2006/566/EC: Commission Decision of 23 November 2005 on the aid scheme Real Estate Transfer Tax Exemption for Housing Companies in the Neue Länder with regard to the labour market region Berlin (notified under document number C(2005) 4434)   (Text with EEA relevance)
Date: 2005-11-23
Institutions: European Commission
Subjects: Germany, State aid, control of State aid, land and buildings, tax exemption

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Official Journal of the European Union

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II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 23 November 2005
on the aid scheme ‘Real Estate Transfer Tax Exemption for Housing Companies in the Neue Länder’
with regard to the labour market region Berlin

(notified under document number C(2005) 4434)

(Only the German text is authentic)

(Text with EEA relevance)

(2006/566/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

(3)

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

By letter dated 26 April 2004 and further to a meeting
held on 10 April 2004, in which Germany announced
that it would provide supplementary information on the
scheme, Germany requested an extension of the deadline.
This extension was granted by letter dated 10 May 2004.

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

(4)

Having called on interested parties to submit their comments
pursuant to the provisions cited above (1) and having regard to
their comments,

By letter dated 14 May 2004, registered as received by
the Commission on the same day, Germany submitted
further information. By letters dated 30 June 2004 and
14 September 2004, the Commission requested addi-
information concerning the scheme. This infor-
tional
mation was submitted by Germany by letters dated 29
July 2004 and 6 October 2004, registered as received by
the Commission on 29 July 2004 and on 15 October
2004.

Whereas:

(1)

(2)

1. PROCEDURE

(5)

By letter dated 16 January 2004, registered as received by
the Commission on 19 January 2004, Germany notified
the Commission of the aid scheme entitled ‘Real Estate
Transfer Tax Exemption for Mergers between Housing
Companies and Housing Associations in the Neue Länder’.

the Commission
By letter dated 17 February 2004,
information. By letter dated 17
requested additional
March 2004, registered as received by the Commission
on 19 March 2004,
information was
submitted by Germany.

additional

to those parts of

the Commission
By letter dated 1 December 2004,
it had decided to raise no
informed Germany that
objections
the scheme that were
restricted to the new German Länder which are assisted
areas under Article 87(3)(a) (2).
In the same letter the
Commission informed Germany that it had decided to
initiate the formal investigation procedure laid down in
Article 88(2) of the EC Treaty as regards Berlin and those
parts of Brandenburg that belong to the labour market
region of Berlin and are assisted areas under Article
87(3)(c) of the EC Treaty (3).

(2) Brandenburg (except areas belonging to the labour market region of
Berlin), Mecklenburg-Western Pomerania, Saxony, Saxony-Anhalt,
Thuringia.

(3) See list of German assisted areas, State aid N 195/99, C 47/99, and

(1) OJ C 53, 3.3.2005, p. 18.

N 641/02.

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(6)

The decision was published in the Official Journal of the
European Union on 3 March 2005. The Commission
invited interested parties to submit their comments on
the aid scheme (4), but received none.

(7)

Germany submitted its comments by letter dated 14
February 2005.

of living space actually demanded. In order to achieve
this, housing companies and associations in the new
Länder and in the labour market region of Berlin need
to invest massively to adapt
their current stock of
apartments. In order to put the companies in the new
Länder and in the labour market region of Berlin in a
position to invest, Germany concludes they should have
the opportunity to merge, thereby benefiting from the
resulting synergy effects.

(8)

(9)

2. DETAILED DESCRIPTION OF THE AID SCHEME

2.1. Background

The aid scheme temporarily exempts housing companies
and housing associations from the real estate transfer tax
in cases of mergers and acquisitions involving real estate
located in the labour market region of Berlin.

In the former GDR apartments were built
for many
decades on the basis of a centralised planning system.
At the same time old buildings were neglected to such
an extent that in 1990 many apartments were no longer
habitable. German reunification resulted in strong
demand for newly built apartments or private homes,
which led to a shortage on the housing market in the
new Länder and in the labour market region of Berlin.
Experts and politicians expected the housing shortage to
last and reacted by providing tax subsidies and accel-
erated depreciations
for new buildings and refurb-
ishments in the new Länder and in the labour market
region of Berlin in the period 1990 to 1998. These
incentives led to a housing surplus,
in particular as in
the meantime it had become clear that demand for
apartments did not grow as predicted, but decreased.
At present, the surplus amounts to some 1 million units.

(10) Germany and the new Länder

therefore decided to
in a programme called
demolish vacant apartments
‘urban rebuilding East’
(Stadtumbau Ost). According to
the information provided by Germany, a substantial
part of the demolition costs will have to be borne by
the housing companies and housing associations them-
selves.

(11) Germany argues that

the undercapitalisation of many
housing companies and associations in the new Länder
and in the labour market region of Berlin — caused by
lost revenues due to high vacancy rates and the relative
the market — is
fragmentation of
threatening to
jeopardise the demolition programme deemed necessary
by the Federal Government and the Länder as they will
not be able to bear their share of the demolition costs.

(12) Germany emphasises that the re-balancing of demand
and supply cannot be achieved by simply eliminating
oversupply, but also necessitates supplying the quality

(13) According to Germany, the real estate transfer tax has
to mergers and acquisitions
proved to be a barrier
between such companies and associations. By suspending
the real estate transfer tax temporarily, market parti-
cipants will have
the opportunity to merge. The
broadened capital base of merged housing companies
and associations will put them in a better position to
bear the costs of necessary demolition while simulta-
neously undertaking the investments necessary to offer
modern housing.

(14) A real estate transfer tax is a tax levied on real estate
transactions resulting in a change in the ownership of the
relevant property. Tax liability arises when real estate is
transferred through sale or other legal transaction. The
real estate transfer tax (Grunderwerbsteuer) in Germany is
calculated on the basis of
standardised value
(Einheitswert) of the property and is levied at a rate of
3,5 %.

the

(15)

(16)

2.2. Scope of this Decision

In its letter dated 1 December 2004 the Commission
decided to raise no objections to those parts of the aid
measure ‘Real Estate Transfer Tax Exemption for Housing
Companies in the New Länder’ which relate to assisted
areas covered by Article 87(3)(a) of the EC Treaty. This
Decision accordingly concerns only those parts of the
scheme which relate to the labour market region of
Berlin, which is an assisted area covered by Article
87(3)(c) of the EC Treaty.

2.3. Objective of the aid scheme

The objective of the scheme is to redevelop the housing
market in the labour market region of Berlin by elimi-
nating oversupply and by helping housing companies
and housing association to provide the quality of
housing which is actually demanded. By enabling such
companies to demolish unoccupied apartment blocks,
Germany intends to improve the physical appearance
and infrastructure of certain areas in the labour market
region of Berlin which are otherwise characterised by a
poor physical environment. […] (*).

(4) See footnote 1.

(*) Business secret.

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(17)

(18)

2.4. Beneficiaries

The potential beneficiaries of the scheme are housing
(Wohnungsunter-
companies and housing associations
nehmen and Wohnungsgenossenschaften)
acquiring real
estate in the labour market region of Berlin by means
of mergers and acquisitions. For the purpose of
this
Decision, housing companies and housing associations
will be defined as companies and associations whose
main business is the administration, construction, sale
and renting of apartments. Enterprises in difficulty are
excluded from the scheme.

— the scheme constitutes an advantage for the housing
companies and associations involved in mergers and
acquisitions, as they are exempted from the payment
of the real estate transfer tax they would otherwise
have had to bear in the absence of the scheme;

— finally, as the transfer of real estate is an activity in
it
the scheme affects trade

trade between Member States,

which there is
cannot be excluded that
between Member States.

the time being,

For
three mergers between housing
companies are anticipated in the labour market region
of Berlin. In the case of mergers that took place in Berlin
between 1995 and 1998,
the following real estate
transfer tax amounts were registered: EUR 3,1 million
for a merger
land; EUR 1,4
involving 19 plots of
million for a merger involving 39 plots of land; and
EUR 6,7 million for a merger involving 491 plots of
land.

(21)

restructuring sectors

In its Decision 2002/581/EC (5) on the tax measures for
banks and banking foundations implemented by Italy,
the Commission considered that tax exemptions aimed
in difficulty by specifically
at
favouring mergers and acquisitions should be regarded
as aid aimed at reducing firms' current expenses and
thus constituting operating aid. However, in its decision
to initiate the present formal investigation procedure this
matter was left undecided as the Commission took into
consideration the arguments put forward by Germany in
order to demonstrate that the present aid measure could
be finally assessed in a different way.

2.5. Duration of the scheme

(19)

The scheme is limited to all merger and acquisition
activities between housing companies and associations
taking place between 31 December 2003 and 31
December 2006.

(22)

The Commission had serious doubts whether the scheme
proposed by Germany for the Article 87(3)(c)
labour
to the
region of Berlin is proportionate
market
objective and does not distort competition to an extent
contrary to the common interest,
the following
reasons:

for

3. DECISION TO INITIATE THE PROCEDURE

(20)

In its letter of 1 December 2004,
considered the
notified scheme
meaning of Article 87(1) of the EC Treaty:

constituted State

following

the Commission
the
aid within the

and concluded that

— the involvement of State resources is demonstrated
that by allowing exemption from the
tax
transfer

by the fact
real
estate
revenues that would otherwise have accrued to it;

tax, Germany

forgoes

— the measure is

it

is

selective as

targeted upon
particular geographical areas in the new Länder and
the labour market region of Berlin by favouring
certain undertakings, namely housing companies
and associations, and is limited to mergers and acqui-
sitions between such companies and associations
involving real estate property in the new Länder and
the labour market region of Berlin;

— the vacancy rate in Berlin, at 5,3 % for privately
communal
owned apartments
is significantly lower than in the new
apartments,
Länder, where the overall vacancy rate is 14,2 %.
Almost all vacant apartments are located in the
eastern districts of Berlin;

and 8,77 % for

— no data had been provided by Germany to demon-
strate that the labour market region of Berlin was
is
suffering from depopulation in a way that
comparable with the Article 87(3)(a) assisted areas
covered by the scheme;

in mergers

— whereas the typical amounts of real estate transfer tax
involved
and acquisitions between
housing companies and associations are in the
range of EUR 150 000 and EUR 1,5 million for the
Article 87(3)(a) areas, the corresponding amounts for
the city of Berlin — based on past experience — lie
between EUR 1,4 million and EUR 6,7 million.

(5) OJ L 184, 13.7.2002, p. 27.

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— No data had been provided by Germany that would
demonstrate that the temporary tax exemption was
likely to contribute to activating the real estate
market
in the labour market region of Berlin as
well as having positive spill-over effects and that it
is extremely unlikely that private sector involvement
in remediation can be expected without any state
intervention.

for housing. However, the statistical data provided by
Germany show that, having become the capital for the
Federal Republic of Germany, Berlin is not suffering from
a decline of population, but has a stable population
the
trend. Nevertheless,
eastern districts of Berlin have suffered from out-
migration in comparable proportions to the new Länder.

the data do confirm that

4. COMMENTS FROM GERMANY

(23) Germany argues that aid granted under the present aid
scheme cannot be considered to be operating aid under
the Community guidelines on national regional aid (6).
The particularity of the scheme is to exempt transactions
regarding real estate situated in the labour market region
of Berlin from real estate transfer tax. Beneficiaries are
housing companies and associations where the trans-
action is the result of a merger or acquisition between
such entities. Only in such cases will
the companies
which are involved in the transaction be exempted
tax. As a
temporarily from the real estate transfer
merger or acquisition between two housing companies
(or housing associations) takes place in principle only
once, Germany does not regard the aid as compensating
for current expenses.

(24)

is

the housing companies and associations
Furthermore,
will in principle continue to pay the real estate transfer
the regular business
tax when buying property. As
in
and associations
activity of housing companies
and sale
general
rent of
and/or
the real estate transfer tax
property,
would constitute
the
current
expenses of
companies concerned. However,
the scheme does not
affect
these regular current expenses as it does not
apply in cases where housing companies and associations
simply acquire or sell a piece of property.

the purchase
the payment of
regular

(25) With regard to the alleged lower vacancy rates in Berlin,
Germany argues that such a contention is unfounded as
the Commission's argument is based on average data,
whereas certain districts in Berlin have vacancy rates
which are comparable to those in the new Länder.
According to the data provided by Germany,
the
districts with similar low vacancy rates (around 14 %)
are mostly located in the eastern districts of Berlin, e.g.
Hohenschönhausen, Marzahn-Hellersdorf and Lichtenberg.

(26) As regards depopulation, Germany argues that the labour
market region of Berlin suffered from a decline of popu-
lation in recent years, resulting in a decline in demand

(27) Germany confirmed that

aid amounts

involved in
mergers between housing companies and housing asso-
ciations
region of Berlin are
substantially higher than in the Article 87(3)(a) assisted
areas, which is due to the size and higher value of real
estate in the labour market region of Berlin (7).

in the labour market

(28) Germany claims that mergers and acquisitions in the
housing sector will have a positive spill-over effect on
the housing market as the newly created undertakings
the overdue restructuring
have the capacity to start
processes, e.g. by putting vacant
real estate on the
market and/or by demolishing run-down apartments.
As the real estate transfer tax puts a serious strain on
the overall liquidity of the companies involved, levying it
delays the necessary investments.

5. ASSESSMENT OF THE AID

5.1. Existence of State aid

(29)

For the reasons given in its letter of 1 December 2004
(recitals 20, 21 and 22), which have not been contested
by Germany, the Commission considers that the present
aid scheme ‘Real Estate Transfer Tax Exemption for
Housing Companies in the New Länder’
involves State
aid pursuant to Article 87(1) of the EC Treaty.

5.2. Legality of the measure

(30)

By notifying the aid scheme as a draft, Germany met its
obligation under Article 88(3) of the EC Treaty.

5.3. Compatibility of the measure

(31) Article 87(2) of the EC Treaty provides that certain types
of aid are compatible with the common market. In view
of the purpose of the aid, which is to redevelop the
empty
housing market
apartment
that
spaces,
Article 87(2)(a) and (b) of
the EC Treaty are not
applicable to the aid scheme, nor has Germany argued
that this may be the case.

through the demolition of

the Commission considers

(6) OJ C 74, 10.3.1998, p. 9; point 4.15 of the guidelines states that
regional aid aimed at reducing a firm's current expenses (so-called
operating aid) is normally prohibited.

(7) Based on information provided in a letter dated 21 June 2004, the
assets of certain housing companies in Berlin amount to between
EUR 552,4 million and EUR 1 202 million.

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(32) Nor is Article 87(2)(c) of the EC Treaty applicable, as the
oversupply of housing was not caused by the division of
Germany and Berlin, but rather by tax measures to
promote new buildings and refurbishments in the new
Länder and Berlin during the years 1990 to 1998.

December 2002 on the application of Articles 87 and 88
the EC Treaty to State aid for employment (13).
of
Therefore, none of these guidelines, frameworks or regu-
lations
case. The
Community guidelines on state aid for environmental
protection (14) are not applicable either because the
scheme is not intended for environmental protection.

to the present

applicable

are

(33) Article 87(3) of the EC Treaty specifies other forms of aid
which may be regarded as compatible with the common
market. In view of the nature and purpose of the scheme
and its geographical scope, the Commission considers
that Article 87(3)(b) and (d) of the EC Treaty are not
applicable. Article 87(3)(a) of the EC Treaty allows aid
to promote the economic development of areas where
the standard of living is abnormally low or where there is
labour
serious underemployment. However,
market
region of Berlin is an assisted area under
Article 87(3)(c) of the EC Treaty, Article 87(3)(a) is not
applicable.

the

as

(34)

(35)

In assessing whether the exemptions provided for in
Article 87(3) (c) of the EC Treaty can apply, the Court
of Justice of the European Communities held in Case C-
169/95 Kingdom of Spain v Commission (8) that Article
‘gives the Commission a discretion the exercise
87(3)
of which involves economic and social assessments that
must be made in a Community context’. For certain types
of aid, the Commission has defined how it will exercise
these discretionary powers, be it in the form of block
exemptions or of Community frameworks, guidelines or
the
notices. Where
such
Commission must
follow them in its assessment of
cases of aid.

secondary

exist,

texts

In this respect, the Commission notes that the scheme is
not limited to measures that are in line with Commission
Regulation (EC) No 70/2001 of 12 January 2001 on the
application of Articles 87 and 88 of the EC Treaty to
state aid to small and medium-sized enterprises (9), or to
measures covered by the Community guidelines on state
aid for rescuing and restructuring firms in difficulty (10),
or to any of the following instruments: the Community
framework for State
research and devel-
aid for
opment (11), Commission Regulation (EC) No 68/2001
of 12 January 2001 on the application of Articles 87
the EC Treaty to training aid (12) or
and 88 of
Commission Regulation (EC) No 2204/2002 of 12

(8) [1997] ECR I-135. See also judgement dated 17 September 1980
in case 730/79 Philip Morris v Commission [1980] ECR I-2671.
(9) OJ L 10, 13.1.2001, p. 33. Regulation as last amended by Regu-

lation (EC) No 1040/2006 (OJ L 187, 8.7.2006, p. 8).

(10) OJ C 244, 1.10.2004, p. 2.
(11) OJ C 45, 17.2.1996, p. 5.
(12) OJ L 10, 13.1.2001, p. 20. Regulation as last amended by Regu-

lation (EC) No 1040/2006.

(36)

(37)

(38)

support

For assisted areas covered by Article 87(3)(c) of the EC
Treaty such as the labour market region of Berlin, the
guidelines on national regional aid (hereinafter referred to
as the regional aid guidelines) apply. The regional aid
guidelines
investment and job creation by
promoting the expansion, modernisation and diversifi-
cation of
located in such less
favoured regions. However, the regional aid guidelines
also state that aid confined to one area of activity may
have a major impact on competition in the relevant
market, and its effects on regional development are
likely to be limited.

establishments

the

In any case, the regional aid guidelines only apply to
certain categories of aid which include aid for initial
investment, aid for
job creation and, exceptionally,
operating aid. According to point 4.15 of the regional
aid guidelines, such operating aid may only be granted in
regions eligible under the derogation in Article 87(3)(a)
of the EC Treaty provided that it is justified in terms of
its contribution to regional development and its nature
and that its level is proportional to the handicaps it seeks
to alleviate.

The present tax exemption for housing companies active
in the labour market region of Berlin does not appear to
be specifically linked to an initial
investment or the
extension of an existing establishment as provided in
point 4.4 of the regional aid guidelines. Nor does it
concern any job creation linked to the carrying out of
an initial
investment project as provided for in point
4.11 of the regional aid guidelines.

(39)

Consequently, the scheme does not fall within the scope
frameworks or regulations
of any existing guidelines,
adopted on the basis of Article 87(3)(c) of
the EC
Treaty. The Commission will
thus assess the scheme
directly upon the basis of Article 87(3)(c) of the EC
Treaty.

(13) OJ L 337, 13.12.2002, p. 3. Regulation as last amended by Regu-

lation (EC) No 1040/2006.

(14) OJ C 37, 3.2.2001, p. 3.

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5.3.1. Compatibility with Article 87(3)(c) of the EC Treaty

(40) Article 87(3)(c) of

the EC Treaty allows State aid
intended to facilitate the development of
measures
certain economic activities or of
certain economic
areas, where such aid does not adversely affect trading
conditions to an extent contrary to the common interest.
When examining whether aid is compatible under Article
87(3)(c) of the EC Treaty, the Commission takes into
the Community's objectives and determines
account
whether the State aid is an appropriate instrument for
dealing with the problem as opposed to other policy
instruments and whether the aid is proportionate to
the objective pursued.

(41)

(42)

The objective of the present aid scheme is to redevelop
the housing market in the labour market region of Berlin
by eliminating oversupply and by helping housing
companies and housing associations
to provide the
quality of housing which is actually demanded. By
enabling companies to demolish unoccupied apartment
the physical
blocks, Germany intends
appearance and infrastructure of certain areas in the
labour market region of Berlin […].

to improve

in

are

properties

disadvantaged

Tackling physical deprivation and regenerating […] urban
areas
in the
an increasing political priority
Community. The Commission has accordingly approved
aid schemes directly under Article 87(3)(c) of the EC
Treaty in the field of urban regeneration, for example
in Commission Decision 2003/433/EC of 21 January
2003 on the aid scheme ‘Stamp duty exemption for
areas’
non-residential
notified by the United Kingdom (15) or in State aid
N 211/03 ‘Nouvelles Zones Franches Urbaines’ (16).
In
these decisions
the Commission acknowledged that
many cities in the Community, including the most pros-
perous ones, contain ‘pockets of deprivation’,
i.e. areas
that are characterised by a lack of social inclusion and a
poor physical environment
infrastructure,
housing and local amenities. The Commission recognised
the need for public financial aid in order to support the
urban regeneration process and found that the schemes
were compatible under the Community objectives of
economic
the
reduction of disparities between levels of development
of different areas.

cohesion, which implies

in terms of

and social

(43) Germany acknowledged that the city of Berlin — now
that it had become the capital of the Federal Republic of
Germany — was not suffering from a decline in popu-
lation. A study provided by Germany indicates that the
number of inhabitants will remain stable. However, what
is also clear from the data is that the districts Marzahn-
Hellersdorf, Lichtenberg and Hohenschönhausen have indeed

suffered from out-migration in comparable proportions
to that in the new Länder. As a result the vacancy rate in
Marzahn-Hellersdorf is as high as 14,1 %.

(44)

The Commission notes, however, that under the present
aid scheme not only housing companies and housing
associations owning real estate in certain districts in the
labour market region of Berlin (e.g. Marzahn-Hellersdorf,
Lichtenberg, Hohenschönhausen, Neukölln) can benefit from
real estate transfer tax exemptions, but that the scheme
applies to all such undertakings in the whole of the
labour market region of Berlin. While the Commission
recognises that the regeneration process in Berlin might
suffer from several handicaps resulting from its unique
past and that the above mentioned districts might be
considered ‘pockets of deprivation’, it is of the opinion
that the labour market region of Berlin as a whole is not
in need of aid to support urban regeneration.

(45) Germany did not provide data for the labour market
region of Berlin to demonstrate that State aid to
among housing
support mergers
and acquisitions
companies (housing associations)
is in fact the appro-
priate instrument for tackling efficiently the oversupply
of apartments in certain districts. Whether or not the
scheme will result in the undertakings actually demol-
ishing empty housing space in districts like Marzahn-
Hellersdorf, Lichtenberg, Hohenschönhausen and Neukölln
remains unknown.

5.3.2. Effect on trade to an extent contrary to the common

interest

(46) Having established that urban regeneration falls within
the Community's objectives, the Commission will now
assess whether trading conditions are adversely effected
to an extent contrary to the common interest.

(47) Germany acknowledged that the aid amounts involved in
mergers and acquisitions between housing companies
(housing associations)
in the labour market region of
Berlin are substantially higher than in Article 87(3)(a)
assisted areas, which is due to the size and the higher
value of real estate in the labour market region of
Berlin (17). Germany has confirmed that aid for housing
companies
scheme can
amount up to EUR 6,7 million. The Commission
considers that aid of this magnitude distorts competition
and affects trade within the Community. In addition, the
present scheme does not prevent housing companies
(housing associations)
from merging more than once,
and no mechanism is put into place to monitor the
cumulation of aid.

in Berlin under

the present

(15) OJ L 149, 17.6.2003, p. 18.
(16) See website: http://europa.eu.int/comm/secretariat_general/sgb/

state_aids/industrie_2003.htm

(17) According to the information provided in a letter sent on 21 June
2004, the assets of certain housing companies in Berlin amount to
between EUR 542,4 million and EUR 1 202 million.

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(48)

(49)

(50)

(51)

concludes

In view of the fact that the scheme potentially benefits all
housing companies and housing associations owning real
estate in the labour market region of Berlin whereas only
certain districts are in fact in need of regeneration, the
by
the
Commission
Germany for the labour market region of Berlin, which
is an assisted area covered by Article 87(3)(c) of the EC
Treaty, is not proportionate to the objective pursued. The
Commission considers that promoting real estate transfer
in the whole of the labour market region of Berlin will
prove to be ineffective and that the aid adversely affects
trade and competition contrary to the common interest.

proposed

scheme

6. CONCLUSIONS

The regional aid guidelines are not applicable in this
specific case. The scheme does not
initial
investment or job creation.

support

appropriate

considered it

The Commission has
to
examine the aid measure directly on the basis of
Article 87(3)(c) of
the EC Treaty as no Community
framework, guidelines or regulations are applicable to
the
regeneration
it.
Community objectives of
cohesion and
sustainable development,
the present measure is not
well targeted.

falls within

economic

Though

urban

The measure is aimed at the labour market region of
Berlin as a whole, whereas only certain districts suffer
from deprivation. The Commission therefore concludes
that the scheme is disproportionately wide. Germany did
not provide any information on how the aid measure
will specifically address the districts which are in need
of regeneration and finally lead to the demolition of
all
empty
housing companies
in the
labour market region of Berlin are eligible for the tax
exemption under the measure and even if they do not
own any real estate in the deprived districts.

housing. Germany

and associations

acknowledged

active

that

(52)

The aid amounts involved in the measure are significant,
especially in cases where a housing company or housing
association merges several times or receives cumulated
the aid scheme
aid. The Commission concludes that
to an extent
conditions
adversely
contrary to the common interest,

trading

affects

HAS ADOPTED THIS DECISION:

Article 1

The State aid scheme ‘Real Estate Transfer Tax Exemption for
Housing Companies in the Neue Länder’ is incompatible with the
common market as far as the labour market region Berlin is
concerned.

The aid may accordingly not be implemented.

Article 2

Germany shall inform the Commission, within two months of
notification of this decision, of the measures taken to comply
with it.

Article 3

This decision is addressed to the Federal Republic of Germany.

Done at Brussels, 23 November 2005.

For the Commission

Neelie KROES
Member of the Commission