1 in
so far as it is continuing to produce effects.

For the Commission

Mario MONTI

Member of the Commission