Invitation to submit comments pursuant to Article 1(2) in Part I of Protocol 3 to the Surveillance and Court Agreement on the proposal for regionally differentiated social security contributions in Norway (Case No 56310 — former Case No 55463)
Date: 2005-03-10
Institutions: EFTA Surveillance Authority
Subjects: EFTA countries, European Economic Area, Norway, control of State aid, social-security contribution, supervisory body

10.3.2005

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Official Journal of the European Union

C 60/9

EUROPEAN ECONOMIC AREA

EFTA SURVEILLANCE AUTHORITY

Invitation to submit comments pursuant to Article 1(2) in Part I of Protocol 3 to the Surveillance
and Court Agreement on the proposal for regionally differentiated social security contributions in
Norway (Case No 56310 — former Case No 55463)

(2005/C 60/09)

By means of Decision 245/04/COL of 6 October 2004, reproduced in the authentic language on the pages
following this summary, the EFTA Surveillance Authority initiated proceedings pursuant to Article 1(2) in
Part I of Protocol 3 of the Agreement between the EFTA States on the establishment of a Surveillance
Authority and a Court of Justice (Surveillance and Court Agreement). The Norwegian Government has
been informed by means of a copy of the decision.

The EFTA Surveillance Authority hereby gives the Contracting Parties to the EEA Agreement and interested
parties notice to submit their comments on the measure in question within one month from the publica-
tion of this notice to:

EFTA Surveillance Authority
35, rue Belliard/Belliardstraat 35
B-1040 Brussels

The comments will be communicated to the Government of Norway. Confidential treatment of the identity
of the interested party submitting the comments may be requested in writing, stating the reasons for the
request.

SUMMARY

Procedure

By letter from the Norwegian Mission to the European Union dated 26 April 2004, the Norwegian authori-
ties notified the Authority pursuant to Article 1(3) in Part I of Protocol 3 to the Surveillance and Court
Agreement of their intention to apply reduced rates of social security contributions to undertakings active
in certain sectors and located in designated geographical Zones 2, 3 and 4 in Norway.

Description of the aid measure

The Norwegian authorities have proposed to apply from January 2005 onwards the reduced rates of
employers' social security contributions valid until the end of 2003 in tax Zones 2, 3 and 4 of Norway.
These rates were as follows: Zone 2, applicable rate 10,60 %; Zone 3, applicable rate 6.4 and Zone 4,
5,1 %. These rates compare with the full rate of 14,1 % applicable in Zone 1. The tax is levied on the basis
of gross salaries.

The notified scheme will be applicable to 209 NACE (1) sectors identified on the basis of an economic
report drafted by the consultancy firm ECON which assessed the competition interfaces (‘konkurranse-
flater’) between undertakings located in Norway and those in other EEA States (2).

(1) Classification of industrial sectors.
(2) See below for the table with the identified NACE codes. Cipher 0 means that according to the Norwegian authorities
there is no effect on trade in these sectors, whereas cipher 0/2 indicates that some undertakings of the given sectors
within the actual zone are exposed to competition from other EFTA States whereas others are not.

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The notification was based on the assumption that activities in the notified sectors are not subject to intra-
EEA trade. Consequently, in the view of the Norwegian Government, undertakings in these sectors can
benefit from reduced rates of social security contributions without being granted State aid within the
meaning of Article 61(1) of the EEA Agreement.

Reference should be made in this context to the scheme of regionally differentiated social security contribu-
tions approved by the Authority with Decision 218/03/COL of 12 November 2003 (1). This scheme
foresaw the application in Zones 3 and 4 of reduced and differentiated rates of social security contributions
to any undertakings located within these areas. Following the approval of a transitional period by the
Authority, these rates should be progressively increased over a period of three years to reach the uniform
rate of 14,1 %.

Contrary to the prior scheme, the notified scheme of reduced social security rates proposes the indefinite
application of regionally differentiated social security rates exclusively to certain sectors of the economy,
mainly within the services segment.

Assessment

The Authority has doubts regarding the non-State aid nature of the notified scheme as alleged by the
Norwegian authorities.

The application of reduced social security contributions represents reduced social security revenues for the
State. Whenever the State is foregoing income normally due, there is a consumption of State resources.

The favourable rates of social security contributions would thus provide an advantage to any undertaking
active in any of the sectors included in the listed sectors which is located in Zones 2, 3 and 4 of Norway.

The measure would not only distort competition with respect to undertakings of the same sector located in
areas not benefiting from the notified scheme but also with respect to those undertakings located in the
differently treated areas within the scheme since the applicable rates vary from one zone to the other.

The Authority has doubts concerning the method and the approach followed to determine the lack of
effect on trade between the Contracting parties to the EEA Agreement. It has even more doubts as to
whether the approach is in line with the interpretation of the criterion ‘effect on trade’ within the meaning
of Article 61(1) of the EEA Agreement made by Jurisprudence.

Given the broad sectoral coverage of more than 209 NACE sectors, the lack of precise and clear eligibility
criteria as well as the failure to implement a control and review mechanism to assure the necessary legal
and economic certainty in its application, the Authority has doubts about whether the scheme qualifies or
not as State aid within the meaning of Article 61(1) of the EEA Agreement.

Conclusion

The Authority has doubts as to the State aid nature of the notified scheme of regionally differentiated
social security rates within the meaning of Article 61(1) of the EEA Agreement. Should the measure consti-
tute State aid, the Authority has doubts as to whether it may be regarded as compatible with the func-
tioning of the EEA Agreement. Consequently, the Authority is obliged to initiate the formal investigation
procedure provided for in Article 1(2) in Part I of Protocol 3 of the Surveillance and Court Agreement.

(1) Not yet published in the Official Journal. The EFTA Surveillance Authority's State Aid decisions can be found on its

website: http://www.eftasurv.int/fieldsofwork/fieldstateaid/stateaidregistry/

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EFTA SURVEILLANCE AUTHORITY DECISION

No 245/04/COL

of 6 October 2004

on a proposal for regionally differentiated rates of social security contributions for certain sectors

(Norway)

THE EFTA SURVEILLANCE AUTHORITY,

Having regard to the Agreement on the European Economic Area (1), in particular to Articles 61 to 63 and
Protocol 26 thereof,

Having regard to the Agreement between the EFTA States on the establishment of a Surveillance Authority
and a Court of Justice (2), in particular to Article 24 thereof and Article 1(2) in Part I of Protocol 3 thereof,

Having regard to the Authority's Guidelines (3) on the application and interpretation of Articles 61 and 62
of the EEA Agreement,

Whereas:

I. FACTS

1. Procedure

Pursuant to Article 1(3) in Part I of Protocol 3 to the Surveillance and Court Agreement, the Norwegian
authorities notified their intention to apply reduced rates of social security contributions to undertakings
active in certain sectors and located in designated geographical Zones 2, 3 and 4 in Norway. The notifica-
tion was sent by letter dated 26 April 2004 from the Norwegian Mission to the European Union,
forwarding a letter from the Ministry of Trade and Industry together with a letter from the Ministry of
Finance both dated 23 April 2004, received and registered by the EFTA Surveillance Authority (hereinafter:
‘the Authority’) on 27 April 2004 (Event No 278992).

On 3 May 2004, a meeting was held in Oslo between representatives of the Authority and the Norwegian
authorities to discuss the notification.

Following this meeting, by letter dated 23 June 2004 (Event No 279843), the Authority requested addi-
tional information and clarification from the Norwegian authorities.

The Norwegian authorities replied to the information request by letter dated 12 August 2004 from the
Norwegian Mission to the European Union, received and registered by the Authority on 13 August 2004
(Event No 290198).

A further discussion between representatives of the Authority and the Norwegian authorities was held in
the framework of a package meeting which took place in Oslo on 23 September 2004.

2. Background

On the basis of the Norwegian Social Security Act of 28 February 1997 (‘Lov om folketrygd’), all employers
in Norway are subject to compulsory contributions to the national social security scheme. These contribu-
tions are calculated in relation to gross salaries of employees and differentiated according to the place of
residence of the employees. For this purpose, Norway is divided into five geographical zones. Zone 1
covers the most central parts of the southern part of the country. Zone 2 comprises less central parts of
Southern Norway. Zone 3 covers mostly certain mountain regions in Southern Norway. Zone 4 is made
up of the most northern part of South Norway and North Norway south of Zone 5. Zone 5 covers the
very northernmost part of the country. A detailed overview of the geographical zones is given in Annex I
to this Decision.

(1) Hereinafter referred to as ‘the EEA Agreement’.
(2) Hereinafter referred to as ‘the Surveillance and Court Agreement’.
(3) Procedural and Substantive Rules in the Field of State Aid — Guidelines on the application and interpretation of Arti-
cles 61 and 62 of the EEA Agreement and Article 1 of Protocol 3 to the Surveillance and Court Agreement, adopted
and issued by the EFTA Surveillance Authority on 19 January 1994, published in OJ 1994 L 231, EEA Supplements
03.09.94 No 32, last amended by the Authority's Decision No 195/04/COL of 14 July 2004, not yet published, here-
inafter referred to as ‘the State Aid Guidelines’.

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The Authority opened the formal
investigation procedure with respect to the regionally differentiated
social security contribution rates in Norway on 19 November 1997 (1). On 2 July 1998, the Authority
adopted a decision (2) in which it found that the system provided, through the State budget, a benefit to
certain undertakings, which could not be justified on the basis of the general nature and character of the
system and which distorted or threatened to distort competition within the European Economic Area. The
system of regionally differentiated social security rates was declared incompatible State aid and had to be
brought in line with the rules of the EEA Agreement.

On 2 September 1998, the Norwegian authorities brought an action under Article 36(1) of the Surveillance
and Court Agreement before the EFTA Court requesting the annulment of the Decision of 2 July 1998.

The Court dismissed the application for annulment on 20 May 1999 (3) and upheld the Authority's deci-
sion which considered that the system of differentiated social security contributions constituted State aid
within the meaning of Article 61(1) of the EEA Agreement.

With a view to complying with the Authority's decision of 2 July 1998, the Norwegian authorities
proposed new regulations in the regionally differentiated social security contributions scheme. On 22
September 1999, the Authority approved the new regulations for a limited period of time, not going
beyond 31 December 2003 (4).

On 21 December 2000, the European Commission took a negative decision concerning a reduced social
security contributions aid scheme notified by Sweden (5). In the decision, the Commission pointed out that
Norway, by letter dated 27 July 2000, not only submitted comments to the decision to initiate the proce-
dure regarding the Swedish case but also confirmed that it operates a similar scheme.

In the light of the Swedish decision, the Norwegian system was thereafter discussed at several meetings
between the Norwegian authorities and the Authority, as well as between the Authority and the services of
the European Commission. In view of the similarities between the Norwegian and the Swedish schemes
and in order to assure a level playing field within the EEA, the Authority considered it necessary to
examine the compatibility of the Norwegian scheme and initiated a formal review of the Norwegian
system by letter to the Norwegian authorities dated 4 June 2002 (Doc. No: 02-4189 D).

In its Decision of 25 September 2002 (6), the Authority concluded that the regionally differentiated social
security contributions scheme did not qualify for the derogation provided for under Article 61(3)(c) of the
EEA Agreement and proposed the adoption of appropriate measures requesting the elimination of any
incompatible aid involved in the system or to render it compatible with effect from 1 January 2004.

By letter from the Mission of Norway to the European Union dated 29 October 2002, received and regis-
tered by the Authority on 31 October 2002 (Doc. No: 02-7855 A), the Norwegian authorities accepted the
appropriate measures.

In March 2003, the Norwegian authorities notified the Authority of a three-year transitional period, from
2004 to 2007, for the progressive adjustment of the rates of social security contributions applicable in
Zones 3 and 4 (Doc. No: 03-1846 A). According to the notification, the social security rates would be as
follows (7):

Rates 2003

Rates 2004

Rates 2005

Rates 2006

Rates 2007

Zone 1

Zone 2

Zone 3

Zone 4

14,1

10,6

6,4

5,1

14,1

14,1

8,3

7,3

14,1

14,1

10,2

9,5

14,1

14,1

12,1

11,7

14,1

14,1

14,1

14,1

(1) Decision No 246/97/COL. All EFTA Surveillance Authority's State Aid Decisions mentioned hereinafter can be found

at the Authority's website:
http://www.eftasurv.int/fieldsofwork/fieldstateaid/stateaidregistry/

(2) Decision No 165/98/COL.
(3) Case E-6/98, The Government of Norway v EFTA Surveillance Authority [1999] Report of the EFTA Court, page 76.
(4) Decision No 228/99/COL.
(5) Published on the OJ L 244 of 14 September 2001, page 32.
(6) Decision No 172/02/COL.
(7) Undertakings in certain economic sectors would pay the full rate of 14,1 % as they already did according to the
scheme approved by the Authority's decision of 22 September 1999. The Norwegian authorities also informed about
their intention to continue applying the rates for 2003 to the extent that that would be in compliance with the de
minimis rule.

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Zone 1 covers 76,6 % of the total population in Norway whereas Zone 2 only covers 9,4 %, Zone 3 covers
2,6 % and Zone 4 covers 9,4 %.

By letter dated 15 April 2003 (Doc. No:03-2467 A), the Norwegian authorities had also notified a conti-
nuation of regionally differentiated social security contributions in Nord-Troms and Finnmark (Zone 5).
This notification was however withdrawn by letter from the Norwegian Ambassador to the European
Union dated 4 July 2003 (Doc. No: 03-4403 A) as the EFTA States, by common accord in the Standing
Committee of the EFTA States on 1 July 2003 (No 2/2003/SC), and by reference to Article 1(2) of Protocol
3 to the Surveillance and Court Agreement, had decided that the present scheme in Zone 5 was compatible
with the EEA Agreement due to the exceptional circumstances in this zone.

After opening the formal investigation procedure by a decision dated 16 July 2003 (1), the Authority
authorised the notified three-year transitional period for the regionally differentiated social security contri-
butions in Zones 3 and 4 by Decision No 218/03/COL of 12 November 2003. In this decision, the
Authority noted that without a transitional period, the increase in the social security payments would lead
to adverse employment effects. The Authority observed that a gradual phasing out of the differentiated tax
rates over a period of three years would mean that the annual cost increases for the undertakings would be
spread over the period. On the contrary, an immediate abolishment of the current system would have
implied a cost shock to the enterprises concerned. An appropriate transition period seemed advisable in
order to mitigate the shock effects and give the undertakings time to adjust to the new economic environ-
ment.

3. Detailed description of the notified measure

The Norwegian authorities have notified the Authority of their intention to apply, for certain economic
sectors, from 1 January 2005 onwards, the regionally differentiated rates of social security contributions
that existed until the end of 2003 (2).

Zone 5 is kept outside the notification as the rate there continues to be zero following the Decision of the
Standing Committee of the EFTA States No 2/2003/SC of 1 July 2003.

The notified scheme will only be applicable for certain sectors which, according to the Norwegian authori-
ties, are not exposed to competition from undertakings in other EEA States. The Norwegian authorities
assessed the exposure to competition on the basis of an economic report prepared by an independent
consultancy firm ECON in cooperation with a Norwegian law firm (hereinafter: ‘the ECON report’). The
ECON report is based on the assessment of the competition interfaces (‘konkurranseflater’) between under-
takings located in Zones 2, 3 and 4 in Norway and those in other EEA States.

The ECON report contains a list of sectors supposedly not affected by competition from other EEA States.
This list has been drafted on the basis of data on export and import figures to the relevant zones provided
by Statistics Norway. In addition, several telephone interviews were made with a selection of enterprises in
the services sector in Zones 2, 3 and 4 in Norway. In the introduction to the report, ECON states that
there was not enough time or resources to conduct a thorough analysis within all sectors covered by the
report. In most cases, the assessment was built on interviews with selected enterprises. Due to this fact,
there is a risk of failure. ECON is nonetheless of the opinion that a reasonable picture of competition
between EEA States can be drawn from the outcome of the report.

The current notification is thus based on the assumption that activities in the notified sectors are not
subject to intra-EEA trade. The Norwegian authorities consider that the notified scheme does not constitute
State aid within the meaning of Article 61(1) of the EEA Agreement because, on the basis of the ECON
report, there is no trade effect in the sectors benefiting from the intended application of reduced social
security rates. Consequently,
in view of the Norwegian authorities, undertakings in these sectors can
benefit from reduced social security contributions without being granted State aid within the meaning of
Article 61(1) of the EEA Agreement.

Contrary to the approved three-year transitional period (Decision No 218/03/COL), the scheme of region-
ally differentiated social security rates currently notified proposes an indefinite application of regionally
differentiated social security rates exclusively to certain sectors of the economy, mainly within the services
segment of the economy.

The list of sectors (3) subject to the current notification breaks down as follows, whereby the cipher 0
means that according to the Norwegian authorities there is no effect on trade in these sectors and the
ciphers 0/2 indicates that some undertakings of the given sectors within the actual zone are exposed to
competition from other EEA States whereas others are not:

(1) Decision No 141/03/COL.
(2) Reference is made to the table above.
(3) NACE list of sectors according to the classification of the Norwegian Statistical Office.

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NACE Code

Zone 2

Zone 3

Zone 4

01.300 Growing of crops combined with farming of animals

n.a. (1)

(mixed farming)

22.120 Publishing of newspapers

22.210 Printing of newspapers

35.111 Building and repairing of ships and hulls more than

100 g.r.tons

35.113 Building and repairing of ships less than 100 g.r.tons

40.120 Transmission of electricity

45.110 Demolition and wrecking of buildings; earth moving

45.212 General construction of civil engineering works

45.221 Tinsmith work

45.229 Other erection of roof covering and frames

45.230 Construction of motorways, roads, airfields and sport

facilities

45.240 Construction of water projects

45.250 Other construction work involving special trades

45.310 Installation of electrical wiring and fittings

45.320 Insulation work activities

45.330 Plumbing

45.340 Other building installation

45.442 Glazing

45.450 Other building completion

0/2

0/2

0/2

0/2

0

0

0

n.a.

n.a.

0

0

0

0

n.a.

0

0

n.a.

0

45.500 Renting of construction or demolition equipment with

n.a.

operator

50.200 Maintenance and repair of motor vehicles

50.301 Commission- and wholesale of motor vehicle, motor

vehicle parts and accessories

50.302 Retail sale of motor vehicle parts and accessories

50.500 Retail sale of automotive fuel

0

0

0

0

51.170 Agents involved in the sale of

food, beverages and

n.a.

tobacco

51.180 Agents specializing in the sale of particular products or

n.a.

ranges of products n.e.c.

51.210 Wholesale of grain, seeds and animal feeds

51.220 Wholesale of flowers and plants

51.389 Wholesale of molluscs n.e.c.

51.390 Non-specialized wholesale of food, beverages and tobacco

51.421 Wholesale of clothing

0

n.a.

n.a.

n.a.

0

51.434 Wholesale of gramophone records, tapes, CD, DVDs and

n.a.

videos

51.460 Wholesale of pharmaceutical goods

51.477 Wholesale of sport goods, games and toys

51.479 Wholesale of household goods and personal goods n.e.c.

51.520 Wholesale of metals and metal ores

51.532 Wholesale of lumber

51.533 Wholesale of paints and varnish

51.539 Wholesale of construction materials n.e.c.

51.561 Wholesale of paper and paperboard

51.840 Wholesale of computers, computer peripheral equipment

and software

n.a.

0

n.a.

n.a.

0

n.a.

0

0

0

n.a.

0/2

0/2

0/2

0/2

0

0

0

n.a.

n.a.

0

n.a.

0

0

n.a.

0

n.a.

n.a.

n.a.

0

0

n.a.

0

0

n.a.

n.a.

0

n.a.

n.a.

0

0

n.a.

n.a.

n.a.

n.a.

n.a.

0

n.a.

n.a.

n.a.

0

0

0/2

0/2

0/2

0/2

0

0

0

0

0

0

n.a.

0

0

0

0

0

0

0

0

0

0

0

0

0/2

0

0

0

0

0

0

0

0

n.a.

0

0

0

0

0

0

0

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NACE Code

Zone 2

Zone 3

Zone 4

51.850 Wholesale of other office machinery and equipment

51.872 Wholesale of shipping equipment and fishing tackle

51.900 Other wholesale

n.a.

n.a.

0

52.110 Retail sale in non-specialized stores with food, beverages

0/2

or tobacco predominating

52.120 Other retail sale in non-specialized stores

52.220 Retail sale of meat and meat products

52.230 Retail sale of fish, crustaceans and molluscs

52.241 Retail sale of bread, cakes and flour confectionery

52.271 Retail sale of health food

0

0

n.a.

0

n.a.

52.279 Retail sale of food, beverages and tobacco in specialised

n.a.

stores n.e.c.

52.310 Dispensing chemists

52.330 Retail sale of cosmetic and toilet articles

52.410 Retail sale of textiles

52.420 Retail sale of clothing

52.431 Retail sale of footwear

52.441 Retail sale of lighting equipment

52.442 Retail sale of china and glass ware

52.443 Retail sale of furniture

52.449 Retail sale of non electrical household articles n.e.c.

0

n.a.

0

0

0

n.a.

n.a.

0

n.a.

52.451 Retail sale of electrical household appliances, and radio

0

and television goods

52.453 Retail sale of musical instruments and musical notes

52.461 Retail sale of variety of hardware, paints and glass

52.463 Retail sale of paints and varnish

52.464 Retail sale of wood

52.469 Retail sale of hardware, paints and glass n.e.c.

52.481 Retail sale of watches, photographic and optical goods

52.482 Retail sale of gold and silver ware

52.483 Retail sale of sport goods, games and toys

52.484 Retail sale of flowers and plants

n.a.

0/2

0

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

52.485 Retail sale of computers, office and telecommunication

n.a.

equipment

52.489 Retail sale in specialised stores n.e.c.

52.612 Retail sale of textiles, clothes, footwear, travel accessories

and leather goods via mail order houses

52.619 Other retail sale of specialised assortment of goods via

mail order houses

52.630 Other non-store retail sale

52.720 Repair of electrical household goods

55.301 Operation of restaurants and cafés

55.302 Operation of snack bars, salad bars and hot dog bars

55.401 Pubs

55.510 Canteens

55.520 Catering

60.220 Taxi operation

63.110 Cargo handling

n.a.

0

0

n.a.

n.a.

0

n.a.

0

0

0

n.a.

0

n.a.

n.a.

0

0/2

0/2

n.a.

n.a.

n.a.

n.a.

n.a.

0

n.a.

0

0

0

n.a.

n.a.

0

0

0

n.a.

0/2

0

n.a.

0

0

0

n.a.

n.a.

n.a.

0

n.a.

n.a.

n.a.

n.a.

0

0

0

n.a.

n.a.

0

n.a.

0

0

0

0/2

0/2

n.a.

0

0

0

0

0

0

0

0/2

0

0

0

0/2

0

0

0

0/2

n.a.

0/2

0

0

0

0

0

0

0

n.a.

0

0

0

0

0

0

0

0

0

0

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NACE Code

Zone 2

Zone 3

Zone 4

63.120 Storage and warehousing

n.a.

63.211 Central agencies for goods and transportation procure-

0

ment

63.212 Parking places and parking houses

63.213 Toll bar stations

63.219 Other services allied to land transport

63.221 Operation of harbours

63.229 Other supporting water transport activities

63.230 Other supporting air transport activities

63.302 Tourist offices

63.401 Freight forwarding services

63.409 Other forwarding services

64.110 National post activities

64.120 Courier activities other than national post activities

64.210 Fixed telecommunications carriers

64.220 Mobile telecommunications carriers

64.230 Internet service providers

64.240 Other telecommunication activities

65.120 Other monetary intermediation

65.220 Other credit granting

65.239 Other security management

66.010 Life insurance

66.030 Non-life insurance

67.130 Activities auxiliary to financial intermediation

67.200 Activities auxiliary to insurance and pension funding

70.111 House building cooperatives

70.112 Other development and sale of real estate

70.120 Buying and selling of own real estate

70.202 Other letting of own property

70.310 Real estate agencies

70.321 Management of real estate on a fee or contract basis

70.322 Caretaker services

71.110 Renting of automobiles

71.320 Renting of construction and civil engineering machinery

and equipment

71.340 Renting of other machinery and equipment n.e.c.

71.400 Renting of personal and household goods n.e.c.

n.a.

n.a.

0

n.a.

n.a.

0

n.a.

0

n.a.

0

n.a.

0

0

n.a.

n.a.

0

0

n.a.

n.a.

0

n.a.

n.a.

n.a.

n.a.

n.a.

0

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

0

72.500 Maintenance

and repair of office,

accounting and

n.a.

computing machinery

74.110 Legal activities

74.121 Accounting, book-keeping

74.122 Auditing

74.130 Market research and public opinion polling

74.140 Business and management consultancy activities

74.203 Geological surveying

74.300 Technical testing and analysis

74.400 Advertising

74.501 Labour recruitment of personnel

n.a.

0

0

n.a.

0

n.a.

0

0

0

n.a.

0

n.a.

n.a.

0

n.a.

n.a.

0

0

0

n.a.

0

0

n.a.

n.a.

n.a.

n.a.

0

n.a.

n.a.

n.a.

0

n.a.

0

n.a.

n.a.

0

0

n.a.

0

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

0

0

n.a.

n.a.

n.a.

0

n.a.

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

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NACE Code

Zone 2

Zone 3

Zone 4

74.600 Investigation and security activities

74.700 Industrial cleaning

74.810 Photographic activities

74.820 Packaging activities

74.851 Secretarial activities

74.852 Translation activities

74.871 Bill collecting, credit granting activities

74.877 Activities of fairs, exhibitions and congress organisers

74.879 Other business activities n.e.c.

75.110 General (overall) public service activities

75.120 Regulation of the activities of agencies that provide health
care, education, cultural services and other social services,
excluding social security

75.130 Regulation of and contribution to more efficient opera-

tion of business

75.140 Supporting service activities for the government as a

whole

75.220 Defence activities

75.230 Justice and judicial activities

75.240 Public security, law and order activities

75.250 Fire service activities

75.300 Compulsory social security activities

80.102 Primary and lower secondary education

80.103 Specialised education for handicap

80.210 General secondary education

80.309 Education at other colleges

80.410 Driving school activities

80.421 Folk high school education

80.423 Activities of adult education associations

80.424 Activities of municipal music schools

80.429 Other education

85.114 Rehabilitation institutions

85.116 Mental health hospitals for adults

85.118 Nursing homes

85.121 General practitioners

85.122 Physicians, specialist other than psychiatrist

85.130 Dental practice activities

85.142 Physiotherapy services

85.143 School health services, maternal and child health care

85.144 Other preventive health care

85.147 Ambulance services

85.149 Other health activities

85.200 Veterinary activities

85.311 Child welfare institutions

85.312 Institutions for alcoholic and drug addicts

85.319 Other social care institutions

0

0

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

0

0

0

0

0

0

0

0

0

0

0

0

0

n.a.

n.a.

0

n.a.

n.a.

0

0

0

0

n.a.

n.a.

0

n.a.

0

n.a.

0

0

0

0

0

n.a.

0

0

n.a.

n.a.

0

n.a.

n.a.

n.a.

0

0

0

0

n.a.

0

0

0

0

0

0

0

0

n.a.

n.a.

0

0

0

0

0

0

0

n.a.

n.a.

0

n.a.

n.a.

0

0

0

0

n.a.

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0/2

0

0

0

0

0

0

n.a.

0

0

0

0

0

n.a.

0

0

0

0

n.a.

0

0

C 60/18

EN

Official Journal of the European Union

10.3.2005

NACE Code

Zone 2

Zone 3

Zone 4

85.321 Home help services

85.322 Dwellings with accommodation for elderly and disabled

85.323 Child welfare services

n.a.

n.a.

0

85.324 Social welfare services without accommodation for alco-

n.a.

holic and drug addicts

85.325 Family counselling services

85.326 Municipal social service offices activities

85.327 Early childhood education and care institutions

85.331 School-age child care

85.333 Day care activities for elderly and disabled

85.334 Training for work activities for ordinary labour market

85.335 Permanent sheltered work activities

85.336 Social welfare organisations activities

85.337 Reception centres for asylum seekers

85.338 Employment/training for work activities under the muni-

cipal health and social departments

n.a.

n.a.

0

n.a.

n.a.

0

0

n.a.

0

0

85.339 Other social work activities without accommodation

n.a.

90.010 Collection and treatment of sewage

90.020 Collection and treatment of other waste

91.110 Activities of business and employers organizations

91.200 Activities of trade unions

91.310 Activities of religious organizations

91.330 Activities of other membership organizations n.e.c.

92.110 Motion picture and video production

92.130 Motion picture projection

92.200 Radio and television activities

92.320 Operation of arts facilities

92.330 Fair and amusement park activities

92.400 News agency activities

92.510 Library and archives activities

92.521 Museum activities

92.522 Preservation of historical sites and buildings

92.610 Operation of sports arenas and stadiums

92.621 Sport clubs and associations

92.629 Other sporting activities n.e.c.

92.721 Activities and adventure companies

92.729 Other recreational services n.e.c.

93.010 Washing and dry-cleaning of textile and fur products

93.020 Hairdressing and other beauty treatment

93.030 Funeral and related activities

93.040 Physical well-being activities

(1) The reference „n.a.“ hereinafter means „not applicable“.

0

0

n.a.

n.a.

0

0

n.a.

n.a.

0

0

n.a.

n.a.

0

0

n.a.

0/2

0

n.a.

n.a.

0

0

n.a.

n.a.

0

n.a.

n.a.

n.a.

0

n.a.

n.a.

0

n.a.

n.a.

0

0

n.a.

0

n.a.

0

n.a.

0

0

n.a.

0

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

0

0

0

0

n.a.

0

0

0

0

n.a.

0

0

0

0

0

0

0

0

0

0

0

0

0

0

n.a.

n.a.

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

n.a.

0

0

0

0

0

10.3.2005

EN

Official Journal of the European Union

C 60/19

Regarding the sectors marked with the ciphers 0/2, the following criteria have been established in order to
differentiate between undertakings not subject to competition from undertakings located in other EEA
States and those undertakings which are affected by EEA-wide competition in that only the former are
entitled to benefit from reduced social security rates:

— NACE Code 22.120 and 22.210: publishing and printing of newspapers

Due to language, culture and distance, the publishing and printing of local newspapers is considered to
operate only in local markets. A newspaper is considered local as long as it is not nationwide.

— NACE 35.111 and 35.113: building and repairing of ships and hulls over 100 tons and under 100 tons

As long as the repair concerns ships operating in Norwegian waters or in acute difficulties, the given
shipyards are considered to operate locally and thus not subject to competition from other EEA States.

— NACE 51.170: agents involved in the sale of food, beverages and tobacco

The Norwegian authorities have not provided any further explanation on the eligibility criteria applic-
able to undertakings of this sector. According to the ECON report, on the basis of the retail shops they
distribute, it was not possible to separate enterprises subject to competition from those which are not.

— NACE 52.110: retail sale in non-specialised stores with food, beverages or tobacco predominating

Undertakings that are located at a distance of more than 150 kilometres from competitors on the other
side of the national border are considered not to be exposed to competition from other EEA States.
According to the information submitted by the Norwegian authorities, the use of a critical distance of
150 km was established by identifying the nearest competitors situated on the other side of the border
to undertakings with the standard industrial classification 52.110, non specialised retail sales. The
competition conditions were considered with respect to undertakings located at varying distances from
the nearest competitor on the other side of the border. On the basis of the conclusions of the ECON
report, the Norwegian authorities stated that the probability that undertakings situated more than
150 km from a competitor are exposed to competition from undertakings in other EEA states is low.
The Norwegian authorities acknowledge that whether there is actual competition depends on the
assortment of goods offered.

— NACE 52.120, 52.420 and 52.443: other retail sale in non-specialised stores, retail sale of clothing and retail

sale of furniture

Although the distance to competitors on the other side of the border is of significance, the Norwegian
authorities acknowledge that it is difficult to determine an absolute and decisive limit between under-
takings affected by intra-EEA trade and those which are not affected. Whereas undertakings located
approximately 200 km from a relatively large shopping centre on the other side of the border are
exposed to competition, according to the findings of the ECON report, undertakings located closer to
the border, but without having any large shopping centre on the other side, are not exposed to compe-
tition. Nevertheless, following the same assessment as for NACE 52.110, the Norwegian authorities
have explained in the notification that a distance of 200 km seems an appropriate objective criterion
to determine the effect on trade for this sector.

— NACE 52.461 and 52.464: retail sale of variety of hardware, paints and glass and retail sale of wood

The Norwegian authorities have explained that undertakings located at ‘a very long distance to the national
border’ are not exposed to competition from undertakings of other EEA States. On the basis of the infor-
mation provided, ‘a very long distance to the national border’ means that it would not be worth traveling
back and forth in one day, whereby the distance depends on i.a. the road standard and traffic condi-
tions. Undertakings situated in the counties Rogaland, Hordaland, Sogn og Fjordane and Møre og
Romsdal can benefit from reduced social security rates since they are not exposed to competition from
other EEA States. Undertakings in other counties are excluded.

— NACE 80.309: education at other colleges

The notification only covers adult education courses.

— NACE 92.610: operation of sports arenas and stadiums

An athletic club is considered to be local when it does not participate in the highest division in its
branch of athletics. Other sports installations are considered to be local when they are mainly used by
local clubs, the local population in the municipality and daytrip visitors, having no competitive offers
in other EEA States.

C 60/20

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Official Journal of the European Union

10.3.2005

II. APPRECIATION

1. Procedural requirements

Pursuant to Article 1(3) in Part I of Protocol 3 to the Surveillance and Court Agreement, ‘the EFTA Surveil-
lance Authority shall be informed, in sufficient time to enable it to submit its comments, of any plans to grant or
alter aid (…). The State concerned shall not put its proposed measures into effect until the procedure has resulted in a
final decision.’

By submitting a notification by letter dated 26 April 2004 (Event No 278992) for the scheme of reduced
social security rates applicable from 1 January 2005, the Norwegian authorities have complied with the
above mentioned notification requirement.

2. The presence of State aid

In the notification, the Norwegian authorities claim that the proposed scheme of reduced rates of social
security contributions does not constitute State aid within the meaning of Article 61(1) of the EEA Agree-
ment because it does not affect trade between the Contracting Parties to the EEA Agreement.

Article 61(1) of the EEA Agreement reads as follows:

‘Save as otherwise provided in this Agreement, any aid granted by EC Member States, EFTA States or
through State resources in any form whatsoever which distorts or threatens to distort competition by
favouring certain undertakings or the production of certain goods shall, in so far as it affects trade
between Contracting Parties, be incompatible with the functioning of this Agreement.’

Thus, in order for a measure to be considered State aid, it must constitute a selective advantage in favour
of certain undertakings, be granted through state resources and affect competition and trade between the
Contracting Parties to the EEA Agreement. These are cumulative criteria. Accordingly, the failure to fulfil
one of them determines that the measure under assessment does not qualify as State aid within the
meaning of Article 61(1) of the EEA Agreement.

2.1. State resources

The application of reduced social security contributions represents reduced social security revenues for the
State. Whenever the State is foregoing income normally due, there is a consumption of state resources
within the meaning of Article 61(1) of the EEA Agreement. Under the notified scheme, the application of
reduced rates would diminish the income that the State would receive in the form of social security contri-
butions. This foregone income constitutes state resources.

2.2. Selective advantage

In order to be caught by Article 61(1) of the EEA Agreement, the measure must be selective in that it
favours ‘certain undertakings or the production of certain goods’. Moreover, it must confer on certain undertak-
ings an advantage that reduces the costs they normally bear in the course of business and relieves them of
charges that are normally borne from their budgets.

Undertakings benefiting from the application of the notified reduced rates of social security contributions
are subject to payment of contributions lower than any other undertaking located in Norway subject to the
general social security rate of 14,1 %. Instead of paying social security contributions for their employees
for an amount equivalent to 14,1 % of their salaries, undertakings active in the selected sectors which are
located in Zones 2, 3 and 4 of Norway will, according to the notification, pay contributions corresponding
to 10,6 %, 6,4 % and 5,1 % respectively of their employees' salaries.

The favourable rates of social security contributions thus provide a selective advantage to any undertaking
active in any of the sectors included in the list above which are located in Zones 2, 3 and 4 in Norway (1).

(1) The EFTA Court has already stated in Case E-6/98, The Government of Norway v EFTA Surveillance Authority, [1999]
Report of the EFTA Court, page 76, paragraph 38, that the application of regional differentiated reduced social
security rates confers a selective advantage to certain undertakings which neither derives from the inherent logic of
the general system nor results from objective conditions within that general system.

10.3.2005

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Official Journal of the European Union

C 60/21

2.3. Distortion of competition

In order to be caught by Article 61(1) of the EEA Agreement, the measure must distort competition.

A State intervention may distort competition between undertakings of the same sector competing within
the national boundaries. Undertakings benefiting from an economic advantage granted by the State which
reduces their normal burden of costs are placed in a better competitive position than those who cannot
enjoy this advantage.

Social security contributions constitute running or operational costs which undertakings must put up with
in the normal course of business. The reduction of such costs in the form of lower social security contribu-
tions in favour of certain undertakings located in a number of regions in Norway offers an appreciable
advantage to the beneficiaries of that tax concession vis-à-vis their competitors. Undertakings other than
those to which the measure at issue applies will have to pay their social security contributions on less
advantageous terms, subject to full rates. The fact that the social security costs are reduced makes the
undertakings more competitive. Lower costs as a result of reduced social security contributions may allow
undertakings to charge lower prices for their products. They may also offer better economic conditions for
employees than undertakings subject to the full rate of social security contributions.

In the opinion of the Authority, given that the rates applicable to the various zones benefiting from the
notified scheme would be different, competition would be distorted not only with respect to undertakings
located in areas outside the scheme but also amongst those located within the zones covered by the
scheme.

2.4. Effect on trade

Finally, for Article 61(1) of the EEA Agreement to be applicable, the notified measure must have an effect
on trade between the Contracting Parties to the EEA Agreement.

The Norwegian authorities consider that the notified scheme of reduced rates of social security contribu-
tions does not qualify as State aid because it will not have an effect on trade within the meaning of Article
61(1) of the EEA Agreement.

The Norwegian authorities have put forward that the potential beneficiaries of the scheme at hand only
participate in purely local activities which do not have an effect on trade. They base their assessment on
the ECON report on competition interfaces which has identified a list of sectors supposedly not affected by
competition from other EEA States. This list has been drafted on the basis of statistical data on export and
import to Zones 2, 3 and 4 as well as on telephone interviews with a selection of enterprises in the services
sector. Following the explanations provided in the notification, undertakings in the identified sectors are
not exposed to intra-EEA trade. Due to the lack of effect on trade, any state financing granted to undertak-
ings in these sectors will not qualify as State aid within the meaning of Article 61(1) of the EEA Agree-
ment. The Authority has doubts both with regard to the method of data collection, which does not seem
systematic, and to the approach followed to determine the lack of effect on trade between the Contracting
Parties to the EEA Agreement.

Furthermore, the ECON report produces only a, although not complete, picture of the status quo. It bears
no analysis of the future situation. Since trade patterns can change at any time, there is no guarantee that
the results of the ECON report, although already questionable now, would also remain valid in the future.

The Authority has even more doubts whether the approach followed in the notified scheme is in line with
the interpretation of the EFTA Court and the Community Courts of the criterion ‘effect on trade’ within the
meaning of Article 61(1) of the EEA Agreement.

The criterion of ‘effect on trade’ as an element for the application of Article 61(1) of the EEA Agreement
has traditionally been broadly interpreted by the case law of the Courts of Justice of the European Commu-
nities. Whenever an undertaking is placed in an advantageous position there is a distortion of competition
which inextricably leads to an effect on trade (1). Following the case law, this criterion cannot be inter-
preted in a restricted way to the effect that only aid having a direct effect on trade between EEA States and
distorting competition is covered by Article 61(1) of the EEA Agreement (2). In general terms, a measure is
considered to be State aid if it is ‘capable’ of affecting trade between the EEA States. An aid may affect
trade between EEA States even if the recipient undertaking, which is in competition with undertakings
from other EEA States, does not itself participate in cross border activities (3). Where a State grants aid to
an undertaking, internal supply may be maintained or increased, with the consequence that the opportu-
nities for undertakings established in other EEA States to offer their services to the market of that State are
reduced (4).

(1) Case 730/79, Philip Morris v Commission [1980] ECR 2671, paragraph 11.
(2) Joined Cases T-298/97, T-312/97 e.a., Alzetta a.o. v Commission [2000] ECR-2319, paragraphs 76-78.
(3) See in this context, Case T-55/99, CETM v Commission [2000] ECR II-3207, paragraph 86.
(4) Case C-303/88, Italy v Commission [1991] ECR I-1433, paragraph 27; Case T-55/99, CETM v Commission [2000] ECR

II-3207, paragraph 86.

C 60/22

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Official Journal of the European Union

10.3.2005

The very circumstances in which the aid has been granted may show whether it is liable to affect trade
between EEA States or not (1). The fact that aid is granted in respect of purely local activities or to under-
takings operating solely at local level and therefore not in competition with other undertakings in EEA
States does not by itself preclude the possibility of an effect on trade (2). The relatively small amount of aid
or the relatively small size of the undertakings which receive it do not as such exclude the possibility that
intra-EEA trade might be affected (3) although it may constitute one of the features to be taken into
account for the assessment of whether there is an effect on trade (4). Anyway, no reference is made in the
notification to the size of the undertakings which benefit from the application of reduced social security
rates.

The Authority has doubts whether the notified scheme provides the necessary mechanisms to guarantee
the absence of effect on trade in all instances.

There are no clear criteria for the eligibility of undertakings under the proposed scheme of reduced rates of
social security contributions within the sectors identified in the ECON report. As a rule, a general scheme
should contain precise and clear criteria to ensure that the Authority has no doubts that the undertakings
possibly benefiting from it are also entitled to such aid. Contrary to individual aid awards, a scheme can
only be approved in abstract terms whereby it must be ensured that trade is not affected for single under-
takings which may benefit from it (5).

Reference should be made to the Authority's Decision of 12 November 2003 (6) authorising a transitional
period of three years in order to progressively adjust the reduced social security rates applicable to Zones 3
and 4 in Norway to the generally valid rate of 14,1 %. This scheme, from which all undertakings located in
Zones 3 and 4 benefit regardless of the sector of activity, was considered to constitute State aid, exception
being made of ‘de minimis’ aid amounts.

The scheme notified at this time proposes the application of reduced social security rates which vary
amongst the three zones. Contrary to the scheme mentioned-above, not all undertakings located in the
selected Zones 2, 3 and 4 would benefit from the proposed reduced rates, but only those which operate
within a given list of economic sectors.

The scheme covers a very broad and varied spectrum of undertakings (7). It is impossible to ensure that all
beneficiaries within each of the 209 notified NACE sectors are not exposed to trade within the meaning of
Article 61(1) of the EEA Agreement. Trade would be affected whenever an undertaking would take advan-
tage of its reduced running costs to expand its market outside the Norwegian borders or would carry this
advantage over to more competitive pricing which would prevent foreign undertakings from entering the
market. The Authority questions whether it is feasible to assure the lack of effect on trade with respect to a
scheme which covers such a varied range of undertakings. In this respect, the Norwegian authorities have
themselves acknowledged the difficulty of determining clear and absolute limits between the pure local
operation of an activity and its operation with a potential effect on trade.

Moreover, in some of the notified sectors, which are characterised by deregulation and liberalisation, it is
difficult to demonstrate that any financial intervention from the State in general does not have an effect on
trade. In all areas where secondary legislation has been adopted to open and regulate the establishment of
the internal market, such as financial services, telecommunications, etc. or in areas which are subject to
specific State aid rules, such as shipbuilding, it cannot be taken for granted that the given activity is shel-
tered from intra-EEA trade.

(1) Joined Cases 296 and 318/82, Netherlands and Leeuwarder Papierwarenfabriek v Commission [1985] ECR 809.
(2) Case C-280/00, Altmark Trans GmbH a.o v Nahverkehrgesellschaft Altmark Gmb [2003] ECR I (not yet reported).
(3) See in this context, inter alia, Case C-142/87, Belgium v Commission [1990] ECR I-959, paragraph 43; Case T-55/99,
CETM v Commission [2000] ECR II-3207, paragraph 92 or Case T-214/95, Vlaams Gewest v Commission [1998] ECR
II-2319, paragraph 85.

(4) See in this context, inter alia, Commission Decision N711/2001, United Kingdom — Community Investment Tax Credit.
(5) See in this context, inter alia, Case E-6/98 The Government of Norway v EFTA Surveillance Authority, [1999] Report of
the EFTA Court, page 76, paragraphs 56 and 57 where the EFTA Court stated that, in particular, as far as the rules
of a scheme are general and abstract in character, the analysis of the impact on trade of a scheme can only be carried
out at a general abstract level whereby the impact of the scheme on a market, sector or specific product does not
have to be established.
(6) Decision No 218/03/COL.
(7) According to the Norwegian authorities, whereas most but not all sectors in manufacturing industry are supposed to
be exposed to foreign competition and consequently not supposed to benefit from the currently notified reduced
social security rates, 213 branches out of a total of 285 branches in the service sector in Zones 2, 3 and 4 are
presumed not to be exposed to foreign competition and thus not to affect trade. In other words, according to the
notification, all undertakings in 75 % of all service sectors are not exposed to competition and trade within the EEA.

10.3.2005

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Official Journal of the European Union

C 60/23

The Norwegian authorities have not explained in the notification why some sectors are exposed or partially
exposed to competition in certain areas but not in others. This is for instance the case of retail sale in non-
specialised stores (NACE 52.120), retail sale of clothing (NACE 52.420) or retail sale of furniture (NACE
52.443). According to the notification, undertakings active in these sectors and located in Zones 2 and 3
are not subject to EEA-wide trade while they are partially exposed if they are located in Zone 4.

The same differentiation can be found in the notification in sectors which are not supposed to be exposed
to intra-EEA trade in some areas and accordingly are subject to the notification in one of the zones
whereas they are not notified in others. By way of example, this is the case of wholesale of household
goods (NACE 51.479) or renting of automobiles (NACE 71.110) amongst others.

The ECON report, on the basis of which the notified social security scheme has been prepared, follows a
sectoral approach. Therefore, it seems inconsistent not to include in the notification all sectors identified in
the report as supposedly not being exposed to intra-EEA trade in all three areas covered by the scheme.

The scheme of regionally differentiated social security rates as it has been notified does not contain any
general safeguards to ensure the necessary legal and economic certainty in its application concerning the
effect on trade.

Furthermore, the scheme is unlimited in time and does not provide for a review clause of the criteria and
conditions of application.

Under these circumstances, the Authority has serious doubts whether the effect on trade can automatically
be excluded with respect to all potential beneficiaries of reduced rates of social security contributions.

2.5. Conclusion

In view of the foregoing, the Authority cannot exclude that the proposed regionally differentiated social
security rates might affect trade between the Contracting Parties to the EEA Agreement.

For these reasons, the Authority has serious doubts about the classification of the notified scheme as a
non-aid measure falling outside the scope of Article 61(1) of the EEA Agreement.

3. Compatibility of the aid

Should the measure constitute State aid within the meaning of Article 61(1) of the EEA Agreement, the
Authority has doubts regarding its compatibility with the rules of the EEA Agreement.

The Norwegian authorities have argued that the measure at issue does not constitute State aid. Therefore,
they have not put forward any arguments concerning its compatibility. However, after assessing the likely
involvement of State aid, it has to be considered whether such aid could be compatible on the basis of
Article 61(2) and (3) of the EEA Agreement.

The Authority is of the opinion that none of the derogations mentioned in Article 61(2) of the EEA Agree-
ment can be applied to the case at hand.

The Authority has doubts whether the system of reduced rates of social security contributions can be
considered compatible on the basis of Article 61(3) of the EEA Agreement. A reduction in the running
costs of an undertaking such as the social security contributions constitutes operating aid. Such aid, given
to undertakings in certain regions, is normally prohibited.

The application of reduced rates of social security contributions cannot be considered within the frame-
work of Article 61(3)(a) of the EEA Agreement since none of the Norwegian regions qualify for this provi-
sion which requires an abnormally low standard of living or serious underemployment. Furthermore, the
aid granted in the form of reduced rates of social security contributions does not satisfy the requirements
laid down in the regional aid guidelines.

The reduced rates of social security contributions do not seem to promote the execution of an important
project of common European interest or to remedy a serious disturbance in the economy of a State, as it is
requested for compatibility on the basis of Article 61(3)(b) of the EEA Agreement.

C 60/24

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Official Journal of the European Union

10.3.2005

Concerning Article 61(3)(c) of the EEA Agreement, in its Decision No 218/03/COL of 12 November 2003,
with regard to State aid in the form of regionally differentiated social security contributions, the Authority
considered that a continuation of the Norwegian scheme would be incompatible with Article 61(3)(c) of
the EEA Agreement and the State Aid Guidelines. However, the Authority deemed a transitional period to
be necessary for Zones 3 and 4 to dampen the shock effects that would follow from an immediate applica-
tion of the full social security tax rates. A period of three years was considered appropriate on the basis of
the information provided by the Norwegian authorities, which demonstrated that undertakings would need
three years to adjust to the new economic reality.

For undertakings located in Zones 2, 3 and 4 which are active in the sectors listed in the notification, the
notified measure implies a return to the rules which were declared incompatible aid by the Authority in
2002 for not qualifying for a derogation under Article 61(3)(c) of the EEA Agreement. The fundamental
features of the notified scheme are the same as the ones of the scheme subject to the prior decision of the
Authority mentioned above with the difference of the sectoral scope of application of the notified measure
which is limited to undertakings active in a given list of sectors. Consequently, there is a negative presump-
tion regarding the compatibility of the notified measure with the State aid rules of the EEA Agreement.

On the basis of the information currently available to it, the Authority is not in a position to declare the
reduced rates of social security contributions regarding all sectors included in the notified list which are
located in Zones 2, 3 and 4 in Norway to be compatible with the EEA Agreement.

4. Conclusion

Based on the information submitted by the Norwegian authorities, the Authority cannot exclude that the
notified measure involves aid within the meaning of Article 61(1) of the EEA Agreement.

Furthermore, the Authority has doubts that the measure can be declared compatible with the functioning
of the EEA Agreement on the basis of Article 61(3)(c) of the EEA Agreement.

Consequently, and in accordance with Article 4(4) in Part II of Protocol 3 to the Surveillance and Court
Agreement, the Authority is obliged to open the formal investigation procedure provided for in Article
1(2) in Part I of Protocol 3 of the Surveillance and Court Agreement. The decision to open proceedings is
without prejudice to the final decision of the Authority.

In light of the foregoing considerations, the Authority, acting under the procedure laid down in Article
1(2) in Part I of Protocol 3 to the Surveillance and Court Agreement, requests Norway to submit its
comments and to provide all such information as may help to assess the aid scheme notified, within one
month of the date of receipt of this Decision.

The Norwegian authorities are reminded not to put the proposed measure into effect,

HAS ADOPTED THIS DECISION:

1. The Authority has decided to open the formal investigation procedure pursuant to Article 1(2) in Part I
of Protocol 3 to the Surveillance and Court Agreement regarding the notified scheme of reduced rates
of social security contributions in Zones 2, 3 and 4 in Norway.

2. The Norwegian Government is invited, pursuant to Article 6(1) in Part II of Protocol 3 to the Surveil-
lance and Court Agreement, to submit its comments on the opening of the formal investigation proce-
dure within one month from the notification of this Decision.

3. Other Contracting Parties to the EEA Agreement and interested parties shall be informed by the
publishing of this Decision in the EEA Section of the Official Journal of the European Union and the EEA
Supplement thereto, inviting them to submit comments within one month from the date of publication
of this Decision.

4. This Decision is authentic in the English language.

Done at Brussels, 6 October 2004.

For the EFTA Surveillance Authority

Hannes HAFSTEIN

President

Einar M. BULL

College Member

10.3.2005

EN

Official Journal of the European Union

C 60/25

ANNEX

Geographical zones and 2003 tax rates

Zone I: 14,1 per cent tax

This zone includes all municipalities not mentioned below under zone II-V.

Zone II: 10,6 per cent tax

This zone includes:

— in Nord-Trøndelag county, the municipalities of Meråker, Frosta, Leksvik, Mosvik, Verran,

— in Sør-Trøndelag county, the municipalities of Ørland, Agdenes, Rissa, Bjugn, Rennebu, Meldal, Midtre Gauldal,

Selbu,

— in Møre og Romsdal county, the municipalities of Vanylven, Sande, Herøy, Norddal, Stranda, Stordal, Rauma, Nesset,

Midsund, Sandøy, Gjemnes, Tingvoll, Sunndal, Haram, Aukra, Eide,

— in Sogn og Fjordane county, all municipalities,

— in Hordaland county, the municipalities of Etne, Ølen, Tysnes, Kvinnherad, Jondal, Odda, Ullensvang, Eidfjord, Ulvik,

Granvin, Kvam, Modalen, Fedje, Masfjorden, Bømlo,

— in Rogaland county, the municipalities of Hjelmeland, Suldal, Sauda, Kvitsøy, Utsira, Vindafjord, Finnøy,

— in Vest-Agder county, the municipalities of Åseral, Audnedal, Hægebostad, Sirdal,

— in Aust-Agder county, the municipalities of Gjerstad, Vegårshei, Åmli, Iveland, Evje og Hornnes, Bygland, Valle,

Bykle,

— in Telemark county, the municipalities of Drangedal, Tinn, Hjartdal, Seljord, Kviteseid, Nissedal, Fyresdal, Tokke,

Vinje, Nome,

— in Buskerud county, the municipalities of Flå, Nes, Gol, Hemsedal, Ål, Hol, Sigdal, Rollag, Nore and Uvdal,

— in Oppland county, the municipalities of Nord-Fron, Sør-Fron, Ringebu, Gausdal, Søndre Land, Nordre Land,

— in Hedmark county, the municipalities of Nord-Odal, Eidskog, Grue, Åsnes, Våler, Trysil, Åmot.

Zone III: 6,4 per cent tax

This zone includes:

— in Nord-Trøndelag county, the municipality of Snåsa,

— in Sør-Trøndelag county, the municipalities of Hemne, Snillfjord, Oppdal, Røros, Holtålen, Tydal,

— in Oppland county, the municipalities of Dovre, Lesja, Skjåk, Lom, Vågå, Sel, Sør-Aurdal, Etnedal, Nord-Aurdal,

Vestre Slidre, Øystre Slidre, Vang,

— in Hedmark county, the municipalities of Stor-Elvdal, Rendalen, Engerdal, Tolga, Tynset, Alvdal, Folldal, Os.

Zone IV: 5,1 per cent tax

This zone includes:

— in Troms county, municipalities not included among those listed below under zone V,

— in Nordland county, all municipalities,

— in Nord-Trøndelag county,

the municipalities of Namsos, Namdalseid, Lierne, Røyrvik, Namsskogan, Grong,

Høylandet, Overhalla, Fosnes, Flatanger, Vikna, Nærøy, Leka,

— in Sør-Trøndelag county, the municipalities of Hitra, Frøya, Åfjord, Roan, Osen,

— in Møre og Romsdal county, the municipality of Smøla.

Zone V: 0 per cent tax

This zone includes:

— in Finnmark county, all municipalities,

in Troms county, the municipalities of Karlsøy, Lyngen, Storfjord, Kåfjord, Skjervøy, Nordreisa and Kvænangen.