2003/27/EC: Commission Decision of 11 July 2001 on the State aid scheme implemented by Spain for firms in Vizcaya in the form of a tax credit amounting to 45 % of investments (notified under document number C(2001) 1765) (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 relief

22.1.2003

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Official Journal of the European Communities

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II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 11 July 2001

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

(notified under document number C(2001) 1765)

(Only the Spanish version is authentic)

(Text with EEA relevance)

(2003/27/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,
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)

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
information that

the Commission learned of

similar measures

SA (3),

(2)

(3)

(4)

Province of Vizcaya, 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
Permanent
1999
letter
Representation, Spain provided information on the tax
incentive in question.

from its

June

of

2

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

Journal

of

(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, 1.12.2000, p. 36).

(4) OJ L 83, 27.3.1999, p. 1.
(5) OJ C 71, 11.3.2000, p. 8.

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(5)

(6)

(7)

Business

Vasca/Euskal

Confederation

received from:

the Autonomous
Comments were
the
Community of Castile-Leon, on 3 January 2000;
(Confederaci(cid:243)n
Basque
Empresarial
Entrepresarien
Konfederakuntza) (hereinafter Confebask), on 4 January
supplementary
2000, plus, outside the time limit,
comments by letter dated 29 December 2000, registered
on 3 January 2001; the Rioja Regional Government, on
5 January 2000;
the Basque Economists Association
(Colegio Vasco de Economistas/Ekonomilarien Euskal
the Basque Business
Elkargoa), on 5 January 2000;
Circle (C(cid:237)rculo de Empresarios Vascos), on 5 January
2000; the Bilbao Chamber of Commerce (CÆmara de
Comercio de Bilbao/Bilboko Erkataritza Ganbera), on 5
January 2000; 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), on 7 January 2000. By
letter dated 1 March 2000 (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.

Provincial Law (Norma Foral) No 7/2000 of 19 July
2000 (6) repealed the fourth additional provision of
Vizcaya Provincial Law No 7/1996 of 26 December
1996 (7), 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
authorities or by third parties,
the tax incentive in
question entered into force on 1 January 1997 pursuant
to the fourth additional provision of Provincial Law No
7/1996 of 26 December 1996 (8). Under that provision,
the aid was payable in respect of certain investments
made in 1997;
it was subsequently extended for an
indefinite period by the second provision of Provincial
Law No 4/1998 of 2 April 1998 (9).

(8)

As regards the 45 % tax credit in force since 1 January
1997, the fourth additional provision of Provincial Law
No 7/1996 of 26 December 1996 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 Vizcaya Provincial Council, give
rise to a tax credit equal to 45 % of the amount of
the investment, as determined by the latter, to be
deducted from the amount of tax payable.

(6) Bolet(cid:237)n Oficial de Vizcaya 1.8.2000.
(7) Bolet(cid:237)n Oficial de Vizcaya 30.12.1996.
(8) Norma Foral No 7/1996 de 26 de diciembre de 1996 (disposici(cid:243)n

adicional dØcima).

(9) Norma Foral No 4/1998 de 2 de diciembre de 1998 (disposici(cid:243)n

adicional dØcima).

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

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.

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

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

The Vizcaya Provincial Council shall 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)

(9)

(10)

(11)

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

expenditure (10)

incurred

during

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

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 1
to the Treaty,
steelmaking,
transport, shipbuilding, synthetic fibres and the motor
industry.

coalmining,

fisheries,

(12)

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

in question irrespective of

(10) 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.

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(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-ax
loans,
guarantees, equity purchases, etc., relating to the same
investments is not ruled out.

subsidised

including

grants,

aid,

(14)

said procedure,

the
In its decision initiating 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.

(15)

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.

(16)

Secondly, the Commission provisionally considered that
the 45 % tax credit involves a loss of tax revenue and is
to the consumption of public
therefore equivalent
resources in the form of fiscal expenditure.

(17)

(18)

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

also involved in intra-Community

firms’ net profit

trade

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

(20)

(21)

(22)

(23)

and that of the preparatory phase of the investment
qualifying for the aid.

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
meets
an
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 (11).

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(3) 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.

a precise

The Commission also found that the 45 % tax credit is
aid conditional on investment (12). However,
in the
eligible
the
absence of
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 (13).

definition of

some of

(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

(19)

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 Vizcaya
provincial authorities have the power to determine, at
their discretion, the duration of the investment process

(11) See point 3.2 of the Community guidelines on State aid for small
and medium-sized enterprises (OJ C 213, 19.8.1992, p. 2) and the
Commission notice on the de minimis rule for State aid (OJ C 68,
6.3.1996, p. 9).

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

systems (OJ C 31, 3.2.1979, p. 9).

(13) See point 18 of the Annex to the Commission communication on
regional aid systems (OJ C 31, 3.2.1979, p. 9) or point 4.4 of the
guidelines on national regional aid (OJ C 74, 10.3.1998, p. 9).

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(25)

The 45 % tax credit, which is not
restricted to a
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.

(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
being covered by the multisectoral
framework on
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
stated
therefore
assessment.
to the
as
provisionally
compatibility of the tax aid where large projects were
concerned.

Commission
there were doubts

The
that

result

(26)

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.

(31)

(27) On the question of whether investment aid in Vizcaya
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
Vizcaya to be a region where investment aid in support
of regional 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)
large
firms.

in the case of

to

(cid:145)aid

((cid:133)) of

concerns

facilitate
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
development
((cid:133))(cid:146).
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(2)(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

(28)

in the

included

standard

The Commission also pointed out at that stage that the
in question apply only to certain eligible
ceilings
and
expenditure
base
initial
complying with the Community definition of
investment, which excludes
replacement
inter
investments.
It stressed that aid granted between 1
January and 31 December 1999 is subject to the above
investment aid not
regional aid guidelines,
exceeding the
to certain
ceilings
additional conditions laid down in those guidelines.

so that
is

also subject

alia

(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 Vizcaya. 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

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applied,

schemes
definitions
(cid:145)investments made during the preparatory phase(cid:146).

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

and precise

constitute

of what

etc.),

detailed
and

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,

(36)

(37)

(34)

They also argue that
the measure is not specific or
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 Vizcaya, 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 substance, this does not exist, since
the measure is open to all sectors and to all taxpayers.
The Spanish authorities maintain that the requirement
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) (14). The measure in question is justified by the
nature of the tax system, since it forms part of the
single tax system applicable in the territory of Vizcaya
and derives from the exercise of the Provincial Council’s
it is also
powers to adopt measures in the tax field;

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

relating to direct business

measures
10.12.1998, p. 3).

It

justified by the general scheme of the tax system since
is
its objective is to promote economic activity.
furthermore logical that the incentive should be targeted
at large investments since (i) it is large investments that
will be of real benefit
to Vizcaya in the long run,
enabling the tax authorities to collect tax receipts that
more than offset the tax expenditure incurred at the
beginning of the investments and (ii) the investment
threshold does not penalise small and medium-sized
enterprises, which
from many
Community funding programmes.

already

benefit

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 Vizcaya 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
Commission that
satisfy the
In their opinion, the
conditions of the sectoral rules.
Commission ought
the specific
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
for such firms to obtain the tax credit;
it should be
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.

(38)

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

(39)

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
involved.
the
since no State
tax
Consequently,
the
information requested in the decision initiating the
procedure.

they are not providing any of

aid is

credit,

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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.

debt whose reduction involves a loss of tax revenue.
this argument were sound, any tax deduction
If
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;

(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
a set of tax measures adopted by the Vizcaya 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.

trade. To determine the extent

(b) the effect on trade: according to the Commission,
where the recipients participate in intra-Community
that
the tax measures in question distort
trade,
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,
the way
through
to
harmonisation, not State aid;

it would

remove

be

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 (Confebask))

started

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

by
reasons

drawing
for

to

(a)

the presumed reduction of
the
Commission is wrong to think that there is a tax

tax debt:

the

(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 (cid:151) 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
be
otherwise
question
contradictory to try and use both.

it would

since

fall,

(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
the
authorities are restricted to checking that
satisfies
applicant
eligibility.
the
tests
Moreover,
if the tax measures are regarded as
it
enabling rules which subsequently make
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
instances of
is meaningless.
Similarly, according to the first paragraph of the
Commission’s letter to the Member States (15), a

their application,

of

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

1989.

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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;

(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
introduced them are competent. As
to the
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
not
of
necessarily mean that the measures are specific
the 1998 Competition
and,
Report,
a
that measures which
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

promoting

sectors

certain

have

does

of

(d)

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

expectations,
by

illegal, Confebask argues

that
tax credit

institutions,

legal

the

the

as

proportionality, since the Commission regarded the
in its Decision
Basque tax arrangements as lawful
93/337/EEC (16).
the Commission
In any event,
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 already rules providing for
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)
No 659/1999,
(cid:145)existing aid(cid:146) means (cid:145)all aid which
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
is
administrative
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
this type of provision. According to the Court of
Justice (17),
the Commission should specify in its
decisions what the adverse effects on competition
are, determining the real effect of
the measures
Incompatibility cannot be determined,
examined.
in abstract situations specific to a tax
therefore,

(16) OJ L 134, 3.6.1993, p. 25.
(17) See Joined Cases C-278/92, C-279/92 and C-280/92 Spain v

Commission [1994] ECR I-4103.

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22.1.2003

(46)

(47)

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
the tax measures in question comply with
that
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 (18).
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
that
the recipients’ business benefits, as they have a
competitive advantage over all other firms. In addition
to the specificity of
in the form of a
substance,
minimum investment of ESP 2 500 million, the Rioja
the discretionary
Regional Government
states
nature of
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.

the 45 % tax credit

that

(48) Moreover,

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

territory does not

tax matters

in a

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

the notice in the Official

date of publication of
European Communities, i.e. 26 February 2000.

Journal of

the nature or general scheme of
is
Vizcaya,
competitiveness of recipient firms.

their purpose

since

the tax system in
the

to improve

(49)

(50)

(51)

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.

Comments from the Basque Economists Association
(Colegio Vasco de Economistas/Ekonomilarien
Euskal Elkargoa) and the Bilbao Chamber of
Commerce (CÆmara de Comercio de Bilbao/Bilboko
Erkataritza Ganbera) (hereinafter (cid:145)the CVE and the
CCB(cid:146))

they argue that

The CVE and the CCB consider that the tax system of
the specificity
each Basque province does not meet
criterion in Article 87(1) of the Treaty merely because it
applies only in part of a Member State. In support of
this view,
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
the subject of a transfer from the
measures are not
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.

(52) Nonetheless, the CVE and the CCB do not rule out the
possibility that, in the exercise of their tax autonomy,
the Provincial Councils may adopt tax measures that are
caught by Article 87(1) of the Treaty. However, in the
present case, they take the view that the 45 % tax credit
is not so caught, since it only meets the criterion of
being granted from state resources. It does not distort
the
competition, because its payment

implies

that

22.1.2003

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Official Journal of the European Communities

L 17/9

recipient company has made profits. Moreover,
its
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 and the CCB examine whether there is any
specificity deriving from the threshold of ESP 2 500
million or the need to obtain the Provincial Council’s
approval in order to apply the tax credit. In this respect,
they consider
involve
specificity, since it is objective and non-discriminatory.
As for the determination by the Provincial Council of (i)
the investments qualifying for the 45 % tax credit; (ii)
the
to
limitations
and
deadlines
the
deduction; and (iii)
the investment
the duration of
process, which may include investments made during
the preparatory phase of the project giving rise to the
investments, the CVE and the CCB take the view that
this does not
involve the exercise of a discretionary
power, but is governed by rules and, ultimately, subject
to judicial review.

the threshold does not

applicable

that

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

(53)

The CVE and the CCB conclude 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.

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 (cid:145)the CEV and the
APCPV(cid:146))

(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

(54)

(55)

Since these associations
identical
together.

comments,

submitted similar or even
summarised

views

are

their

(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.

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

(60)

V. TRANSMISSION OF THE THIRD PARTIES’
COMMENTS TO SPAIN

By letter 2000(D/50 912)
to the Spanish Permanent
Representation, dated 1 March 2000, the Commission
sent, pursuant to Article 6(2) of the aforesaid Regulation
the third parties’ comments to
(EC) No 659/1999,
Spain, inviting it to submit its observations within one
It received only a
month of
request
the deadline for
replying. Consequently, Spain has not submitted any
such observations.

for a 20-day extension of

the date of

the letter.

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VI. ASSESSMENT OF THE AID

VII. CLASSIFICATION AS STATE AID

recipients an advantage which relieves them of charges
that are normally borne from their budgets. The
advantage may be provided through a reduction in the
firm’s tax burden in various ways, including: ((cid:133)) a total
or partial reduction in the amount of
tax (such as
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.

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
the Commission emphasises
any form(cid:146). Nevertheless,
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.

(65)

(61)

(62)

(63)

(64)

in particular,

them of charges

tax burden and,

the measure must confer on recipients an
Firstly,
that are
advantage which relieves
normally borne from their budgets. The advantage may
be provided through different types of reduction in the
firm’s
through an
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 (19). 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 Vizcaya
Provincial Council on the basis of a statutory provision.

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

tax system in question and not

(19) See Case 248/84 Germany v Commission [1987] ECR 4013.

(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 on the external
dependency of the Basque economy in the period 1990
to 1995 (20), exports abroad went up (21), not only in
absolute terms but,
in relative terms as
in particular,
well, to the detriment of exports to the rest of Spain.
The foreign market
thus partly replaced the market
which is the rest of Spain. Furthermore, according to
another statistical report on the foreign trade of the
Basque Country (22) at 28,9 % the Basque economy’s
(cid:145)propensity to export(cid:146)
is
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
in 1998, for
the period 1993 to 1998. In particular,
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
it may be deduced that recipient firms are
economy,
engaged in economic activities which are likely to
include
aid
strengthens their position vis-(cid:224)-vis their competitors in
thereby affecting such trade.
intra-Community 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 tax credit.

trade. Consequently,

intra-Community

improves

tax)

(66)

in character,

Since, in this case, the tax rules under examination are
the Commission
general and abstract
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
market, sector or specific product, as is stated in the

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

(cid:145)La dependencia
exterior
Euskal
Estatistika-Erakundea/Instituto Vasco de Estad(cid:237)stica (EUSTAT), the
statistical office of the Basque Government.

1990-1995(cid:146),

periodo

vasca

en

el

(21) 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.

(22)

22.1.2003

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Official Journal of the European Communities

L 17/11

abovementioned comments by
third parties. This
position has been confirmed on a number of occasions
by ECJ case law (23).

(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 the other firms of the Member
State; 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 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 the tax authorities. The Vizcaya
Provincial Council has
to
determine, in particular, the investments that are eligible
for the 45 % tax credit, the duration of the investment
the
process and that of
investment qualifying for the aid. It should be stressed

the preparatory phase of

a discretionary power

(23) See Case C-75/97 ((cid:145)Maribel(cid:146)) Belgium v Commission, paragraphs 48
and 51; Case T-298/97 Alzetta Mauro and others v Commission,
paragraphs 80 to 82;
the Opinion of Advocate General
Ruiz-Jarabo in Case C-310/99 Italy v Commission, paragraphs 54
and 55; and the Opinion of Advocate General Saggio in Case
C-156/98 Germany v Commission, paragraph 31, which ran thus: 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. 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

in

here that the Provincial Law introducing the notions of
the
(cid:145)investment process(cid:146) and (cid:145)preparatory phase of
investment(cid:146) does not define those terms. Unlike the
concept of (cid:145)investments in tangible fixed assets(cid:146), which is
defined
other
provisions (25),
and generally
accepted definition of the (cid:145)investment process(cid:146) or the
(cid:145)preparatory phase(cid:146).
a precise
definition, therefore, the regional authorities have some
leeway in determining exactly what is meant by the
the
(cid:145)investment
(cid:145)preparatory phase(cid:146) in the case of each recipient.

rules (24)
is no precise

accounting
there

absence of

investment

process(cid:146)

In the

and

the

or

in

(70)

should also be stressed that, while in Decision
It
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

in some 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 -
according to certain comments by third parties,
this
leads to a legitimate expectation concerning all similar
tax credits - 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
in the present case.
that,
It should be pointed out
(cid:145)any
according to the case law of the Court of Justice,
breach by a Member State of an obligation under the
Treaty in connection with the prohibition laid down in
Article 92 cannot be justified by the fact that other
Member States are also failing to fulfil this obligation.
The effects of more than one distortion of competition
on trade between Member States do not cancel one

the

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

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22.1.2003

another
damaging
accumulate
consequences to the common market are increased(cid:146) (26).

and

out

but

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

(72)

Concerning the question raised in some of
the
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
in any tax system of collecting revenue for
inherent
founded on the
financing public
principles of equality and progressiveness (27).
In this
regard
to
discriminate (28)
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
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

expenditure,

45 % tax

credit

said

can

the

be

is

(26) See 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, states that neither the principle of
equal
legitimate
expectations may be relied upon in order to justify the repetition
of an incorrect interpretation of a measure.

the protection of

treatment nor

that of

(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
General de Actividades 1996 to 1999), (cid:145)tax policies are
essential
and,
similarly, for promoting industrial projects based on the
industrial development of
(page
131), and in the chapter (cid:145)Tax policy instruments(cid:146) one
reads: (cid:145)the tax autonomy which we have [in the Basque
Country]
imaginative
to
made-to-measure tax solutions, e.g. for priority projects
or even tax incentives for large firms(cid:146) (page 133). The
45 % tax credit
is part of an
industrial policy whose objectives are not inherent in
the tax system.

the Basque Country(cid:146)

in question,

therefore,

enables

search

for

us

(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 the tax system of each of
the three Basque provinces.

(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.

VIII. THE UNLAWFUL NATURE OF THE 45 % TAX
CREDIT

(27) Article 31 of the Spanish Constitution.
(28) 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 907/98 Administraci(cid:243)n del Estado v
Juntas Generales de `lava.

(78) Given that

the said scheme does not comprise a
commitment from the Spanish authorities to grant the

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aid in accordance with the conditions for de minimis
aid (29), the Commission considers that the aid cannot
to those rules.
be regarded as subject
It should be
the Spanish authorities
that
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,
the conditions laid down in
since it does not meet
Article 1(b) of Regulation (EC) No 659/1999.

that

(79)

two schemes
from the

that
reveals
45 % tax
scheme did not

The claim made by some third parties that the 45 % tax
In
credit constitutes existing aid must be rejected.
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
those
of
substantially
under
credit
examination. The first
specify any
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
is
substantial changes with respect to those schemes,
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 adopted
pursuant to Article 89 of the Treaty (30). 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

(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(3) of
the EEA Agreement. However, the Spanish authorities
fulfilled this obligation, which is why the
have not

(29) 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, p. 9) 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. 30).

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
scheme of
In that
for
the tax
Decision the Commission in fact
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
it should,
the 1993 Decision,
in the first place, have
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,
in the
expectations
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
specific
given
administration(cid:146) (31). This
that
legal certainty have been
legitimate expectations or
violated is without foundation in this case.

him by
is why the argument

the principle of

assurances

to

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

(31)

was any such exemption regulation in force.

Joined Cases T-132/96 and T-143/96 Freistaat Sachsen and others v
Commission [1999] ECR II-3663, paragraph 300.

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(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.

Article 87(3)(a) derogation, since the per capita GDP (32)
of the NUTS (33) II region 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 (34), (35) the conditions of eligibility for the
derogation in Article 87(3)(a) of the Treaty are met only
if the region, at NUTS level 2, has a per capita GDP of
not more than 75 % of the Community average.

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

(86) As

for

the

regards

admissibility of Vizcaya

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 (36), applied from 26 September 1995
until 31 December 1999 and provided that the whole
of Vizcaya was a region in which investment aid for
regional development could be regarded as compatible
the derogation in
with the common market under
Article 87(3)(c), provided that
it did not exceed the
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, Vizcaya 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.

(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
case
these
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

(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
admissibility of Vizcaya, the Commission would point
out that the territory has never been eligible for the

(87)

The Commission would also point out that, in the case
of SMEs (37), the intensity of investment aid may,
in
SME guidelines (38), be 10
accordance with the

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

power standards (PPS).

(33) Nomenclature of Territorial Units for Statistics.
(34) 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.

(35) See point 1 of the Commission communication to the Member
States on the method for the application of Article 87(3)(a) and (c)
to regional aid (OJ C 212, 12.8.1988, p. 2) and point 3.5 of the
guidelines on national regional aid (98/C 74/06).

(36) OJ C 25, 31.1.1996, p. 3.
(37) For the purposes of the Community guidelines on State aid for
small and medium-sized enterprises (OJ C 213, 19.8.1992, p. 2)
or the Commission recommendation of 3 April 1996 concerning
the definition of small and medium-sized enterprises (OJ L 107,
30.4.1996, p. 4).

(38) Community guidelines on State aid for small and medium-sized
enterprises
(OJ C 213, 19.8.1992, p. 2) or
Community guidelines on State aid for small and medium-sized
enterprises (96/C 213/04) (OJ C 213, 23.7.1996, p. 4).

(92/C 213/02)

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percentage points higher than the regional ceiling for
the total does not exceed
large firms, provided that
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 (39).
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 (40) in new tangible fixed assets, it does not
investments (41) 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
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.

expenditure

linked

also

to

to

(89)

The Commission notes that, since the entry into force
of the guidelines on national regional aid (98/C 74/06),
the derogation in Article
aid that may qualify for

(39) See the Annex to the Council resolution of 20 October 1971 (OJ
C 111, 4.11.1971, p. 1), point 5(c); the Annex to the Commission
communication on regional aid systems (OJ C 31, 3.2.1979, p. 9),
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, p. 9),
point 4.4 ((cid:145)initial investment means an investment in fixed capital
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)

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

systems (OJ C 31, 3.2.1979, p. 9).

(41) 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

also

satisfy

ceilings;

In the case in point,

87(3)(c) of the Treaty in Vizcaya must not only comply
with the abovementioned Community definitions of
initial investment and the standard base and observe the
applicable
other
it must
requirements.
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).

(90)

(91)

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 from 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 may not fully correspond to those included in the
standard base since replacement
investments are not
excluded and other
items of expenditure may be
accepted. In these circumstances, the Commission finds
investments
that a tax credit amounting to 45 % of
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.

expenditure

accordance with

The aid for investment expenditure (42) 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
the
in
investment
Community rules. However,
in the case in point, the
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
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

(42) 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.

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this type of investment therefore has to be classed as
operating aid and as such is subject to specific rules.

the

with

Commission’s

In this respect, the Commission would point out that, in
accordance
1988
communication (43) 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, in the outermost regions or in regions of low
population density if it is intended to offset additional
transport costs. However, the NUTS level 3 territory of
Vizcaya is not eligible for the derogation in Article
the said
87(3)(a) of
operating aid does not meet the conditions described.
The NUTS level 3 territory of Vizcaya is not an
outermost region (44) nor a region of low population
density (45). 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 the
Treaty,
low
population density. The aid is therefore incompatible in
this case.

in an outermost region or a region of

the Treaty, and the grant of

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

(92)

(93)

(94) As far as investments made by SMEs outside Vizcaya 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 firms. On the other hand,
in accordance with
small
the Community guidelines on State aid for
and medium-sized enterprises (96/C 213/04), where the
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

is an SME,

(43) 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, p. 2).

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

Treaty.

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

aid (98/C 74/06).

state that

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 tax aid
The Commission accordingly finds that
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,
and the
fibres
synthetic
shipbuilding,
steelmaking,
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
large
multisectoral
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

as

cases,

as well

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
medium-sized enterprises,
research and development,
environmental protection,
job creation or training in
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.

of measures

small

assist

to

(95)

(96)

(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

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specific Community rules, such as those applicable to
the
the production, processing and marketing of
agricultural products in Annex I to the Treaty, fisheries,
coalmining, steelmaking, shipbuilding, synthetic fibres
and the motor industry (46). 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

firm in difficulty within the meaning of the Community
guidelines on State aid for rescuing and restructuring
firms in difficulty (1999/C 288/02) (48), despite the
Spanish authorities’ claim that the tax credit, as it has
is unlikely to be applied to firms in
been designed,
in this
difficulty. The Commission would point out
connection that the grant of the tax aid in question is
not subject to the conditions (49)
laid down in those
guidelines. As stated in point 20 of the abovementioned
rescue and restructuring aid guidelines (1999/C 288/02),
rescue and
(cid:145)the Commission considers
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

(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) (47). 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
in
investment project must be notified in advance,
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
assessment.
following
The
Commission’s
Commission therefore finds that
the tax aid under
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 Vizcaya.

the

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
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 heritage conservation.

Summary

(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

(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,

(46) For the sectoral rules currently in force see,
the European Communities,

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

in addition to the
the
the website of

Journal of

(47) OJ C 107, 7.4.1998, p. 7.

(48) OJ C 288, 9.10.1999, p. 2. These guidelines have since 1999
replaced a previous version (94/C 368/05) of the same guidelines
(OJ C 368, 23.12.1994, p. 12).
that

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

conditional
restructuring plan which enables

(49) Among

on
the

other

the

aid

is

L 17/18

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Official Journal of the European Communities

22.1.2003

eligible

is not

((cid:133)) of

assistance under

Vizcaya
that
for
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
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
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 (50), 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,

that,

the recipients may not

in accordance with the

(103) 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

law such as

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 (51).

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

aid

granted

(105) 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

(50) 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.

(51) 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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X. CONCLUSIONS

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

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.

Article 5

This Decision is addressed to the Kingdom of Spain.

Done at Brussels, 11 July 2001.

For the Commission

Mario MONTI

Member of the Commission

(106)

In view of the above, the Commission concludes that:

(cid:151) Spain has unlawfully put into effect, in Vizcaya, the
45 % tax credit for investments, thereby infringing
Article 88(3) of the Treaty,

(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
due
the
to
Spanish
incompatible
to
authorities must
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

HAS ADOPTED THIS DECISION:

Article 1

The State aid in the form of a 45 % tax credit for investments,
unlawfully put into effect by Spain in the Province of Vizcaya,
in breach of Article 88(3) of the Treaty, through the fourth
additional provision of Provincial Law No 7/1996 of 26
December 1996, extended indefinitely by the second provision
of Provincial Law No 4/1998 of 2 April 1998 (52)
is
incompatible with the common market.

Article 2

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

(52) Norma Foral No 4/1998 de 2 de abril de 1998 (disposici(cid:243)n

segunda).