2003/293/EC: Commission Decision of 11 December 2002 on the measures implemented by Spain in the agricultural sector following the increase in fuel prices (notified under document number C(2002) 4378)
Date: 2002-12-11
Institutions: European Commission
Subjects: Spain, State aid, agricultural cooperative, aid system, control of State aid, farmer, interest rate subsidy, tax system

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COMMISSION DECISION

of 11 December 2002

on the measures implemented by Spain in the agricultural sector following the increase in fuel
prices

(notified under document number C(2002) 4378)

(Only the Spanish text is authentic)

(2003/293/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

(5)

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

to submit comments in
Having invited interested parties
accordance with the above Article (1), and taking account of
such comments,

Whereas:

I. PROCEDURE

By letter of 29 September 2000, the Spanish authorities
in accordance with Article
notified the Commission,
88(3) of
to support
the EC Treaty, of measures
agriculture following the increase in fuel prices, as set
out in the decision to initiate the procedure.

The Commission's decision to initiate the procedure was
published in the Official
the European
Communities (2). The Commission invited interested
parties to submit
their comments on the measures
concerned.

Journal

of

(6)

(7)

(8)

By letters of 6 June and 20 December 2001, Spain sent
a series of comments.

The Commission has received comments from interested
parties. It passed on those comments to Spain, giving it
the opportunity to comment on them, and received its
comments by letters of 1 and 30 October 2001.

II. DETAILED DESCRIPTION OF THE AID

Name of
following the increase in fuel prices.

scheme: measures

to support agriculture

(9)

Budget: not specified.

By fax of 20 November 2000, the Commission asked
for further information. That information was supplied
by letters of 9 January and 13 March 2001.

(10) Duration: varies according to the measures.

Since most of the measures covered by the notification
had already been adopted,
accordingly
transferred to the register of unnotified aid measures
(aid NN 19/2001). The notified measures which had not
yet been adopted were entered in the register of notified
aid (N 681/A/2000).

they were

By letter of 11 April 2001, amended on 25 April 2001,
the Commission notified Spain of its decision to initiate
the procedure laid down in Article 88(2) of the Treaty
concerning some of the measures, and to consider that
others did not meet the requirements to fall within the
scope of Article 87 of the Treaty.

(11)

Beneficiaries: farmers and agricultural cooperatives.

(12) Aim of the measures: to compensate the agricultural

sector for the increase in fuel prices.

(13)

Possible impact of the measures: distorting competition,
agricultural
favouring
certain
products and infringing the rules of
the relevant
common organisations of the market.

production

the

of

(14)

Rate of aid, costs qualifying for subsidies, accumulation:
various according to the measures.

(1) OJ C 172, 16.6.2001, p. 2.

(2) See footnote 1.

(1)

(2)

(3)

(4)

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(15)

Reasons why the procedure was initiated: amendment of
Law No 37/1992 on value-added tax (3).

(16)

(17)

This measure is contained in Royal Decree-Law No
10/2000 of 6 October 2000 on emergency support for
agriculture, fisheries and transport (4). It increases the
percentage of compensation payable to taxable persons
(VAT)
covered
arrangements for agriculture and fisheries with a view
to offsetting an increase in VAT.

special

added

value

the

tax

by

The measure falls under the Sixth Council Directive
(77/388/EEC) of 17 May 1977 on the harmonisation of
the Member States relating to turnover
the laws of
taxes (5) (hereinafter called the Sixth Directive), as last
amended by Directive 2002/92/EC (6), and in particular
Article 25 thereof.

(18) An analysis of the changes in macroeconomic statistics
in the sector relating to farmers covered by the scheme
it was
the preceding three years showed that
over
necessary to increase the compensation by no more
than 2,5 percentage points on the
volume of
transactions to offset the VAT charged on purchases of
goods and services. In accordance with Article 25(3) of
the Sixth Directive, it was decided to introduce varying
increases for agriculture, livestock farming and fisheries.
The increase was of three points for agriculture and two
points
stockfarming and fisheries, bringing the
percentage of compensation up to 8 % for the former
and 7 % for the latter.

for

(19)

The measure was introduced to restore the necessary
balance between the VAT borne by and the VAT charged
to taxable persons
special VAT
arrangements for agriculture and fisheries. According to
the Spanish authorities it does not constitute State aid.

covered by

the

(20)

In initiating the procedure, the Commission took the
following view:

(21) Article 25 of the Sixth Directive provides that Member
States may apply to farmers a flat-rate compensation
scheme to offset the VAT charged on purchases of goods
and services made by farmers subject to the scheme

are

(flat-rate farmers). The Member States are to fix the
flat-rate compensation percentages, where necessary,
and notify the Commission before applying them. Such
percentages
to be based on macro-economic
statistics for flat-rate farmers alone for the preceding
three years. They may not be used to obtain for flat-rate
farmers refunds greater than the VAT charges previously
in force. The Member
such
percentages to a nil rate and round them up or down to
the nearest half point. The Member States may fix
varying flat-rate compensation percentages for forestry,
for the different sub-divisions of agriculture and for
fisheries.

States may

reduce

implementing

(22) According to the information available to it at the time,
the Commission considered that the Spanish authorities
the increase in the overall
had not notified it of
compensation percentages before
it,
thereby failing to comply with Article 25 of the Sixth
Directive. Consequently,
the Commission had been
unable to judge whether the amendment to Law No
the Sixth
37/1992 was in line with Article 25 of
Directive, or whether the increase had resulted in all the
farmers covered by the
receiving
refunds greater
than the VAT charges previously in
force, in which case the amendment would constitute a
selective tax measure that would affect the resources of
the State.

flat-rate

scheme

Measures to support agricultural cooperatives

(23)

This measure is provided for in Royal Decree-Law No
10/2000, which amends Law No 27/1999 of 16 July
1999 on cooperatives (7) and Law No 20/1990 of 19
December 1990 on the tax arrangements applying to
cooperatives (8). It abolishes the maximum limit of 50 %
of turnover on which agricultural cooperatives must pay
tax in their transactions with non-member third parties
without
as
granted by Law No 20/1990 for deliveries of B diesel to
non-member
third parties. Law No 34/1998 of 7
October 1998 on hydrocarbons (9) has also been
amended to waive the requirement
that agricultural
cooperatives delivering B diesel to non-members must
set up a
tax
arrangements apply.

entity to which the general

losing their preferential

tax treatment

legal

(24)

In initiating the procedure, the Commission took the
following view:

(3) Official State Gazette No 312, 29.12.1992, p. 44247.
(4) Official State Gazette No 241, 7.10.2002, p. 36614.
(5) OJ L 145, 13.6.1977, p. 1.
(6) OJ L 331, 7.12.2002, p. 27.

(7) Official State Gazette No 170, 17.7.1999, p. 27027.
(8) Official State Gazette No 304, 20.12.1990, p. 37970.
(9) Official State Gazette No 241, 8.10.1998, p. 33517.

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(25)

Royal Decree-Law No 10/2000 granted tax advantages
to agricultural cooperatives which they did not enjoy
previously.

Loans to farmers

(26)

(27)

(28)

legal

entity to which the general

The first advantage is the waiver of the requirement to
tax
set up a
arrangements apply (i.e. higher tax rates) through which
to sell B diesel to non-member third parties, whereby
cooperatives pay less tax than before on their sales of
diesel to non-members. In other words, before Law No
27/1999 was amended,
to
non-members agricultural cooperatives had to set up a
legal entity. Since the Law was changed, they are no
longer required to set up a legal entity and so those
transactions are subject to a lower rate of tax.

in order to sell B diesel

tax treatment.

The second advantage is that agricultural cooperatives
are no longer subject to the 50 % limit when selling B
diesel to non-member third parties, above which they
lose their preferential
In other words,
before Law No 27/1999 was amended, agricultural
cooperatives had to restrict their sales to non-members
to 50 % of their turnover if they did not want to lose
tax treatment. Since the Law was
their preferential
changed, they can exceed that limit without losing their
preferential tax treatment.

This would seem to be a specific measure applying only
to agricultural
tax
advantage whereby they now pay less tax than they did
before Law No 27/1999 was amended. This advantage
was granted in the context of the increase in fuel prices.

cooperatives which confers

a

(30)

(31)

(32)

(33)

is provided for

in a Ministry of
This measure
Agriculture Decision of 15 November 2000 (11)
publishing a Council of Ministers agreement of 10
November 2000, which instructs the credit sections of
agricultural cooperatives to sign agreements with the
Ministry of Agriculture and the Institute of Official
Credit
through financial
organisations loans of up to ESP 35 billion with an
interest rate subsidised by the Ministry of Agriculture.

to farmers

to grant

(ICO)

These loans are granted on the following terms: a
five years with a one-year exemption as
duration of
regards the repayment of the principal; the interest rate
is the ICO's lending rate to financial organisations, the
ICO reference rate; the profit margin for the financial
organisations is one percentage point; the interest-rate
three
subsidy from the Ministry of Agriculture is
percentage points; the risk of the loans falls on the
financial organisations and the maximum amount of
loans is ESP 75 000 per hectare, up to a maximum per
beneficiary of ESP 4,5 million for individuals and ESP
13,5 million for groups.

The Ministry of Agriculture may also subsidise the
guarantees granted by the State Limited Company for
Agricultural Guarantees, when such guarantees are
required for the grant of subsidised loans. The guarantee
subsidy is intended to cover the management costs and
may not amount
the amount
outstanding on the guaranteed loan.

to more than 1 % of

The Spanish authorities reported that the maximum aid
which a farmer received each year averaged over the
five-year
ESP 1 575 per
hectare (12). The average price of diesel was ESP 54,4
per litre in 1999 and ESP 79,8 per litre in 2000. The
increase from 1999 to 2000 was thus 47 %.

loan period would be

(29) According to the information available at the time, the
Commission considered that these measures conferred
an advantage on recipients (agricultural cooperatives)
which relieved them of charges that were normally
borne from their budgets. A loss of
tax revenue is
equivalent
to consumption of State resources in the
form of fiscal expenditure (point 10 of the Commission
the State aid rules to
notice on the application of
taxation (10)).
measures
Accordingly,
considered a
selective tax measure affecting the resources of the State.

relating to direct business
should be

the measure

(10) OJ C 384, 10.12.1998, p. 3.

(34) According to the Spanish authorities, a comparison
between the increase in costs and the annual average aid
interest-rate subsidies (ESP 1 575 per
in the form of
hectare for five years) shows that the aim of the aid is
not to compensate farmers for their losses but to allow
them to benefit from loans from financial organisations
in order to solve their cash-flow difficulties caused by

(11) Official State Gazette 276, 17.11.2000, p. 40088.
(12) Interest rate subsidy: 3 %, duration of loan: five years. One-year
exemption, maximum amount of
the loan per hectare: ESP
75 000. 0,03 × 75 000 (1 + 1+ 1/4 + 2/4 + 3/4)1/5 = ESP 1 575
per hectare.

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the disproportionate increase in diesel costs. That
increase, which caused public disturbances,
strikes,
energy and food shortages and difficulties for the free
transit of goods across Community territory, should be
considered
an exceptional occurrence within the
meaning of Article 87(2)(b) of the Treaty.

(35)

The Spanish authorities argued that this measure cost
less than the reduction in special taxes and VAT applied
by other Member States and disapproved of by the
Commission.
considered
incompatible with the common market, Spanish farmers
would be at a disadvantage compared to farmers in
other Member States who had benefited from tax
reductions.

aid were

to be

this

If

(36)

In initiating the procedure, the Commission took the
following view:

(37)

Subsidising the interest rate on loans is tantamount to
granting State aid to farmers. Furthermore,
some
farmers would receive State aid in the form of a rebate
on part of the administrative costs on guarantees on the
subsidised loans. Consequently, these measures should
be considered selective aid granted by the State.

Tax measures relating to personal income tax and
VAT

(38)

These measures are provided for in an Order of 29
November 2000 of the Ministry of Finance developing
for 2001 the scheme for the objective assessment of
personal
special
and
income
arrangements for VAT (13).

simplified

the

tax

For 2000, a corrective index was applied to feed purchased
from third parties in the case of certain livestock farming
activities covered by the scheme for objective assessment of
personal income tax

(40)

In initiating the procedure, the Commission took the
following view:

(41)

(42)

This change in the corrective index appeared to confer
on its beneficiaries an advantage which relieved them of
charges that were normally borne from their budgets. A
loss of tax revenue is equivalent to the consumption of
State resources in the form of
tax expenditure. The
Spanish authorities did not justify this measure by the
nature or general scheme of the tax system.

Consequently, on the basis of the information available
at that time, the Commission considered that this tax
measure, which was attributable to the State, affected
the resources of
the State and conferred a selective
advantage, did not seem justified by the nature or
general scheme of the tax system.

For 2001, a reduction in the net yield under the scheme for
the objective assessment of personal income tax for farming
activities

(43) All

the

farming activities

for which the yield is
determined using the objective assessment scheme are
granted a 35 % reduction on the purchase price of the
agricultural diesel needed to carry out those activities,
duly documented by means of invoices.

(44)

In initiating the procedure, the Commission took the
following view:

(45)

The Spanish authorities did not provide an explanation
for
the reduction in yield which would justify its
introduction as a means of bringing tax into line with
actual economic activity in the light of the exceptional
circumstances caused by the increase in fuel prices.

(46)

Consequently, according to the information available at
that time, this measure did not appear to be justified by
the nature or general scheme of the system, and was to
be considered as selective aid granted by the State.

Also for 2001, reduction of the percentage for calculating
quarterly VAT payments under the simplified arrangements
for certain agricultural activities

(39) A 5 % reduction in the calculation of the net yield of
certain livestock farming activities
to the
objective assessment scheme by increasing the corrective
index applied to fodder purchased from third parties.

subject

(47)

(13) Official State Gazette 287, 30.11.2000, p. 41611.

VAT

payments

The reductions in the percentage applied for calculating
quarterly
simplified
arrangements for certain agricultural activities are as
follows:
intensive pig and poultry farming (for meat),
7 %; intensive farming of laying hens and sheep, goats
and cows for dairy production, 1 %; intensive farming of

under

the

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intensive farming of
beef cattle and rabbits, 14 %;
breeding pigs and cattle and other forms of livestock
farming, whether intensive or extensive, not explicitly
included under other headings, 19 %; intensive farming
of sheep and goats for meat, 24 %; breeding, keeping
and fattening poultry, 24 %; other activities and related
services carried out by farmers or stockfarmers, 28 %.

(48)

In initiating the procedure, the Commission took the
following view:

(53)

(49)

the

VAT

under

payments

This reduction in the percentage used for calculating
quarterly
simplified
arrangements
reduced payments and conferred on
beneficiaries an advantage which relieved them of
charges that were normally borne from their budgets. A
loss of tax revenue is equivalent to the consumption of
State resources in the form of
tax expenditure. The
Spanish authorities did not justify this measure by the
nature
system.
scheme
Consequently, according to the information available at
the time, this tax measure did not seem justified by the
nature or general scheme of the tax system.

general

the

tax

or

of

Extension, for 2000 and 2001, of tax benefits
applicable to personal income tax on the transfer of
certain agricultural land and holdings

(50)

This extension of tax benefits on the transfer of certain
agricultural land and holdings, provided for in the sixth
additional provision of Law No 19/1995 of 4 July 1995
on modernising agricultural holdings (14),
is contained
in the seventh transitional provision of Law No 14/2000
of 28 December 2000 on measures relating to taxation,
administration and social order (15).

(51)

In initiating the procedure, the Commission took the
following view:

(52)

This measure conferred on its beneficiaries an advantage
which relieved them of charges that were normally
borne from their budgets. A loss of
tax revenue is
equivalent to the consumption of State resources in the
form of tax expenditure. Accordingly, this extension of
tax benefits appeared to constitute State aid. This
position related only to 2000 and 2001 and did not

(14) Official State Gazette 159, 5.7.1995, p. 20394.
(15) Official State Gazette 313, 30.12.2000, p. 46631.

prejudge the Commission's position on the compatibility
or incompatibility of aid granted before that period.

Increase in the percentage of expenditure which is
difficult to substantiate in the context of personal
income tax

This was the only measure that had not yet been
adopted when Spain sent its comments, and therefore
constitutes notified aid. The percentage of expenditure
to substantiate in the context of
which is difficult
personal income tax was increased from 5 % to 10 %,
for agriculture only and for
the 2000 and 2001
financial years only.

(54)

In initiating the procedure, the Commission took the
following view:

(55)

(56)

The Spanish authorities had not given any data on this
increase in the percentage of expenditure which is
difficult to substantiate, as applied to farmers covered by
the objective assessment scheme, that would justify it by
the nature or general scheme of the tax system and
demonstrate that it had been introduced to bring tax
into line with actual economic activity in the light of
the exceptional circumstances caused by the increase in
fuel prices.

Consequently, in the light of the information available at
the time, this tax measure did not appear justified by
the nature or the general scheme of the tax system and
appeared to confer on its beneficiaries an advantage
which relieved them of charges that were normally
borne from their budgets. A loss of
tax revenue is
equivalent to the consumption of State resources in the
form of tax expenditure.

In conclusion, the Commission took the following
view when initiating the procedure:

(57) According to the information available to it at the time,
all these measures were to be considered tax measures
attributable to the State and affecting the resources of
the State; they conferred a selective advantage and did
not appear justified by the nature or general scheme of
the tax system, and therefore constituted selective aid
granted by the State.

(58)

The information supplied by the Spanish authorities,
according to which the price of
fuel rose by 47 %
between 1999 and 2000, provoking public disturbances,
strikes and energy and food shortages, was not sufficient
to allow the Commission to conclude, at that stage in
the procedure, that the increase in fuel prices was an

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exceptional occurrence within the meaning of Article
87(2)(b) of the EC Treaty.

III. COMMENTS FROM INTERESTED PARTIES

(59)

The measure extending, for 2000 and 2001, tax benefits
applicable to personal income tax on transfer of certain
agricultural
land and holdings could be considered an
investment aid in the primary production sector, given
that the tax benefit is linked to the transmission of farm
land and agricultural holdings. However, Law No
14/2000, which provides the legal basis for the grant of
that aid, laid down no requirement to meet any of the
the Community
conditions set out
Guidelines for State aid in the agriculture sector (16).

in point 4.1 of

(64) All the comments from interested parties concern the

support measure for agricultural cooperatives.

Comments from the Association of Service Station
Managers (Asociación de Gestores de Estaciones de
Servicio)

(65)

(66)

(67)

(68)

State

appeared to constitute

(60) According to the information available at that time, the
other measures
aid
measures which was simply intended to improve the
financial situation of producers without contributing to
the development of
the
the sector
Community Guidelines for State aid in the agriculture
sector). Consequently, at the time the procedure was
initiated,
it appeared that these measures were to be
regarded as operating aid incompatible with the
common market.

(point 3.5 of

(61) Moreover, the aid in the form of guarantees made no
provision for the conditions which such aid must meet
in order to be compatible, as set out in the Commission
Notice on the application of Articles 87 and 88 of the
EC Treaty to State aid in the form of guarantees (17).

(62)

Furthermore, it had to be borne in mind that the aid for
agricultural products covered by Annex I to the Treaty
concerned products most of which are covered by a
common organisation of market, and that the Member
States have limited power to intervene in the operation
of such market organisations, which are the exclusive
the Community. This aid was to be
competence of
considered as
common market
in breach of
organisations and hence of the Community rules.

the

(63)

In view of the above, the Commission considered that
the measures in question, in so far as they were aid, did
not appear to be eligible for any of
the exceptions
provided for in Article 87(2) and (3) of the EC Treaty,
and consequently decided to initiate the procedure laid
down in Article 88(2) of the Treaty.

This Association considers that Royal Decree-Law No
10/2000
agricultural
cooperatives.

advantages

grants

tax

to

Firstly, waiving the requirement to set up a legal entity
to which the general tax arrangements apply in order to
distribute B diesel to non-member third parties confers
a tax advantage enabling cooperatives to pay less tax
than before when selling B diesel to non-members, in
that it subjects those transactions to a lower rate of tax.

lies

second tax advantage

The
that
agricultural cooperatives are no longer subject, when
selling B diesel
to the
maximum limit of 50 % beyond which they lose their
preferential tax treatment.

to non-member third parties,

in the

fact

imposed on their

The Association argues
that Royal Decree-Law No
10/2000 encourages the creation outside the market of
a parallel network for cooperatives, as ‘State-assisted
bodies', which are also exempt from fulfilling the legal
requirements
competitors. The
purpose of all this would be to enable cooperatives to
offer prices lower than those prevailing under normal
market conditions, without providing any compensation
for holders of
facilities selling to the general public
(retail distributors), many of whom will be eliminated
from the market.

Comments from the Association of Service Station
Managers of Madrid, the Catalan Federation of
Service Stations and the Spanish Confederation of
Service Stations

(16) OJ C 28, 1.2.2000, p. 2.

(Corrected version in OJ C 232,

12.8.2000, p. 19).

(17) OJ C 71, 11.3.2000, p. 14.

(69)

These associations, which represent practically all service
stations in Spain, take the view that Royal Decree-Law
No 10/2000 contains measures designed to relieve
agricultural cooperatives of various tax charges on their

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sales of B diesel
activity within a specially-protected tax system.

to non-members by bringing that

petroleum sector (20) introduced a new system for the
distribution of petroleum products.

(70)

These associations argue that since Royal Decree-Law
No 10/2000 came into force agricultural cooperatives
have obtained the following tax advantages on their
sales of B diesel to third parties:

(71)

(72)

Tax on capital
transfers and documented legal acts:
cooperatives will not be required to pay tax on their
instruments of incorporation, capital
increases, fusions
and divisions, taking out and cancelling loans (including
long-term bonds), acquisition of goods and rights under
their
the
fulfilment of their purpose and transactions to acquire
goods and rights directly intended for the fulfilment of
their social and statutory purposes.

apprenticeship and training reserves

for

Company tax: given that
that Royal Decree-Law No
10/2000 treats the sale of B diesel to non-member third
parties as the economic result of cooperative activity, it
will be taxed at the rate of 20 %; moreover, cooperatives
are completely free to decide on the depreciation of
their new physical fixed assets acquired during the three
years following the date of
their registration in the
Register of Cooperatives, and what is more, they receive
a 50 % rebate on their entire company tax bill.

(73)

Cooperatives receive a 95 % rebate on their economic
activities tax.

(74)

Cooperatives receive a 95 % rebate on their immovable
property tax.

Comments from the Spanish Confederation of
Agricultural Cooperatives

(76)

(77)

(78)

(79)

specifically,

The previous system had suddenly ceased to apply to
agricultural cooperatives with the publication of Law No
34/1998 and,
fifteenth additional
provision thereof, prohibiting cooperatives from selling
petroleum products (both diesel and petrol)
to third
that
parties, unless they set up a legal entity for
purpose, to which the general tax arrangements would
apply.

the

The Confederation argues that Royal Decree-Law No
10/2000 merely removed — and then only partially —
the restriction on free competition imposed by the
fifteenth additional
prohibition introduced by the
provision of Law No 34/1998.

The tax advantages enjoyed by cooperative societies
must be seen in the light of the technical adjustment
standards and the obligations which these impose on
cooperatives.

in:

engage

transactions with members

For the purposes of determining the taxable amount for
the purposes of company tax, cooperatives must make a
clear distinction between the two types of transactions
they
and
transactions with non-members or third parties. Under
the technical adjustment
in
Article 16 of Law No 20/1990, for the purposes of
determining the taxable amount the cooperative results
transactions with members are to be considered
of
separately
of
transactions between the cooperative and non-members
or third parties.

standard, provided for

extra-cooperative

from the

results

(80) Article 33 of Law No 20/1990 stipulates that the rate of
company tax on cooperatives is differentiated, so that a
rate of 20 % applies
for
to the
cooperative results, and the general rate of 35 % is
applied to the taxable amount
for extra-cooperative
results,
inter alia, the results of transactions
between agricultural cooperatives and third parties.
Therefore, there is no rebate on the amounts earned by
agricultural
transactions with
cooperatives
non-member third parties.

taxable amount

including,

in their

(75) Most of Spain's agricultural cooperatives belong to this
Confederation. Agricultural cooperatives began selling
petroleum products following an Order of 31 July
1986 (18) of
the Ministry of Economy and Finance
amending the Regulation on the supply and sale of fuel
and liquid fuel subject to the petroleum monopoly (19).
Law No 34/1992 of 22 December 1992 regulating the

(81) Article 23 of Law No 20/1990 defines the amount of
company tax payable by cooperatives as the algebraic
resulting from applying the
sum of
corresponding tax rates to the taxable amounts, whether
positive or negative,
that amount being the amount
payable when positive. Here, according to Article 34 of

the amounts

(18) Official State Gazette 188, 7.8.1986, p. 27907.
(19) Official State Gazette 58, 9.3.1970, p. 3820.

(20) Official State Gazette 308, 24.12.1992, p. 43867.

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the Law on specially protected cooperatives, which in
tax
principle
the
agricultural
advantage consists in a 50 % rebate on the full
tax
payable as defined by Article 23 as mentioned above.

cooperatives,

covers

and may not be distributed among members, as in the
case of the mandatory social reserves.

(82)

(83)

(84)

This tax advantage cannot be considered in isolation
from the tax paid by cooperative members on their
share of their cooperative's profits when they pay their
personal income tax. The profits made by a cooperative
are distributed among its members on the basis of the
each carries out during the
cooperative business
each
financial year, not according to the
contributed; this is known as cooperative income and is
completely different
from the dividends paid out by
companies with share capital.

capital

Taking account of these special features, the 50 % rebate
on the amount of company tax payable by specially
protected cooperatives must be seen in the light of the
fact that dividends/cooperative income are taxed twice,
first through company tax and then through personal
income tax. The alleviation of double taxation in the
and their
case of
shareholders (dividends) has no counterpart in the case
of
(cooperative
income), with the result
that cooperative income is
more heavily taxed than dividends.

companies with share

their members

cooperatives

capital

and

This situation is reflected in Article 23 of Law No
40/1998 of 9 December 1998 on personal income tax
tax rules (21), which ratifies the unequal
and other
treatment of dividends (specific to capital companies
subject to the general tax system) in relation to returns
tax
(specific
arrangements).

cooperatives

subject

special

to

to

(85) Moreover, under Article 66 of Law No 40/1988,
personal income tax rebates also vary depending on the
type of company involved; in the case of dividends, the
rebate will be 40 % of the tax payable, while in the case
of cooperative income, Article 32 of Law No 20/1990
applies, according to which the rebate for double
taxation is 10 % for protected cooperatives and 5 % for
specially protected cooperatives.

(86)

In addition, cooperatives are subject to some specific
financial obligations introduced by Law No 27/1999
which do not affect companies subject to the general tax
regime but which tie up the resources of cooperatives

(21) Official State Gazette 295, 10.12.1998, p. 40730.

(87)

(88)

(89)

(90)

Firstly, the mandatory reserve, as provided for in Article
55 of Law No 27/1999, which is specifically intended
for the consolidation, development and guarantee of
cooperatives and may not be distributed among the
members. This reserve is part of the undistributable net
assets and, should the cooperative be dissolved, would
be transferred to the State treasury and used to set up a
cooperative promotion fund. Under Law No 27/1999, at
the cooperative's results and 50 % of
least 20 % of
extra-cooperative profits
income from its
transactions with non-members) are paid into the
mandatory reserve, as are membership dues and the
amounts
share
from the
subscriptions when members leave the cooperative. This
means that part of what each member contributes to
the cooperative will never be recovered and that part of
the cooperative's surplus is tied up.

compulsory

(such as

deducted

the

apprenticeship and training reserve,
Secondly,
governed by Article 56 of Law No 27/1999, is intended
the cooperative's
for
the training and education of
members and workers, dissemination of
information
about
the cooperative movement and promotion of
intercooperative relations and the cultural, professional
and social welfare of the local community or society in
general. According to Law No 27/1999, at least 5 % of
the cooperative's results are to be paid into this reserve.
Like the mandatory reserve,
the apprenticeship and
training reserve may not be distributed among the
members, even if the cooperative is wound up.

Consequently,
the maximum surplus which can be
distributed to cooperative members is lower than what
other companies with share capital can distribute to
shareholders because the latter are under no
their
obligation to use
to fund the
the year's profits
mandatory reserves.

The advantage that a cooperative might have enjoyed as
the company tax rebate is offset by the
a result of
imposed on
double
cooperative members and the increase in their
tax
burden in this way.

taxation on personal

income

(91) A general overview of

the cooperative tax regime,
showing both the advantages and the obligations, can
be seen in the following practical examples.

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(92)

The first example analyses the net availability of funds received by a cooperative member as
compared with a company shareholder subject to the general tax regime in Spain, starting from
same initial results, namely 150 monetary units (mu).

Hypothesis: Cooperative results (50 %) and extra-cooperative results (50 %), applying Law No 27/1999
and assuming that the entire available profit goes to the member. Marginal rate of personal income tax:
48 %

Cooperative

Company with share capital

Results

Cooperative result (CR): 75 (50 %)
Extra-cooperative result (ER): 75 (50 %)
Total: 150

Financing the
social reserves

Apprenticeship and training reserve:
5 % CR = 3,75
Mandatory reserves: 20 % CR = 15
50 % ER = 37,5
Total: 56,25

Results after
reserves have been
financed

CR: 56,25
ER: 37,5
Total: 93,75

150

0

150

Company tax

CR: (75 – 11,25) × 20 % = 12,75
RE: (75 – 18,75) × 35 % = 19,687
Total: 32,437

150 × 35 % = 52,5

Available profit

93,75 – 32,437 = 61,313

150 – 52,5 = 97,5

Personal income
tax

Taxable amount:
61,313 × 100 % = 61,313
Tax payable (marginal rate):
61,313 × 48 % = 29,430
Rebate: 61,313 × 10 % = 6,131
Amount payable:
29,430 – 6,131 = 23,299

Taxable amount:
97,7 × 140 % = 136,5
Tax payable (marg. rate):
136,5 × 48 % = 65,52
Rebate: 97,5 × 40 % = 39
Amount payable:
65,52 – 39 = 26,52

Net amount
received

61,313 – 23,299 = 38,014

97,5 – 26,52 = 70,98

(93)

Taking a marginal personal income tax rate, for an identical initial result of 150 monetary units, a
cooperative member would receive a net amount of 38 units, while a company shareholder subject
to the general tax regime would receive 71 units. Moreover, as mentioned above, the double
taxation of company tax and personal income tax cancels out the initial effect of the rebate on the
full amount of company tax payable.

(94)

in which different rates are applied to the cooperative's transactions with
The second example,
members and with non-member third parties (i.e. cooperative and extra-cooperative results), shows
how the higher the ratio of extra-cooperative to cooperative results, the larger the amount to be
paid into the mandatory reserves, the higher the company tax and the smaller the percentage of
available profit, so that the higher the extra-cooperative results, the lower the net amount received
by each member.

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Analysis of different breakdowns between cooperative and extra-cooperative results

Protected cooperative

Company with share
capital

Hypothesis

Results

Financing the social
reserves

Results after reserves have
been financed

CR: 75 %
ER: 25 %

CR: 66,66 %
ER: 33,33 %

CR: 50 %
ER: 50 %

CR: 25 %
ER: 75 %

150

46,875

150

50

150

150

56,25

65,625

103,125

100

93,75

84,375

Company tax

28,97

30,125

32,437

35,906

Available profit

74,155

69,875

61,313

48,469

Personal income tax

28,179

26,55

23,299

18,418

Net amount received

45,976

43,325

38,014

30,051

150

0

150

52,5

97,5

26,52

70,98

(95)

the

considers

In conclusion, the Spanish Confederation of Agricultural
legislation on the
that
Cooperatives
taxation of agricultural cooperatives in Spain must be
analysed as a whole. These tax arrangements make
structural distinctions, and the advantages they confer
the
are
mandatory reserves,
treatment of capital and double
taxation).

to specific obligations

(financing

linked

compensation must

of
also be notified to the
Commission. If this were indeed the conclusion to be
drawn from the Sixth Directive, a separate monitoring
system would have to be set up for this compensation
scheme alongside the general arrangements already in
amendments which the
place
Member States make to their laws, which would not be
consistent. Moreover, the text of the Sixth Directive does
the
not
the Commission
introduction of compensation, but only that
it be
informed.

for monitoring the

authorise

require

to

IV. SPAIN'S COMMENTS

(96)

By letter of 11 June 2001, the Spanish authorities put
forward the following arguments.

Amendment of Law No 37/1992

(97) Article 25 of the Sixth Directive allows Member States
to set up a flat-rate scheme for farmers engaged in
farming and fishing. Spain has applied such a scheme
since it joined the Community.

flat-rate

States may

(98) Article 25(3) of the Sixth Directive provides that the
Member
compensation
‘fix
percentages, where necessary, and shall notify the
Commission before applying them'. The sense of this
provision is, firstly, that the Member States wishing to
introduce this type of compensation must notify the
amount of compensation before approving it. However,
it does not follow from this that changes in the amount

(99) Despite the above, the Spanish Tax Authority notified
the Commission (a copy of the document is attached),
before the regulation increasing the compensation rate
was approved and published in the Official State
Gazette, of the Government's intention to increase the
compensation rate and to differentiate it according to
the product to which it was to be applied, an option
expressly provided for in the second subparagraph of
Article 25(3) of the Sixth Directive.

(100) Secondly, a further obligation on Member States can be
the Sixth Directive,
construed from Article 25(3) of
namely that
the amount of
compensation does not exceed the tax charged on the
taxable individuals covered by the scheme thereby
advantage on them. The
conferring an economic
Spanish rules also comply with this requirement, as

they must ensure that

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confirmed by the data on which the Spanish authorities
based their calculation of the new compensation rates,
which were included in a study annexed to Spain's
comments in the context of this procedure.

third parties,

such that
business with non-member
extra-cooperative results are subject to the general rate
of company tax as laid down in Article 26(3) of Law No
43/1995 of 27 December on company tax (22). On the
other hand, the sixth additional provision of Law No
27/1999 requires cooperatives to keep separate accounts
for their transactions with non-member third parties.

(101) The method consists of

subject

to the

the first

two phases:

is to
calculate the amount of sales of products obtained on
for
holdings
agriculture and fisheries, the second is to determine the
total VAT paid by those holdings on purchases. The
result of this exercise shows that the percentage of real
compensation
legally
established level since 1987, standing at 8,28 % in 1999.

special VAT regime

exceeded

largely

has

the

(102) Spain concludes

that

the increase in the flat-rate
compensation percentage has at all times complied with
Article 25(3) of the Sixth Directive, in the sense that the
issue has not conferred an economic
increase at
by
advantage
the
covered
on
than the
arrangements by granting refunds greater
charges borne.

persons

taxable

Measures to support agricultural cooperatives

(103) Spain maintains that the argument that the measures to
support agricultural cooperatives constitute State aid
because cooperatives will pay less tax than they did
before the amendment does not stand up,
the
following reasons:

for

(104) The measures

introduced by Royal Decree-Law No
10/2000 are actually measures to liberalise the supply of
B diesel,
in that they remove barriers that prevented
agricultural cooperatives from supplying such fuel to
third parties, without this involving a tax advantage to
cooperatives that would imply favourable treatment.

(105) The tax regime for agricultural cooperatives makes a
distinction between cooperative business transacted with
members
transacted with non-members,
as
latter
revenue
extra-cooperative results, which are subject to company
tax under the general regime,
i.e. at the same rate as
any other organisation carrying out the same activity.

and that
from the

known

being

(107) The purpose of

the measures

introduced by Royal
Decree-Law No 10/2000 is to liberalise the supply of B
diesel by allowing agricultural cooperatives to supply
such fuel, irrespective of what share of the cooperative's
represent, without
total business
those transactions
thereby losing their entitlement
tax
to preferential
treatment for their cooperative business. The aim is to
this activity without
allow cooperatives to carry out
having to set up a separate entity, since the same
company tax is payable in both situations in so far as
the revenue from sales of B diesel to third parties is
subject to the general company tax regime.

(108) Spain concludes that the measures introduced by Royal
Decree-Law No 10/2000 are not State aid inasmuch as
competition in the
they do not
alter or
including
distribution of B diesel,
agricultural cooperatives, engaging in this activity are
subject to the same rate of company tax.

affect
since all

firms,

(109)

In addition to its comments on this measure in its letter
of 6 June 2001, Spain also sent, by letters of 1 and 30
October 2001, comments on the comments
from
interested parties. In its letter of 1 October 2001, Spain
added the following comments:

(110) Both the increase in price of crude oil and the
depreciation of the euro against the dollar led to events
that substantially changed normal
farming conditions
and brought about a crisis in the sector. This affected
farms by worsening their economic results and, if the
trend continued, threatening the survival of many.

(106) The cooperative tax regime is governed by Law No
20/1990, Article 21 of which defines extra-cooperative
from carrying out cooperative
returns as

revenue

(111)

In view of
the Spanish Government
decided to introduce not only anticyclical measures but

the situation,

(22) Official State Gazette No 310, 28.12.1995, p. 37072.

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also structural measures, such as further liberalising fuel
distribution so that farms could continue their activities
while maintaining their competitiveness.

incorrectly interpret the impact of Royal Decree-Law No
10/2000 on the tax regime for protected cooperatives.
Extra-cooperative results,
including those arising from
the distribution of B diesel to non-member third parties,
are taxed at the general rate of 35 %.

(112) The support measures introduced by Royal Decree-Law
the objective to further
No 10/2000 are part of
they remove
sector. Specifically,
liberalise
the fuel
certain restrictions
Spanish law on
imposed by
agricultural cooperatives, thereby also certainly opening
up the market in the distribution of B diesel in Spain.

retail

(113) Hence the waiving of the requirement that cooperatives
restrict their distribution of B diesel to non-members to
less than 50 % of their transactions with members, and
the abolition of the rule that cooperatives may only
to
undertake
non-member third parties if they have previously set up
a separate legal entity distinct from the cooperative. This
latter requirement restricted the scope of agricultural
cooperatives' activities and to some extent contradicted
Law No 27/1999, which confirms that the societies it
covers may embark on and engage in any economic
activity whatsoever.

sales of petroleum products

to non-member

(114) The amendment to the effect that cooperatives do not
lose their specially protected status when they distribute
should be
B diesel
construed
a
true meaning
penalisation by restoring a pre-existing entitlement that
had been taken away, without
this conferring any
special tax advantages in the distribution of agricultural
fuel to third parties.

third parties

removing

in its

as

(117) The sole purpose of

the amendments introduced by
to liberalise the
Royal Decree-Law No 10/2000 is
distribution of B diesel by
agricultural
cooperatives to sell such fuel, irrespective of what share
of
the cooperative's total business those transactions
represent, without thereby losing their entitlement to
preferential tax treatment for their cooperative business.

allowing

(118)

In any case, those amendments have in no way altered
the tax arrangements applicable to the supply of B
diesel by cooperatives, and so it should be concluded
that there is no measure which might be considered to
be State aid within the meaning of Article 87 of the
Treaty.

(119) Concerning the tax on capital transfers and documented
legal acts, the comments of the associations of service
stations indicate that
those advantages predate Royal
Decree-Law No 10/2000, so it cannot be said that
cooperatives enjoy them as a result of the Decree-Law,
but
those advantages are designed to
encourage this type of society and the cooperative
movement in Spain.

rather

that

(120) Lastly, concerning local taxes, the comments from the
associations of service stations are aimed not so much
the tax advantages enjoyed by specially protected
at
cooperatives themselves as at the change introduced by
Royal Decree-Law No 10/2000, which alters
the
requirements to be met by agricultural cooperatives to
qualify for specially protected status, specifically the fact
of allowing such cooperatives to distribute B diesel to
non-member third parties without restrictions.

(115) The assertion in the comments from the associations of
service stations that liberalising the distribution of diesel
by cooperatives to non-member third parties results in
those transactions being charged only 20 % company
tax is incorrect. All transactions between cooperatives
and non-member third parties are taxed at the general
rate of 35 %.

Loans to farmers

(116)

In its letter of 30 October 2001 supplementing its
comments on the comments from interested parties
made in letter of 1 October 2001, Spain added the
following comments from the Ministry of Finance: The
comments from the associations of service stations

(121) Spain restricts itself to repeating the arguments already
set out in the notification and insisting that this case
concerns an exceptional occurrence (Article 87(2)(b) of
the Treaty). While accepting that
the Commission is
right to interpret the notion restrictively, this does not
detract from the fact that the exceptional occurrences
and the resulting mitigating measure both came into
being because the Spanish Government decided to

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follow the public line taken by the Commission and not
to give in to the Organisation of Petroleum Exporting
Countries (OPEC) by cutting fuel taxes, deciding instead
to leave the taxes unchanged and to find another way of
compensating for the excessive rise in prices that was
seriously threatening the survival of farms, provoking
strikes, public disturbances
and energy and food
shortages.

(122)

In its letter of 6 June 2001, Spain confirmed that this
type of loan was not being used. However, by letter of
20 December 2001 it reported that these loans had
been in operation from 22 November 2001, that funds
had already been made available to beneficiaries and
that aid payments had accordingly also been made.

(123)

In any case, Spain argues that the cost of this measure is
lower than the possible reduction in special taxes and
VAT applicable
advised against by the
Commission.

to diesel

Tax measures relating to personal income tax and
VAT

adjusting the net return to reflect the real yield from the
activity.

A reduction in the net yield under the scheme for the objective
assessment of personal income tax for farming activities

(127) The objective assessment scheme for farming activities
works by applying a number of net yield indices —
determined on the basis of a standard operating account
— to the income from the activity concerned.
In
determining the standard operating account for 2001,
the diesel bill was calculated using January 1999 diesel
prices. Since the price of diesel rose by around 35 %
between January 1999 and 1 January 2001,
it was
decided to opt for this reduction instead of amending
the standard operating account.

(128) Spain concludes

that

this cannot be considered a
selective State aid, but rather, it is an objective means of
adjusting the net return to reflect the real yield from the
activity.

Application of a corrective index for feed purchased from third
parties to certain livestock farming activities subject to the
flat-rate tax arrangements

Reduction in the percentage used for calculating quarterly VAT
payments under the simplified arrangements for certain
farming activities

(124) This corrective index has existed since 1995 and is
applied to certain stockfarming activities according to
the percentage of fodder purchased from third parties
used in farming operations. Since 2000, this corrective
index has been extended to all stockfarming activities,
provided that the market value of the fodder purchased
from third parties represents more than 50 % of the
value of the fodder consumed.

(125) The use of this index was extended because the net yield
indices applicable to these activities were not changed
for 2000 or 2001, implying that no account was taken
of the increase in the price of fodder when calculating
the net return. Thus, when the consumption of fodder
purchased from third parties is significant (more than
50 % of all fodder consumed) instead of reducing the
net
correcting index (0,95) was
introduced.

return index,

a

(126) Spain concludes
selective

advantage,

that

this cannot be considered a
an objective means of

rather

(129) Concerning the statement that reducing the percentages
used for calculating quarterly VAT payments under the
simplified arrangements reduces the amount of those
payments
to
tax burden, Spain
beneficiaries by reducing their
indicates that this reduction does not affect the indices
used to determine the quarterly payments, which are
calculated provisionally and regularised at the end of the
year.

and therefore

an advantage

confers

as

six months of 2000,
indicated in the preamble

(130) The measure was justified by the increase in diesel
and is
prices during last
provisional,
to the
Ministerial Order of 29 November 2000 on the
simplified arrangements for 2001. That the measure is
provisional can be seen in the fact that the reduction in
the indices affects only the quarterly payments by
instalment, not those used to determine the annual tax
due. This means that at the end of the financial year,
any difference between the amount due according to the
indices and the amounts paid on a quarterly
annual
basis must be settled.

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(131) Spain concludes

that

for
there was any reduction in the tax

are no grounds

there

conceding that
burden calculated for 2001.

Extension, for 2000 and 2001, of tax advantages
applicable to personal income tax on the transfer of
certain agricultural land and holdings

(132) This measure, which extends until 31 December 2001
the tax advantages provided for in the sixth additional
provision of Law No 19/1995, must be seen in the
broader context of the advantages granted to transferors,
which are granted only in certain circumstances,
depending on the party acquiring the land and holdings
which are being transferred.

(133) Consequently, according to Spain, the measure is not
exclusively a tax advantage, but rather an advantage
granted when the purchaser meets certain conditions
aimed at improving the management of agriculture in
Spain and rationalising the size of holdings.

Increase in the percentage of expenditure which is
difficult to substantiate in the context of personal
income tax

(134) Spain stated in its comments that the measure had not
yet been adopted at the time of writing, and that if it
were finally adopted, this would be in order to bring the
percentage
the
simplified method of the objective assessment scheme
expenditure which that
into line with the actual
percentage is supposed to represent (expenditure which
is difficult to substantiate and provisions), which has
risen because of the increase in the price of diesel.

expenditure

applicable

under

of

Conclusion

(135) Spain considers

that

the measures adopted by the
Spanish Government to support agriculture should not
be considered as State aid since they are all
fully
compatible with Article 87(1) of the Treaty.

special VAT arrangements

of compensation payable to taxable persons covered by
the
and
fisheries in order to offset an increase in VAT, and falls
within the scope of the Sixth Directive,
in particular
Article 25 thereof.

for agriculture

(137) The measure was introduced to restore the necessary
balance between the VAT borne by and that charged to
taxable
VAT
arrangements for agriculture and fisheries.

covered

persons

special

the

by

(138) Before the regulation increasing the compensation rate
was approved, the Spanish Tax Authority notified the
Commission of the Government's intention to increase
that rate and differentiate it according to the product to
which it is to be applied, an option expressly provided
for in the second subparagraph of Article 25(3) of the
Sixth Directive.

(139) Spain also supplied the Commission, in accordance with
Article 25(3) of the Sixth Directive, with the data which
the Spanish authorities used to calculate the new
compensation rates and which prove that the amount of
compensation paid does not exceed their actual
tax
any economic
charges,
these
advantage
arrangements. The Commission has examined these data
and made no comments concerning them.

and so does not
individuals

confer
taxable

under

on

(140) Consequently,

in view of the information supplied by
Spain in its comments, the Commission considers that
this measure falls within the scope of the Sixth Directive
and does not constitute a selective tax measure.

Measures to support agricultural cooperatives

V. ASSESSMENT OF THE AID

Article 87(1) of the Treaty

(141) The changes made by Royal Decree-Law No 10/2000 to
Law No 27/1999 and Law No 20/1999 merely restore
the legal situation regarding the distribution of oil
products by agricultural cooperatives prior to adoption
of Law No 34/1998.

Amendment of Law No 37/1992

(136) The amendment to Law No 37/1992, provided for in
Royal Decree-Law No 10/2000, increases the percentage

(142) Spain has explained in its comments that, under Law
20/1990, agricultural cooperatives pay the general rate
of company tax on income from their transactions with
non-member third parties, so such transactions enjoy no
rebate and the changes introduced by Royal Decree-Law

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No 10/2000 do not alter the tax regime applicable to
sales of B diesel by cooperatives to non-member third
parties.

cooperative members and the increase in their
burden in this way.

tax

(143) The

amendments made by Royal Decree-Law No
10/2000 allow agricultural cooperatives to distribute B
diesel to non-member third parties without having to
create a new legal entity for that purpose and allow
those transactions to account for more than 50 % of
their turnover in supply transactions with such third
parties without losing their preferential tax treatment.

from transactions with non-member
is nevertheless also true that,
it

(144) While it is true that agricultural cooperatives pay the
same rate of company tax as other firms on their
third
income
parties,
since the
introduced by Royal Decree-Law No
amendments
10/2000,
to
non-member third parties without any restriction in
turnover and without having to set up a separate legal
thereby benefiting from the differentiated tax
entity,
treatment as cooperatives.

cooperatives may distribute B diesel

(145) Since

before

Royal Decree-Law No

10/2000,
cooperatives have enjoyed advantages under the tax on
capital transfers and documented legal acts, economic
activities tax, immovable property tax and company tax.
In the case of company tax, transactions with members
are subject to a reduced rate and specially protected
cooperatives
in
principle, also receive a 50 % rebate on their overall
company tax bill.

cooperatives,

agricultural

such as

their

(146) But the tax advantages enjoyed by cooperatives must be
seen in the light of the technical adjustment standards
and the obligations which these impose on cooperatives.
As stated by the Spanish Confederation of agricultural
cooperatives in its comments, this tax advantage cannot
be considered in isolation from the tax paid by
cooperative members
their
on
cooperative's profits when they pay their personal
income tax, which is completely different
from the
dividends paid out by companies with share capital. The
alleviation of double taxation in the case of companies
with share capital and their shareholders (dividends) has
no counterpart in the case of cooperatives and their
members (cooperative income), with the result
that
cooperative
taxed than
dividends. The advantage that a cooperative might have
enjoyed as a result of the company tax rebate is offset
by the double taxation on personal income imposed on

is more heavily

income

share

of

(147) The tax regime for agricultural cooperatives in Spain
must be analysed as a whole since it makes structural
distinctions so that the advantages it confers are linked
to
the mandatory
reserves, treatment of capital and double taxation).

obligations

(financing

specific

(148) Consequently,

the Commission considers

in view of the information provided by
Spain and by the Spanish Confederation of agricultural
the
cooperatives,
changes introduced by Royal Decree-Law No 10/2000
to the legislation on agricultural cooperatives do not
confer an advantage which alleviates the normal tax
burden on their budgets and are not a selective tax
the State. This
measure affecting the resources of
measure does not therefore constitute State aid within
the meaning of Article 87(3) of the Treaty.

that

Loans to farmers

(149) Subsidising the interest rate on loans is tantamount to
granting State aid to farmers. Furthermore,
some
farmers would receive State aid in the form of a subsidy
on part of the administrative costs on guarantees on the
subsidised loans. Consequently, the Commission believes
that these measures are to be considered selective aid
granted by the State.

Tax measures relating to personal income tax and
VAT

Application of a corrective index for feed purchased from third
parties to certain stockfarming activities subject to the
flat-rate tax arrangements

(150)

In its comments, Spain has explained that this corrective
index, which had already existed since 1995, has been
extended since 2000 to all
stockfarming activities,
provided that the market value of the fodder purchased
from third parties represents more than 50 % of the
the fodder consumed. This extension was
value of
granted because the net yield indices applicable to these
activities were not changed for those years,
implying
that no account was taken of the increase in the price
of fodder when calculating the net return. Thus, when
the consumption of fodder purchased from third parties
is significant, instead of reducing the net return index, a
corrective index is applied. This corrective index was
introduced to bring taxation into line with the actual
fodder
costs created by the increase the price of
acquired from third parties. Had that adjustment not

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an overpayment of

tax would have
been made,
occurred. This measure is not,
therefore, a selective
advantage, but an objective method for adjusting the net
return to reflect the real yield from the activity.

it was decided to reduce the net yield
January 2001,
instead of amending the standard operating account.
This measure is not, therefore, a selective State aid, but
an objective method for adjusting the net yield to reflect
the real yield from the activity.

(151) Point 27 of the Commission Notice on the application
of
the State aid rules to measures relating to direct
business taxation states that ‘specific provisions that do
not contain discretionary elements, allowing for example
tax to be determined on a fixed basis (for example, in
the agricultural and fisheries sectors), may be justified
by the nature and general scheme of the system (…).
Such provisions do not therefore constitute State aid'.

(152) The Spanish rules on the tax on earnings of producers
subject to the objective estimate arrangements provide
for a tax regime based on units corresponding to the
economic results of farms under normal price, cost and
in the
income conditions. Those rules stipulate that
the
event of exceptional circumstances which alter
economic reality, units can be adjusted to bring the
situation back into balance. According to the Spanish
authorities, the increase in fuel prices led to increased
fodder prices, giving rise to exceptional circumstances
that caused a substantial change in conditions, requiring
the introduction of an index to correct the net yield for
the activity.

(153) That adjustment was made in order to bring tax into
line with actual economic activity. Had it not been
made, an overpayment of tax would have occurred. This
adjustment is therefore justified by the nature or general
scheme of the objective estimate arrangements to bring
the quantifiable yield into line with actual
income for
tax purposes.

(156) Under the Spanish rules governing the tax on earnings
of producers subject to the objective estimate scheme,
the net yield for farming activities is determined on the
basis of a standard operating account. Those rules
stipulate that in the event of exceptional circumstances
which alter the economic reality, units can be adjusted
to bring the situation back into balance. According to
the Spanish authorities, the increase in fuel prices led to
exceptional circumstances
that caused a substantial
change in conditions, requiring the net yield to be
reduced to bring it in line with the actual yield for the
activity.

(157) That adjustment was made in order to bring tax into
line with actual economic activity. Had that adjustment
not been made, an overpayment of
tax would have
occurred. This adjustment is therefore justified by the
the objective estimate
nature or general scheme of
to bring the
arrangements,
the aim of which is
quantifiable yield into line with actual
income for tax
purposes.

(158)

the

In view of
information provided in Spain's
comments, the Commission consequently considers that
these measures are tax measures justified by the nature
or general scheme of the tax regime.

(154)

the

In view of
information provided in Spain's
comments, the Commission consequently considers that
these measures are tax measures justified by the nature
or general scheme of the tax regime.

Reduction in the percentage used for calculating quarterly VAT
payments under the simplified arrangements for certain
farming activities

A reduction in the net yield under the scheme for the objective
assessment of personal income tax for agricultural and
stockfarming activities

(155)

In its comments, Spain explained that under
the
objective assessment scheme for farming activities, the
net yield is determined on the basis of a standard
operating
standard
account.
operating account
the diesel bill was
calculated using January 1999 diesel prices. Since the
rose between January 1999 and 1
price of diesel

determining

for 2001,

the

In

in diesel prices,

(159) Spain has explained in its comments that the reduction
in the percentages used for calculating quarterly VAT
payments under the simplified arrangements does not
affect the indices used to determine the payments. The
percentages were reduced provisionally because of the
increase
and neutralised in the
end-of-year payments. The reduction in the indices
affects only quarterly payments on account, not those
used to determine the annual tax due. This means that
at the end of the financial year, any difference between
the amount due according to the annual indices and the
amounts paid on a quarterly basis must be settled. In
conclusion, there was no reduction in the overall tax
burden calculated for 2001.

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(160) Consequently,

in view of the information provided by
Spain in its comments, the Commission considers that
these measures do not entail any reduction in the tax
burden. This position is based on the specific features of
the agricultural sector and does not prejudge decisions
that the Commission might adopt in other sectors.

increase was introduced to bring taxation into line with
the actual costs, and had it not been made, an
overpayment of
tax would have occurred. This
adjustment is therefore justified by the nature or general
scheme of the objective estimate arrangements, the aim
of which is to bring the quantifiable yield into line with
actual income for tax purposes.

Extension, for 2000 and 2001, of tax advantages
applicable to personal income tax on the transfer of
certain agricultural land and holdings

(166)

the

In view of
information provided in Spain's
comments, the Commission consequently considers that
these measures are tax measures justified by the nature
or general scheme of the tax regime.

(161) Spain maintains that this measure is not exclusively a
tax advantage, but rather that the advantage is granted
when the purchaser meets certain conditions, which are
designed to improve the management of agriculture in
Spain and rationalise the size of holdings.

Conclusion

land

(162) This extension of tax benefits for the transfer of certain
its
agricultural
confers
and
beneficiaries an advantage which relieves
them of
charges that are normally borne from their budgets. A
loss of tax revenue is equivalent to the consumption of
State resources in the form of tax expenditure.

holdings

on

(163) Consequently,
extension of
granted by the State.

this
the Commission considers
tax benefits constitutes a selective aid

that

Increase in the percentage of expenditure which is
difficult to substantiate in the context of personal
income tax

(164) Spain has explained in its comments that the reason for
the increase in the percentage of expenditure which is
difficult
to substantiate in the context of personal
income tax, which applied to agriculture and the 2000
to bring the
and 2001 financial years only, was
the
percentage
simplified method of the objective assessment scheme
into line with the actual
expenditure which that
percentage is supposed to represent (expenditure which
is difficult to substantiate and provisions), which has
risen because of the increased in the price of diesel.

expenditure

applicable

under

of

(167)

agricultural

to support

cooperatives,

In view of the information provided by Spain in its
comments, the amendment to Law No 37/1992, the
measures
the
measure applying a corrective index to feed purchased
from third parties in the case of certain stockfarming
activities subject to the objective assessment scheme, the
measure reducing the net yield in the scheme for the
objective assessment of personal income tax for farming
the measure reducing the percentage for
activities,
calculating quarterly VAT payments under the simplified
arrangements for certain agricultural activities and the
tax measure increasing the percentage of expenditure
which is difficult to substantiate in the context of tax on
personal income tax must be considered as tax measures
which are justified by the nature or general scheme of
the tax system, and therefore do not meet the criteria
for falling within the scope of Article 87 of the Treaty.

(168) Conversely,

the subsidy on loans and guarantees to
farmers and the tax measure extending, for 2000 and
2001, tax benefits applicable to personal income tax on
transfer of certain agricultural land and holdings must
be considered, in the first case as selective aid granted
by the State, and in the second case as a tax measure
attributable to the State and affecting the resources of
the State, both of which entail a selective advantage and
do not appear to be justified by the nature or general
scheme of the tax system.

(165) This increase in the percentage of expenditure which is
difficult to substantiate in the context of tax on personal
income tax is justified in that
this expenditure has
increased for farmers because of the rise in the price of
diesel, and if the percentage had not been increased, the
to deduct
said farmers would have been unable
expenditure which they had actually incurred. The

(169) Articles 87 and 88 of

the Treaty apply to all

the
agricultural products in Annex I to the Treaty subject to
a common organisation of the market (all agricultural
products except
the
for potatoes not
production of starch, horsemeat, honey, coffee, alcohol
of agricultural origin, vinegar made from alcohol and
in accordance with the various Regulations
cork)
governing the common organisations of the market.

intended for

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(170) Under Article 87(1) of the Treaty, any aid granted by a
Member State or through State resources in any form
whatsoever which distorts or
to distort
competition by favouring certain undertakings or the
production of certain goods is incompatible with the
common market, in so far as it affects trade between
Member States.

threatens

(171)

In this case, the aid measures confer on beneficiaries an
advantage that alleviates the normal burden on their
budget. They are granted by the State or through State
resources. They are specific or selective in that they
in this case
favour certain companies or products,
farmers.

(176)

direct and immediate effect on the production costs of
agricultural products in Spain. They therefore confer an
economic advantage over farms in other Member States
which do not have access to comparable aid. They
thereby distort or threaten to distort competition.

the above,

the aid at

In view of
issue must be
considered as State aid meeting the criteria of Article
87(1) of the Treaty. However, there are some exceptions
to the principle of incompatibility laid down in Article
87(1).

that

engage

implies

criterion

States. This

(172) To fall within the scope of Article 87(1) of the Treaty,
aid must also affect competition and trade between
the
Member
beneficiaries of
in an
the measure must
economic activity. The case law on this provision has
repeatedly stated that international trade is considered to
be affected when the beneficiary company engages in an
economic activity which is the subject of trade between
the Member States. By the very fact
the aid
strengthens the position of the beneficiary company in
relation
in
intra-Community trade, trade can be considered to be
affected.

companies

competing

other

that

to

(173)

(174)

issue,

In the case at
the beneficiaries engage in an
economic activity which is the subject of trade between
the Member States. Indeed, there is substantial trade in
products
agricultural
the
In 1999, Spain exported EUR 11 329
Community.
million worth
the
agricultural
Community and imported agricultural products worth
EUR 7 382 million (23).

products

between

Spain

and

of

to

Indeed, the beneficiaries operate in a sector which is
particularly open to competition. It must therefore be
pointed out that
there is intense competition in the
farming sector between producers of the Member States
intra-Community
whose products are the subject of
fully in that
trade. Spanish producers participate
competition by exporting substantial quantities of
agricultural
States.
Furthermore, the large number of beneficiaries of these
aid measures will increase their impact on trade.

other Member

products

to

Article 87(2)(b) of the Treaty

(177) Article 87(2)(b) the Treaty provides that aid to make
caused by natural disasters or
good the damage
exceptional occurrences is compatible with the common
market. According to Spain these aid measures are
justified on the grounds that
they were intended to
make good the damage caused by an exceptional
occurrence.

(178) Spain argues that the disproportionate rise in the cost
of diesel caused public disturbances, strikes, energy and
food shortages and difficulties for the free transit of
goods across Community territory, which should be
an exceptional occurrence within the
considered
meaning of Article 87(2)(b) of the Treaty.

the

that

the notion of

common market,

exceptional occurrences wars,

(179) When considering exceptions from the general principle
laid down by Article 87(1) of the Treaty that State aid is
the
incompatible with
Commission holds
‘exceptional
occurrence' contained in Article 87(2)(b) must be
interpreted restrictively. Hitherto, the Commission has
accepted as
internal
disturbances or strikes and, with certain reservations
and depending on their extent, major nuclear or
industrial accidents and fires which result in widespread
loss. Because of the inherent difficulties in foreseeing
such events, the Commission evaluates the compatibility
of such aid on a case-by-case basis, having regard to its
previous practice and the scale of the occurrence at
the Community guidelines for
issue (point 11.2.1 of
State aid in agriculture).

(175) Consequently,

these aid measures can affect

trade in
as
agricultural products between Member
happens when aid confers an advantage on operators in
one Member State to the detriment of producers in
other Member States. The measures concerned have a

States,

(23) Source: Eurostat.

(180) The very wording of Article 87(2)(b) of

the Treaty
excludes any overcompensation of damage. Once the
existence of
an exceptional occurrence has been
demonstrated, the Commission will permit aid of up to
damage.
100 %

for material

compensate

to

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Compensation should normally be calculated at the level
the individual beneficiary, and in order to avoid
of
overcompensation,
should be
any payments
deducted from the amount of aid (point 11.2.2 of the
Community guidelines for State aid in agriculture).

due

Member States and distortions of competition without
any justification of Community interest and would
consequently be granting illegal advantages to operators
in certain Member States.

(181)

In the case at issue, the aid was granted because of the
rise in fuel prices, not the public disturbances, strikes
and energy and food shortages. These circumstances did
not cause the aid to be granted, but came about as a
result of the increase in fuel price.

(182) Spain has not demonstrated any link between the aid
granted and the damage sustained by beneficiaries as a
result of
It has not been
these aid
demonstrated that all
measures suffered damage from that circumstance nor
that
the aid relates to and does not
exceed the damage sustained by the farmers.

the rise in fuel prices.

the beneficiaries of

the amount of

(183) According to the Spanish authorities, the aim of the aid
is not to make good the losses borne by farmers but to
financial
enable
organisations
cash-flow
difficulties caused by the disproportionate increase in
diesel costs.

loans with
their

take out

in order

them to

to solve

(187) The Commission considers that

the aid measures in
question were not intended as regional aid to encourage
new investments or job creation, nor to compensate for
disadvantages relating to infrastructure affecting all the
producers in a region, but as aid to the agricultural
sector. Consequently, this aid is eminently sectoral and
must be evaluated in accordance with Article 87(3)(c).

(188) Article 87(3)(c) provides

that aid to facilitate the
development of certain economic activities or certain
economic areas, where such aid does not adversely
affect trading conditions to an extent contrary to the
common interest may be considered compatible with
the common market.

(184) The information provided by the Spanish authorities
does not conclusively show that all the beneficiaries of
these aid measures have sustained damage from this
cause or that the aid paid does not exceed the damage
sustained. The Commission is not pronouncing in this
decision on whether
in fuel prices
increase
constitutes
an exceptional occurrence within the
meaning of Article 87(2)(b) of the Treaty. This Decision
does not prejudge other decisions
the Commission
might adopt in other sectors.

the

(189) The measure extending, for 2000 and 2001, tax benefits
applicable to personal income tax on transfer of certain
agricultural
land and holdings could be considered an
investment aid in the primary production sector, given
that the tax benefit is linked to the transmission of farm
land and agricultural holdings. However, Law No
14/2000, which provides the legal basis for the grant of
that aid, lays down no requirement to meet any of the
the Community
conditions set out
guidelines for State aid in the agriculture sector.

in point 4.1 of

(185) Consequently,

these aid measures do not qualify for
exemption under Article 87(2)(b) of the Treaty as aid to
make
exceptional
good
occurrences.

damage

caused

the

by

Article 87(3) of the Treaty

(186) The exceptions provided for in Article 87(3) may be
granted only when the Commission determines that the
aid measure is needed to attain one of
the listed
objectives. To allow measures which do not meet that
condition to benefit from these exceptions would be
tantamount to allowing infringements of trade between

(190) Specifically,

investment aid may be granted only to
agricultural holdings the economic viability of which
can be demonstrated by an assessment of the holding's
prospects (24) and where the farmer possesses adequate
occupational skill and competence.
the
comply with minimum Community
holding must
and
standards
animal welfare. No aid may be granted for investments
having as their objective increased production for which
normal market outlets cannot be found. The maximum
rate of public support for investment is limited to 40 %
(50 % in less-favoured areas as defined in Article 17 of

environment, hygiene

regarding the

In addition,

(24) Aid for agricultural holdings in financial difficulty may not be
granted unless that aid meets the conditions set out
in the
Community guidelines on State aid for rescue and restructuring
firms in difficulty (OJ C 288, 9.10.1999, p. 2).

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Council Regulation (EC) No 1257/1999 of 17 May 1999
on support for rural development from the European
Agricultural Guidance and Guarantee Fund (25)),
(see
also Article 51(2) in conjunction with Article 7 of that
Regulation).

(191)

comments, Spain provided no information
In its
permitting verification of whether the investment aid at
issue meets the conditions set out in the aforementioned
guidelines. The Spanish authorities merely indicated that
these measures must be seen in the broader context of
the advantages granted to transferors, which are granted
only under certain circumstances, depending on the
party acquiring the land and holdings being transferred.
This measure is not just a tax advantage, rather the
advantage is granted when the purchaser meets certain
conditions which
the
management of agriculture in Spain and rationalise the
size of holdings.

to improve

intended

are

organisations, which are the exclusive competence of
the Community.

(195) Common market organisations are not restricted to
provisions governing the price regime, but consist of a
number of mechanisms and measures which,
taken
together, form a ‘complete and exhaustive' framework to
which the Commission confirms that there can be no
exceptions and which, according to the consistent case
law of the Court of Justice, does not allow the Member
States to adopt measures which might undermine or
create exceptions to it (See the judgment of the Court of
Justice in Case 177/78 Pigs and Bacon Commission v
McCarren and Company Limited (27)).

Conclusion

(196)

(192) Moreover, the aid in the form of guarantees made no
provision for the conditions which such aid must meet
in order to be compatible, as set out in the Commission
Notice on the application of Articles 87 and 88 of the
EC Treaty to State aid in the form of guarantees.

In the light of the reasoning set out above and the
Community rules applicable, the Commission considers
that, with regard to the exceptions provided for in
Article 87(2)(b) in the case of aid to make good the
damage caused by natural disasters or exceptional
occurrences, and in Article 87(3)(a) and (c) in the case
economic
of
development of certain regions or activities,
the aid
measures at issue can be deemed to adversely affect
trading conditions to an extent contrary to the common
interest and infringe Community rules and are not
eligible for any of
in
Article 87(2) and (3) of the EC Treaty.

the exemptions provided for

to promote

facilitate

the

aid

or

(193) Consequently,

the

extending

aid measures

tax
advantages on transfer of certain agricultural land and
holdings and the aid in the form of subsidies on loans
and guarantees must be regarded as incompatible with
the common market. This type of aid has no lasting
effect on development of the sector, since its immediate
effects disappear once the measure is abolished (see the
judgment of
Instance in Case
T-459/93 Siemens SA v Commission (26)). The direct
consequence of these aid measures is to improve the
production and marketing prospects of the beneficiaries
in relation to other operators not receiving comparable
aid, both in Spain and in other Member States.

the Court of First

(194)

It should also be borne in mind that these aid measures
to the
for agricultural products covered by Annex I
Treaty (all agricultural products except for potatoes not
intended for the production of starch, horsemeat, honey,
coffee, alcohol of agricultural origin, vinegar made from
alcohol and cork) are subject to common organisations
of the market, and that the Member States have limited
power to intervene in the operation of such market

VI. CONCLUSIONS

(197) The Commission concludes that Spain has granted the
aid at issue illegally, in breach of Article 88(3) of the
Treaty. The aid was illegal because it was granted before
the Commission had pronounced on its compatibility
with the common market.

(198) Furthermore, for the reasons set out above, those aid
measures are incompatible with the common market
because they fall within the scope of Article 87(1),
without being eligible
exceptions
for
provided for in Article 87(2) and (3).

any of

the

(199) When aid is incompatible with the common market, the
Commission must require the Member State to recover
the aid granted illegally. The requirement to recover aid,
which is also laid down in Article14(1) of Council
Regulation (EC) No 659/1999 of 22 March 1999 laying

(25) OJ L 160, 26.6.1999, p. 80.
(26) ECR 1995, p. II-1675.

(27) ECR 1979, p. 2161.

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down detailed rules for the application of Article 93 of
the EC Treaty (28), is necessary in order to re-establish
the previous situation by removing all
the financial
advantages enjoyed unduly by the beneficiaries since the
aid was granted.

Agriculture resolution of 15 November 2000 publishing a
Council of Ministers agreement of 10 November 2000 and the
measure extending, for 2000 and 2001, tax benefits applicable
to personal income on transfer of certain agricultural land and
holdings provided for in the seventh transitional provision of
Law No 14/2000 are incompatible with the common market.

(200) The aid granted must be repaid in full.

(201) Repayment must be made in accordance with Spanish
law. The amounts to be repaid must include interest
from the date the aid was granted to its actual recovery.
The interest must be calculated on the basis of
the
commercial rate, taking as a reference the rate used to
calculate
in
accordance with the Guidelines on national regional
aid (29).

equivalent of

the grant

regional

aid,

(202) This Decision does not prejudge any conclusions the
the
European

Commission might draw for
policy
common
Agricultural Guidance and Guarantee Fund (EAGGF).

the financing of
the

agriculture

by

HAS ADOPTED THIS DECISION:

Article 1

The measures implemented by Spain, namely the amendment
to Law No 37/1992 provided for in Royal Decree-Law No
10/2000,
the measures to support agricultural cooperatives
provided for in Royal Decree-Law No 10/2000 and the tax
measures provided for in the Order of 29 November 2000 of
the Ministry of Finance, which involve applying a corrective
index to feed purchased from third parties in the case of
certain stockfarming
to the objective
assessment scheme, reducing the net yield under the scheme
for
income tax for
farming activities,
reducing the percentage for calculating
quarterly VAT payments under the simplified arrangements for
certain agricultural activities, and the tax measure increasing
the percentage of expenditure which is difficult to substantiate
in the context of tax on personal income tax, do not constitute
State aid within the meaning of Article 87(1) of the EC Treaty.

the objective assessment of personal

activities

subject

Article 3

Spain shall abolish the schemes referred to in Article 2.

Article 4

1.
Spain shall adopt all measures necessary to recover from
the beneficiaries all aid referred to in Article 2 which has been
granted illegally.

the immediate and effective implementation of

Recovery shall be immediate and in accordance with the
2.
these
procedures laid down in Spanish law, provided that
permit
this
Decision. The amounts to be repaid must include interest from
the date the aid was made available to the beneficiaries to its
actual recovery. The interest must be calculated on the basis of
the reference rate used to calculate the grant equivalent of
regional aid.

Article 5

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

Article 6

This Decision is addressed to the Kingdom of Spain.

Done at Brussels, 11 December 2002.

Article 2

The State aid granted by Spain to farmers in the form of
subsidies on loans and guarantees provided for in a Ministry of

For the Commission

Franz FISCHLER

Member of the Commission

(28) OJ L 83, 27.3.1999, p. 1.
(29) OJ C 74, 10.3.1998, p. 9.