2002/893/EC: Commission Decision of 11 July 2001 on the State aid scheme applied by Spain to certain newly established firms in Navarre (Spain) (notified under document number C(2001) 1762) (Text with EEA relevance)
Date: 2001-07-11
Institutions: European Commission
Subjects: Spain, State aid, aid system, control of State aid, electrical engineering, packaging product, tax relief

18.11.2002

EN

Official Journal of the European Communities

L 314/17

COMMISSION DECISION

of 11 July 2001

on the State aid scheme applied by Spain to certain newly established firms in Navarre (Spain)

(notified under document number C(2001) 1762)

(Only the Spanish text is authentic)

(Text with EEA relevance)

(2002/893/EC)

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,
called on interested parties to submit
having regard to those comments,

in accordance with the abovementioned Articles (1),
their comments, and

Whereas:

I. PROCEDURE

(1)

(2)

(3)

As a result in particular of the information received in
response to the procedures
initiated following the
complaints about
the State aid granted to Daewoo
Electronics Manufacturing Espaæa SA (2), Ramond(cid:237)n SA
and Ramond(cid:237)n CÆpsulas SA (3), the Commission learned
of the existence of a scheme of non-notified investment
aid in Spain, in `lava, consisting of tax incentives in the
form of a reduction of taxable income for certain newly
established firms. It also received unofficial information
that similar measures existed in Navarre, since that
territory enjoys the same autonomy in tax matters as
`lava.

By letter dated 17 August 1999, SG(99)D/6865, 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 26
August 1999,
the
Spanish authorities requested more time in which to
submit their comments. By letter from the Permanent

registered on 30 August 1999,

(1) OJ C 340, 27.11.1999, p. 52.
(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)

(5)

(6)

(7)

Representation dated 24 January 2000, registered on 31
January 2000, the Spanish authorities submitted their
comments under the abovementioned procedure.

The Commission’s decision to initiate the procedure was
published in the Official
the European
Communities (4). The Commission invited interested
parties to submit their comments on the aid within one
month of the date of publication.

Journal

of

The Commission has
interested parties.

received no comments

from

Pursuant to Provincial Law 8/2001 of 10 April (5), the
first section of Chapter II of Provincial Law 24/1996 of
30 December (6), which constituted the legal basis for
the tax incentives in question, was repealed as from the
tax year starting on 1 January 2001.

II. DETAILED DESCRIPTION OF THE AID

According to the information at
the Commission’s
disposal, the tax incentives in question were introduced
by Articles 52 to 56 of Section 1 of Chapter II of
Provincial
on
Corporation Tax (7). The text of the Articles reads as
follows (8):

Law 24/1996

30 December

of

(cid:145)Section 1

Incentives for newly established firms

Article 52 (cid:151) Reduction of tax liability

Companies starting their business activity after the
the Provincial Law shall be
entry into force of
entitled to a reduction of 50 % of their total tax
from the
liability

in respect of

income

the

(4) See footnote 1.
(5) Published in the Diario Oficial de Navarra No 51, 25.4.2001.
(6) Provincial Law 24/1996, Bolet(cid:237)n Oficial de Navarra No 159,

31.12.1996.

(7) Bolet(cid:237)n Oficial de Navarra No 159, 31.12.1996.
(8) Only the parts essential to the assessment of the aid are cited.

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consecutive tax periods completed within seven
years from start-up, subject to a maximum of four
periods, starting from the first one in which,
in
those seven years,
they obtain a positive taxable
income.

belong to certain sectors, since any activity or sector
may be eligible. Nor is it intended for certain categories
of firms, e.g. small and medium-sized enterprises (SMEs),
since any firm may qualify, provided that it satisfies the
abovementioned tests.

[(cid:133)]

Article 53 (cid:151) Conditions

1. To qualify for the reduction, taxpayers shall meet
the following conditions:

[(cid:133)]

(f) in the first two years of operation they invest at
least ESP 100 million in new tangible fixed assets
assigned to the business [(cid:133)].

[(cid:133)]

(g) at least ten jobs are generated in the six months
following the start of
trading, and the annual
average workforce is kept at that figure from that
time until the end of the fiscal year in which the
right to apply the reduction of liability expires.

[(cid:133)]

Article 54 (cid:151) Incompatibility

Taxpayers who receive the reduction governed by
this Section shall not be entitled to claim the tax
exemptions or
down in this
Provincial Law with regard to investment or job
creation during the period intervening between the
fiscal year in which they start to trade and the last
fiscal year in which they qualify for the reduction.

incentives

laid

Article 55 (cid:151) Negative taxable incomes

[(cid:133)]

(10) As far as combination with other aid is concerned, it is
stated that the tax incentives in question may not be
combined with any other tax concessions that may be
granted in respect of the minimum investment or the
jobs. Nevertheless, combination
minimum creation of
with other, non-tax aid,
including grants, subsidised
loans, guarantees, equity purchases, etc., relating to the
same investments is not ruled out. Nor is possible
other
combination with
concessions whose
the circumstance triggering each
operative event,
i.e.
concession,
for
example, with tax incentives in the form of a tax credit.

is different. Such would be the case,

tax

(11)

(12)

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 applies
(cid:145)in any form(cid:146).
However, the Commission also emphasised provisionally
that, to be regarded as aid, the measures should meet all
four of the criteria which are laid down in Article 87
and which are explained below.

to aid measures

the Commission pointed out

the 50 %
Firstly,
reduction of liability gives its recipients an advantage,
since the charges normally affecting their budgets are
reduced by a partial
tax
liability.

reduction of

the normal

that

(13)

Secondly, the Commission considered that the reduction
involves a loss of tax revenue and is therefore equivalent
to the consumption of public resources in the form of
fiscal expenditure.

Article 56 (cid:151) Application and non-compliance

(14)

[(cid:133)](cid:146).

(8)

activities of

the business

The Commission notes that the tax incentives relate to
the liability to corporation tax resulting from the
performance of
certain
companies.
In this case, the recipients are companies
which started trading after 1 January 1997, the date of
entry into force of the said provincial law, and which
have also invested in new tangible fixed assets at least
ESP 100 million (EUR 601 012) and have generated at
least ten jobs. The period for which they qualify for the
reduction is the first seven years following the start of
trading.

(9)

The Commission finds that
the tax incentive is not
intended for firms which carry out certain activities or

the

aid strengthens

Thirdly, the Commission considered that the reduction
of 50 % in tax liability affects competition and trade
between Member States. Since the recipients conduct
business which may be the subject of intra-Community
their position vis-(cid:224)-vis
trade,
competitors who also trade between Member States.
That
the
recipient firms’ profitability is improved by the increase
in their net profit (profit after tax). In this way they are
able to compete with firms which are not eligible for
the aid.

affected. Furthermore,

therefore

trade

is

(15)

Similarly, the Commission took the view at that stage
that the reduction of liability is specific or selective in
that it favours certain firms, since the conditions for
granting the incentives
firms
established before 1 January 1997, date at which the
said provincial law came into force are ineligible, as are

specifically state that

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(23)

(24)

other firms whose investments are below the threshold
of ESP 100 million (EUR 601 012) and which create
fewer than 10 jobs. The Commission also considered
that the tax aid is not justified by the nature or general
scheme of the tax system.

Furthermore, the Commission considered, at that stage,
that the selective nature of the concession is also due to
a discretionary power of the tax authorities. The aid is
recipient’s
granted
not
since
automatically,
application is
studied by the Provincial Council of
Navarre
(Diputaci(cid:243)n Foral de Navarra), which may,
subsequently, decide to grant the aid if appropriate.

the

In short, the Commission considered that the reduction
of liability is a 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 meets all four
of the criteria of constituting a benefit, being granted by
the State from State resources, affecting trade between
Member States and distorting competition in favour of
certain firms.

Since the tax incentives are not subject, in particular, to
the condition that they do not exceed EUR 100 000 for
a period of three years, the Commission considered, at
that stage, that they cannot be regarded as subject to
the de minimis rule (9).

The Commission stated that,
since State aid was
involved which was not governed by the de minimis
rule, it was subject to the obligation of prior notification
laid down in Article 88(3) of the Treaty and Article
62(2) of
the Spanish
authorities did not meet
that obligation, and the
Commission therefore considered at that stage that the
incentives can be regarded as unlawful.

the EEA Agreement. However,

compatibility of the tax incentives with the rules on
regional aid.

The reduction of tax liability in question, which is not
restricted to a particular sector, may be granted to firms
that are subject
rules. The
Commission therefore questioned at that stage whether
the incentives are compatible where the recipient
belongs to a sector that is subject to special Community
rules.

to Community sectoral

subject

far as
than those

in Article 87(3) other

Lastly, the Commission questioned the compatibility of
the tax incentives with the common market in the light
of the derogations in Article 87(2) and (3) of the Treaty.
The incentives cannot be regarded as aid having a social
character under Article 87(2)(a), are not
intended to
make good the damage caused by natural disasters
under Article 87(2)(b) and are not
to the
provisions of Article 87(2)(c) concerning certain areas of
the
the Federal Republic of Germany. As
derogations
in
subparagraphs (a) and (c), which have already been
discussed, are concerned,
the Commission considered
the incentives are not designed to promote the
that
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). The
fall within the scope of Article
incentives do not
the
to
concerns
87(3)(c), which
development of certain economic activities (cid:133)(cid:146), since
they are not specific in any way to the activities of the
recipient
intended to
promote culture and heritage conservation within the
meaning of Article 87(3)(d).

they are not

firms. Finally,

facilitate

(cid:145)aid

(16)

(17)

(18)

(19)

(20)

conditional

incentives was

The Commission found that, although the granting of
the
a minimum
investment and the creation of a minimum number of
jobs, the tax arrangements did not ensure compliance
with the Community rules on regional aid. It therefore
considered at that stage that the incentives did not rank
as investment or employment aid.

on

(21) However, the Commission also considered that the tax
incentives have the characteristics of operating aid.
Their purpose is to relieve a firm of those costs which it
would have had to meet under normal conditions as
part of its everyday management or its usual activities.

(22)

The Commission pointed out that operating aid is in
principle prohibited. It may nevertheless be granted in
exceptional circumstances,
in those regions which
i.e.
qualify for the regional derogations if they meet certain
conditions. However, the incentives are not subject to
the Commission took
these conditions. Consequently,
the view at that stage that there were doubts about the

(25) 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 reduction of the
in
tax liability of certain newly established firms
Navarre. In this specific case, the relevant information
requested is as follows: copies of all decisions granting
the reduction of tax liability; data on the investments
made by each recipient;
the share
capital, the size of the reduction for which each firm is
eligible, and the outstanding balance.

the jobs created,

III. COMMENTS OF THE SPANISH AUTHORITIES

(9) See point 3.2 of the Community guidelines on aid for SMEs (OJ C
213, 19.8.1992) and the Commission notice on the de minimis rule
for State aid (OJ C 68, 6.3.1996).

(26)

The Spanish authorities submitted their comments by
letter from the Permanent Representation, dated 24
January 2000. Basically, they consider that the reduction

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of

on

the

there

the
other

effect
position

business
are

recipient
instruments

of tax liability does not constitute a State aid under
Article 87 of the Treaty, but a general measure which is
not subject to the State aid rules.
In particular, they
underline that the measure in question, which is limited
in time, should not necessarily have an appreciable
firms.
effect
Furthermore,
of
government, such as social security legislation, which
than tax measures on the
have a greater
competitive
regards
of
intra-Community trade. As far as fiscal instruments are
concerned, the Spanish authorities state that their effect
on firms is not uniform, since some firms always benefit
more than others. But this is not a reason to conclude
that such firms improve their competitiveness by this
promote
means. Moreover,
protection of the environment, research or training are
not regarded as State aid and cannot,
therefore, be
regarded as distorting competition, despite the fact that
only some firms qualify for them.

incentives

firms

that

tax

as

(27)

and the

two other

The Spanish authorities also state that the reduction in
question cannot be combined with other tax incentives
in Provincial Law 24/1996. Of
the four investment
firms, one, whose investment started in 1998, received a
reduction of ESP 17,45 million. The second, whose
investment started in 1996, received a reduction of ESP
firms, whose
0,45 million,
investment started in 1997, have not yet received any
reduction. Between them, the four firms have invested
ESP 2 362 million in new tangible assets, created 142
jobs and have a paid-up share capital of ESP 465
million. If, however, the firms had received all the other
tax incentives introduced by the said Law, the tax aid
would have been ESP 528 million (investment relief:
ESP 236 million; job creation: ESP 99 million; set-off for
negative taxable incomes: ESP 193 million). However,
following the Commission’s criterion,
the incentives,
which amount
to ESP 528 million, do not distort
competition, whereas the Commission maintains that
the
reduction of ESP 17,9 million does distort
competition and affects trade between Member States.
Further, if the Commission considers that the reductions
in question affect intra-Community trade because the
recipient firms carry on businesses that are the subject
tax
of
exemptions in the Law affect trade as well.

this must mean that all

the other

trade,

(28) According to the Spanish authorities, the reduction in
question is open to all firms, since it is not intended for
those carrying on particular businesses or belonging to
certain sectors or categories (e.g. SMEs). Consequently,
the reduction is a general measure in the same way as
all the other tax concessions in the Law.

(29)

In addition,
the Spanish authorities question the
the measures in question,
discretionary character of
since the incentives are granted automatically once the
said objective conditions are satisfied. The Provincial
Council of Navarre can therefore only check that all the
it cannot alter or add any
conditions are satisfied;
conditions.

(30)

For the above reasons, the Spanish authorities consider
that the tax measures in question do not meet the four
cumulative criteria for State aid in Article 87 of the
Treaty.

IV. ASSESSMENT OF THE AID

V. THE CHARACTER OF A STATE AID

(31)

(32)

(33)

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 is applied to aid measures (cid:145)in any form(cid:146).
Nevertheless,
to be
regarded as aid,
in question should
together satisfy all four of the criteria set out in Article
87 and explained below.

the Commission emphasises that,

the measures

them of charges

the measure must confer on recipients an
Firstly,
advantage which relieves
that are
normally borne by their budgets. The advantage may be
provided through a reduction in the firm’s tax burden in
various ways, including a total or partial reduction in
the tax liability. The 50 % reduction in the tax liability
meets this criterion, since it reduces the tax burden of
the recipient firms. If the tax liability were not reduced,
the recipient firm would have to pay this specific tax on
100 % of
tax
liability thus implies an exception to the common tax
system applicable.

the taxable income. The reduction of

the Commission considers

Secondly,
the said
reduction of tax liability involves a loss of tax revenue
and is therefore equivalent to the consumption of public
resources
fiscal expenditure. This
principle also applies to aid granted by regional or local
the
bodies

in the form of

of Member

Furthermore,

States (10).

that

(10) Judgment of the Court of Justice of the European Communities in

Case 248/84, Germany v Commission, [1987] ECR 4013.

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a

of

provisions

intervention of the State can be effected both through
or
tax
administrative kind and through the practices of the tax
authorities. In this specific case, the intervention of the
State is effected by the Autonomous Community of
Navarre through a legislative provision.

regulatory

statutory,

the relatively small size of
the incentives does not
automatically mean that trade between Member States is
not affected.
to the
decisions of the Court of Justice (12) on this subject.

in this respect

It would refer

(34)

that,

the volume of

since the accession of Spain.

in Chapter 2.4 of Navarre’s

Thirdly, the measure must affect competition and trade
between Member States. It should be pointed out in this
respect
single
programming document (11), the regional economy is
highly integrated into international markets;
thus,
industrial exports accounted in 1995 for 36 % of gross
production. The main customers are the Member States
of the European Community, which in 1997 absorbed
84 % of all exports. This percentage has increased by 20
percentage points
In
imports from the Member
addition,
States is greater than the volume of exports to them.
trade balance was clearly in
Similarly,
surplus during the period 1994 to 1998.
In short,
Navarre’s economy is very open to the outside. Given
the nature of the regional economy, the recipient firms’
business activities may be the subject of trade between
the Member States. Consequently, aid strengthens their
position vis-(cid:224)-vis their competitors in intra-Community
trade. That trade is therefore affected. Furthermore, the
recipient firms’ profitability is improved by the increase
in their net profit (profit after tax). This enables them to
compete with firms which are not eligible for the tax
incentives.

the region’s

(35)

The Spanish authorities emphasise that because the tax
incentives paid under this reduction are small they have
a limited or even nil effect on trade between Member
States. The Commission would point out in this respect
that the Spanish authorities’ conclusions are based on
partial data. The data do not cover the whole four years
during which the firms are eligible for the reduction
(starting from the first of the seven years following the
trading in which profits are obtained). The
start of
definitive amount of
the aid cannot be established
the end of each recipient’s four-year
therefore until
period. Furthermore, the Navarre authorities may have
reductions after
granted other
the comments were
Spanish authorities. Thus, no
submitted
the
by
assumptions can be made about
the
reductions for which the firms were eligible. For the
rest, the Commission would point out that in any event

the size of

(11) Navarre’s single programming document for Objective 2, 2000 to

2006.

(36)

(37)

to other, much larger

Similarly, the Spanish authorities draw attention to the
possible inconsistency of applying the State aid rules to
the reduction but not
tax
incentives with a greater effect on competition. The
Commission can only reject this argument, since the
reduction should be assessed on its own merits.
It
should be pointed out in this respect that, as the Court
the principle of equal
of
treatment nor
legitimate
expectations may be relied upon in order to justify the
repetition
a
measure (13).

Justice has held, neither

the protection of

interpretation

incorrect

that of

an

of

of

Since, in this case, the tax rules examined are general
and abstract in character, the Commission would point
out
that the analysis of their incidence can only be
carried out at a general, abstract level; it is not possible
to specify the particular incidence on a market, sector
or specific product, as we see in the abovementioned
third parties. This position has been
comments of
confirmed in the established case-law of the Court of
Justice (14).

(38) As to the specific character which State aid must have,
the Commission takes the view that the reduction of tax
liability is specific or selective in that it favours certain

(cid:145)As

regards

the effects of

(12) Judgment of the Court of Justice of the European Communities of
19 September 2002 in Case C-156/98, Federal Republic of Germany
v Commission, paragraph 32:
the
provision in question on trade between Member States, the Court
has consistently held that the relatively small amount of aid or the
relatively small size of the undertaking which receives it does not
as such exclude the possibility that intra-Community trade might
be affected(cid:146). See also the judgments rendered by the Court of
Justice on 21 March 1990 in Case C-142/87, Belgium v
Commission ((cid:145)Tubemeuse(cid:146)), [1990] ECR I-959, paragraph 43 and
on 14 September 1994 in Joined Cases C-278/92 to C-280/92,
Spain v Commission, [1992] ECR I-4103, paragraphs 40 to 42.
(13) See the the judgment by of Court of Justice dated 24 March 1993
in Case C-313/90, ComitØ international de la Rayonne et des Fibres
synthØtiques and others v Commission, [1993] ECR I-1125, paragraph
45.

(14) See Case C-75/97, Belgium v Commission ((cid:145)Maribel(cid:146)), paragraphs 48
and 51, judgment of the Court of Justice of 17 June 1999; Case
T-298/97, Alzetta Mauro and others v Commission, paragraphs 80 to
82, judgment of the Court of First Instance of 15 June 2000; the
Opinion of Advocate General Ruiz-Jarabo of 17 May 2001 in
Case C-310/99, Italy v Commission, paragraphs 54 and 55; and the
Opinion of Advocate General Saggio of 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 is sufficient if, from an ex ante assessment, 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.

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firms, since the conditions for granting the incentives
firms established before the said
expressly state that
provincial
law came into force are ineligible, as are
other firms whose investments are below the threshold
of ESP 100 million (EUR 601 012) or which create
In this respect, the Commission
fewer than 10 jobs.
would point out that, according to the Fifth Report on
Enterprises in Europe (15), the number of firms in the
European Community in 1995 which had fewer than
ten employees, or no employees at all, was 16 767 000,
the total (16).
the
In Spain’s case,
or 92,89 % of
percentage was even higher, at about 95 % (17).
It is
likely that these percentages are even higher in the case
of new firms,
since a firm usually starts with a
workforce that grows as the firm consolidates and
reaches its cruising speed. This was the case in Spain, in
1995, where the percentage was even higher, at about
98,00 % (18). Consequently, one of
the conditions of
eligibility for the aid means, by itself, that the majority
the objective
of
character of the threshold cited does not prevent it, as
some interested parties claim, from being selective and
excluding firms which do not satisfy the conditions in
question.

firms are excluded. For

the rest,

satisfy the principles of equality and progressiveness
in the Spanish tax system (20). First of all,
inherent
therefore,
the Commission considers that, since the
Spanish authorities have not demonstrated that the logic
of these measures conforms to the internal logic of the
tax system, the reduction of liability cannot be regarded
the
as justified by the nature or general scheme of
system. Secondly,
the
that
reduction fulfils objectives outside the tax system.

the Commission finds

(41)

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

VI. THE UNLAWFUL NATURE OF THE REDUCTION OF
TAX LIABILITY

(39) As for the possible discretionary power of

that

the Commission finds

the tax
authorities,
the aid in
question is not granted automatically. The application
submitted by the recipient is examined beforehand by
the Provincial Council of Navarre, which, after carrying
out the examination, may, if appropriate, grant the aid.
According to the Spanish authorities, this is simply to
check that all the conditions are met. However, they do
not explain why the check should be made beforehand
and not, as is the normal practice in the management of
tax revenue, ex post.

(40) As regards invoking the nature or general scheme of the
tax
tax system as justification for the reduction of
liability, the Commission emphasises that what matters
is to know 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. It is up to the Member
State concerned (19), however, to establish that the tax
measures in question follow the internal logic of the tax
system.
the Spanish authorities
have not supplied any data in this respect. Furthermore,
it should be pointed out that the preamble of Provincial
Law 24/1996 states that the object of some of the tax
measures it contains is to establish economic incentives
for the development of productive activity and the real
economy. The purpose of these measures, therefore, is
the
to promote the economy. This does not meet
principal objective of any tax system, which is to gather
revenue for financing state expenditure, nor does it

In this specific case,

(15) Enterprises in Europe, Fifth Report, EUROSTAT.
(16) Taken from the data in the table on page 31 of the report.
(17) Taken from the data in the table on page 224 of the report.
(18) Taken from the data in the table on page 73 of the report.
(19) See paragraph 27 of the Opinion of Advocate General Ruiz-Jarabo

in Case C-6/97.

(42)

for

aid (21),

conditions

de minimis

Since the scheme does not require a commitment from
the Spanish authorities to grant the aid in accordance
the
with the
Commission considers that the aid cannot be regarded
as subject to those rules. It should be pointed out in this
respect that the Spanish authorities never maintained, in
the procedure, that the aid in question should have the
character of 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 reached. Nor does the
aid have the character of existing aid, since it does not
satisfy the tests of Article 1(b) of Council Regulation
(EC) No 659/1999 of 22 March 1999 laying down
detailed rules for the application of Article 93 of the EC
Treaty (22).

(43)

The Commission would point out that State aid which
is not covered by the de minimis rules 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
have not
fulfilled this obligation, which is why the
Commission believes 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.

(20) Article 31 of the Spanish Constitution.
(21) 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, S.30).

(22) OJ L 83, 27.3.1999, p. 1.

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L 314/23

(44)

the

the Spanish authorities nor

The Commission would also point out that, since the
tax liability was never notified under
reduction of
it has not been able to
Article 88(3) of the Treaty,
decide about
compatibility with the
scheme’s
common market.
It is for this reason that, since no
specific assurance has been given by the Commission,
neither
interested third
parties can entertain justified hopes as to the legality
and compatibility of the aid in question. Consequently,
the recipients cannot claim legitimate expectations or
legal certainty as regards the State aid nature of the
reduction of tax liability. 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
given
specific
administration(cid:146) (23).

the principle of

assurances

him by

to

VII. COMPATIBILITY WITH THE COMMON MARKET

(47)

(45) As the scheme in question covers only the NUTS (24) II
region of Navarre, it is necessary to examine whether
aid in this
the regional
territory can qualify for
exceptions in Article 87(3)(a) or (c) of the Treaty. The
Commission would point out
the Autonomous
Community of Navarre has never been eligible for the
Article 87(3)(a) derogation, since its per capita GDP (25)
has always been higher than 75 % of the Community
average. According to the rules on regional aid (26) the
test of eligibility for the derogation in Article 87(3)(a) is
met, in the case of NUTS II, only if the region has a per
capita GDP of not more than 75 % of the Community
average.

that

(46) As regards the aid’s eligibility for the derogation in
Article 87(3)(c), the Commission would point out that,
in its decision of 26 July 1995 on the changes in
Spain’s regional aid map (27)
it proposed, under the
procedure laid down in Article 88(1) of the Treaty, that
the Spanish authorities should revise the map and
consider in future that part of Navarre was a region in
which aid for regional development could be regarded

(23) Judgment of 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, paragraph 300.

(24) Nomenclature of Territorial Units for Statistics.
(25) Per capita gross domestic product (GDP) measured in purchasing

power standards (PPS).

(26) The references to the regional rules are confined, in the following
recitals, to the guidelines on national regional aid (98/C 74/06). In
any event, the result of the assessment would be the same if the
analysis were based on the earlier rules. See point 3.5 of the
Guidelines on national regional aid (98/C 74/06).

(27) OJ C 25, 31.1.1996, p. 3.

as compatible with the common market under the
derogation in Article 87(3)(c), provided that it does not
exceed the ceiling of 15 % net grant equivalent (NGE) in
the case of large firms. However, regional aid in the rest
of Navarre could not be regarded as compatible with
the common market under the derogation in Article
87(3)(c) of the Treaty. By letter from their Permanent
Representation dated 26 September 1995, the Spanish
authorities accepted this proposal. The new map thus
from that date. As
came
the
into force
the Commission would point out
subsequent period,
that, in its decision of 11 April 2000, it approved the
Spanish regional aid map for the period 2000 to 2006.
In accordance with this map, certain parts of Navarre
are considered to be regions where regional aid may be
regarded as compatible with the common market under
the exception laid down in Article 87(3)(c) of
the
Treaty, provided that it does not exceed the ceiling of
20 % NGE. However, regional aid in the rest of Navarre
could not be regarded as compatible with the common
market under the derogation in Article 87(3)(c) of the
Treaty.

regards

jobs are achieved,

the effect of promoting the creation,

The State aid in the form of a reduction of tax liability
has
in the
Autonomous Community of Navarre, of new firms in
which the initial amount of investment and the number
jobs created exceed certain thresholds. However,
of
although the minimum investment and the minimum
number of
the tax incentives in
question do not qualify as investment or employment
aid. They are not based on the amount of investment,
the number of jobs created, or the corresponding wage
costs, but on the taxable income. Furthermore, they are
not paid up to a ceiling expressed as a percentage of the
amount of investment, the number of jobs created or
the corresponding wage costs, but up to a ceiling
expressed as a percentage of the taxable income. In this
respect, the Commission would point out that Annex I
of the Guidelines on national regional aid (98/C 74/06)
states
(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). Therefore, tax incentives, which, as in
this case, do not meet these criteria, cannot qualify as
investment aid.

that

(48) On the contrary, since they partly reduce the tax paid
on profits by the recipient firms, the incentives qualify
as operating aid. Corporation tax is a tax burden which
companies subject
to it have to pay regularly and
inevitably as part of their everyday management. It is

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18.11.2002

(49)

(50)

(51)

therefore appropriate to examine the tax incentives in
the light of any derogations that may apply to the
operating aid in question.

(52)

the Guidelines, or

regions or in regions of

in accordance
The Commission would point out that,
with the 98/C 74/06 Guidelines, regional aid which has
the character of operating aid is normally prohibited.
Exceptionally, however, such aid may be granted in
regions caught by the derogation in Article 87(3)(a),
provided that it meets certain conditions laid down in
points 4.15 to 4.17 of
in the
outermost
low population
density if it is intended to offset additional transport
costs. However, the NUTS II territory of Navarre is not
eligible for the derogation in Article 87(3)(a), and the
grant of
the
conditions described. The NUTS II territory of Navarre is
not an outermost
low
population density (29). Thus the operating aid elements
in the
are prohibited,
specifically because they are not granted in a region that
is eligible for the derogation in Article 87(3)(a) of the
low
Treaty,
therefore
population
incompatible in this case.

in an outermost region or a region of

the said operating aid does not meet

region (28) nor a region of

density. The

reduction of

tax liability

incentives

are

(53)

considers

The Commission therefore
tax
incentives 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

transport,

steelmaking,

industry (30).

Similarly, in the absence of any sectoral limitations, the
reduction of tax liability 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,
shipbuilding,
coalmining,
In the
synthetic fibres and the motor
circumstances, the Commission considers that the tax
incentives in the form of a reduction of tax liability
In this
cannot comply with the said sectoral rules.
particular case, the reduction of tax liability does not
it should not promote new
meet
the
production capacity so as not
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 EC Treaty on the promotion of certain
activities does not apply.

the abovementioned sectors,

from which these

the condition that

to exacerbate

the

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), since it is not intended to
make good the damage caused by natural disasters or,
the purposes of Article 87(2)(b), by other
for
exceptional occurrences. 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). For the rest, it cannot
qualify for the derogation in Article 87(3)(d), since it is
not
heritage
conservation. The aid is therefore incompatible with the
common market.

intended

promote

culture

or

to

The derogation in Article 87(3)(c) has to be examined to
see whether it might not apply, in the above cases, for
other purposes as well as the development of certain
economic activities. It may be noted in this respect that
the object of the reduction of tax liability is not to
develop an economic activity within the meaning of
Article 87(3)(c),
the development of
measures to assist small and medium-sized enterprises,
research and development, environmental protection,
training in accordance with the
job creation or
appropriate Community rules. Consequently,
the tax
incentives cannot qualify for the derogation in Article
87(3)(c) in respect of the said purposes.

in particular

(54) As the reduction of tax liability covers various tax years,
there could still be some tax aid currently left to pay.
However,
this aid is unlawful and incompatible. The
Spanish authorities should therefore cancel the payment
of any balance from the reduction of tax liability which
could still be due to certain recipients.

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

in accordance with the

pointed out

that,

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

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

Treaty.

(29) According to point 3.14 of the guidelines on national regional aid

(98/C 74/06).

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

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L 314/25

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 to the
date of actual repayment on the basis of the reference
rate used at
that date to calculate the net grant
equivalent of regional aid in Spain (31).

(56)

aid

under

granted

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.

that

(57)

In view of the above, the Commission, concludes that:

(cid:151) Spain has unlawfully put

in the
Autonomous Community of Navarre, the reduction
of tax liability for investments, thereby infringing
Article 88(3) of the Treaty,

into effect,

HAS ADOPTED THIS DECISION:

Article 1

tax liability,
The State aid in the form of a reduction of
into effect by Spain in the Autonomous
unlawfully put
Community of Navarre,
the
Treaty, through Articles 52 to 56 of Provincial Law 24/1996
of 30 December, is incompatible with the common market.

in breach of Article 88(3) of

Article 2

Spain shall abolish the aid scheme referred to in Article 1,
since it is continuing to produce effects.

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 execution of this Decision. The sums
to be recovered shall bear interest from the date on which they
their actual recovery.
were available to the recipients until
Interest shall be calculated on the basis of the reference rate
used for calculating the grant equivalent of regional aid.

Article 4

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

(cid:151) the reduction of

the tax liability in question is

incompatible with the common market,

This Decision is addressed to the Kingdom of Spain.

Article 5

(cid:151) the Spanish authorities shall cancel the payment of
any aid balance which could still be due to certain
recipients. As regards the incompatible aid already
paid, the Spanish authorities shall take all necessary
measures
the
it,
economic situation which the recipient firms would
be in without the unlawful grant of the aid,

to recover

to restore

so as

Done at Brussels, 11 July 2001.

For the Commission

Mario MONTI

Member of the Commission

(31) Commission letter to Member States SG(91)D/4577 of 4 March
1991. See also Case 142/87 of 21 March 1990, Belgium v
Commission [1990] ECR I-950.