2006/269/EC: Commission Decision of  8 February 2006  — State aid C 22/2004 (ex N 648/2001) on tax deductions for professional fishermen (Sweden)  (notified under document number C(2006) 265)   (Text with EEA relevance)
Date: 2006-02-08
Institutions: European Commission
Subjects: State aid, Sweden, control of State aid, fishing industry, self-employed person, tax relief

7.4.2006

EN

Official Journal of the European Union

L 99/21

II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 8 February 2006

State aid C 22/2004 (ex N 648/2001) on tax deductions for professional fishermen (Sweden)

(notified under document number C(2006) 265)

(Only the Swedish version is authentic)

(Text with EEA relevance)

(2006/269/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

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

Having regard to Council Regulation (EC) No 659/1999 of
22 March 1999 laying down detailed rules for the application
of Article 93 of the EC Treaty (1), and in particular Article 14
thereof,

Having invited interested parties to submit their comments, in
accordance with the first subparagraph of Article 88(2) of the
EC Treaty,

Whereas:

I.

PROCEDURE

(1)

On 4 September 2001 the Swedish authorities notified
the Commission of a draft Bill amending the Income Tax
Act
(1999:1229). The Commission requested further
information on the Bill by letters of 10 December
2001, 25 April 2002, 23 July 2002, 4 October 2002,
11 March 2003, 24 July 2003 and 3 February 2004, to
which the Swedish authorities replied by letters of 26
February 2002, 7 June 2002, 29 July 2002, 19
December 2002, 19 May 2003, 19 December 2003
and 8 March 2004 respectively.

(2)

(3)

(4)

(5)

The Commission informed Sweden by letter of 16 June
2004 of the decision to initiate, in relation to the draft
Bill, the formal investigation procedure provided for in
Article 88(2) of the EC Treaty.

The Commission decision to initiate the formal investi-
gation procedure was published in the Official
Journal
the European Union on 20 October 2004 (2). The
of
Commission invited any interested parties to provide
their observations on the case. The Swedish authorities
responded by letter dated 9 November 2004. No other
comments were received.

II.

DESCRIPTION

The notified draft Bill, a Proposal to amend the Law on
income tax (1999:1229),
is aimed at compensating all
licensed fishermen for the costs they incur fishing. It will
modify the existing system of tax benefits.

Existing tax system

advice on tax deductions

In 2002 the Swedish National Tax Board introduced new
general
for professional
fishermen that is still applicable and which in principle
is the application to the fisheries sector of the general
taxation system which also applies to all other sectors.
The tax benefits for fishermen existing from that year are
therefore not considered to be aid.

(1) OJ L 83, 27.3.1999, p. 1. Regulation as amended by the 2003 Act

of Accession.

(2) OJ C 258, 20.10.2004, p. 2.

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Official Journal of the European Union

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(6)

(7)

(8)

(9)

According to the advice from 2002, for the fisherman to
be able to benefit from the tax deductions the fishing trip
must have involved spending the night away from home,
as a night away from home is a general condition under
taxation system. Also according to this
the general
fishermen can make the same standard tax
advice,
deductions for increased cost of
living as other self-
employed persons and with the same amounts. The
Swedish authorities note that 99 % of professional
self-employed and thus
fishermen in Sweden are
constitute one-man businesses.

According to the present rules, when it comes to costs
for accommodation the same rules apply for fishermen
and self-employed persons. Normally, a standard tax
deduction will be made for every night spent away
from home. This means that fishermen or others do
not have
the actual
expenses they have incurred to be able to make the
standard deduction of SEK 95 per day.

specific proof of

to provide

Self-employed persons from other sectors must provide a
satisfactory explanation of their increased costs, including
information on the dates, purpose and destination of the
business trip and the time of the outward and return
journeys.

A similar requirement to provide such an explanation
does not exist for fishermen, but a tax deduction can
only be made if the fishing trips involve spending the
night away from home. To enable the tax authorities to
calculate the size of the standard deduction a fisherman
is entitled to, the fisherman must provide information on
the dates of the fishing trips and their duration. The
Swedish authorities have chosen this criterion so as to
not complicate the tax system and the application of it,
as fishing trips already by nature constitute the business
of a fisherman.

(10)

If the increased living costs are considered to be higher
than the lump sum amount of SEK 95 per day, both
fishermen and self-employed persons can choose the
living
option of proving that
exceeds the standard deduction by producing a report
on all assignments/business trips in the taxation year. If
this option is chosen it will be applied to the whole year
and thus it is not possible to apply a lump sum for some
trips and the actual expenses for others within the same
taxation year.

their increased cost of

(12)

(13)

(14)

living. Thus, this scheme, which is only applicable to
fishermen, places the fishermen who do not spend the
night away from home and those who do on an equal
footing from a taxation point of view.

The aim of
the notified scheme is to create neutral
conditions
competition between Swedish and
for
the
Danish and Norwegian fishermen and to offset
imbalance between those fishermen who can benefit
from this tax deduction and those who cannot.

In addition, the administrative burden on the fisherman
as well as on the taxation authorities will be reduced, as a
deduction made with a certain percentage based on
income is thought to be easier to manage and to verify
than a deduction which is made on the basis of the
number of fishing days.

The effect of the new scheme will be to enable coastal
and lacustrian fishermen to benefit from the system of
tax deductions, which they cannot do at present. The
these fishermen, without
new scheme thus benefits
there being any presumption of the fishermen having
stayed away
(and possibly
from home overnight
incurred expenses), as the only condition for payment
is that the fishermen must have a licence to fish profes-
sionally.

(15) As is the case under the present scheme applicable to all
sectors, fishermen who make use of the notified scheme
would not be able to make use of other tax deductions
for increased cost of living.

(16)

The reduction in each fisherman’s tax burden is changed
from the SEK 95 per day applicable under the current
scheme. It will be calculated on the basis of a percentage
of income and may not exceed SEK 40 000 (EUR 4 444)
per year. Furthermore, the deduction may not exceed
20 % of
this means
that the deduction will amount to SEK 20 000 (EUR
2 222)
for a yearly income of SEK 100 000 (EUR
11 111) and that the maximum deduction can only be
made where the yearly income is SEK 200 000 (EUR
22 222) or more.

the yearly income. For example,

Proposed scheme

(11)

The new scheme notified to the Commission no longer
requires a night to be spent away from home in order to
benefit from the tax deduction for increased costs of

(17)

By letter of 4 October 2002 the Commission asked the
Swedish authorities if they could provide an estimate of
how many of the 2 000 professional fishermen who will
be eligible to benefit from the Bill’s provisions will be
able to benefit from the maximum deduction of SEK
40 000, i.e. fishermen who have a yearly income of at
least SEK 200 000.

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Official Journal of the European Union

L 99/23

(18)

By letter of 19 December 2002 the Swedish authorities
replied that there are no available statistics on the income
of professional
from fishing
fishermen derived just
activity, so an answer to this specific question could
not be provided.

Budget

(19) According to the data provided in the notifications, if the
notified scheme were to be applied it would result in a
loss to the Swedish Exchequer of SEK 34 400 000 (EUR
is SEK 18 200 000 (EUR
3 822 222) per year,
2 022 222)
in national social contributions foregone
and a reduction of SEK 16 200 000 (EUR 1 800 000)
in the regional tax revenue of each region concerned.

that

(20)

(21)

There are approximately 3 000 professional
licensed
fishermen in Sweden and of these approximately 2 000
are currently operating. At the time of opening of the
formal investigation the Swedish authorities did not have
available data which showed how many of the 2 000
operating licensed fishermen undertook fishing trips
which involve spending the night away from home. It
therefore not possible to estimate how many
was
fishermen were currently able to take advantage of the
existing tax benefits for fishermen.

III.

GROUNDS FOR OPENING THE FORMAL
INVESTIGATION PROCEDURE

The Commission considered that the existing system of
tax deductions applied equally to all sectors of
the
economy and thus was not a selective advantage for
the fisheries sector but a general measure. By allowing
the tax deduction without requiring an overnight absence
from home by fishermen, the Commission considered
that the system would provide a selective advantage for
the fisheries sector which was not available to other
sectors. This advantage seemed to be granted without
imposing any obligation on the part of the recipients.
The measures therefore appeared to be intended to
improve the situation of undertakings, to increase their
business liquidity and to have the effect of improving the
recipient’s
income and thus, as operating aid, were
incompatible with the common market.

IV.

COMMENTS FROM THE SWEDISH AUTHORITIES

(22) According to the Swedish authorities the measure has
imbalance
been proposed in order
the
between those fishermen who may benefit
from the
present tax deduction system (i.e. who spend the night
away from home) and those who may not (coastal/la-

to offset

(23)

(24)

(25)

(26)

custrian fishermen), and to bring the applicable tax
regime into line with neighbouring states.

The Swedish authorities estimate that, of
the 2 000
currently operating licensed fishermen, 1 500 currently
undertake fishing trips which involve spending the
night away from home and therefore 500 fishermen
who do not
tax deductions will
benefit from the proposed scheme.

currently receive

The fishermen can under the present system deduct a
fixed amount for meals and small expenses and accom-
modation. As stated above, the Swedish authorities argue
that many professional fishermen in Sweden undertake
long fishing trips, which under the present tax deduction
system results in a great number of cases for the tax
authorities concerning deductions for increased cost of
living in connection with fishing trips.

The Swedish authorities maintain that the scheme should
be allowed because it equalises the tax position between
professional fishermen who spend the night away from
home and those who do not, in that they have similar
the two
is therefore reasonable to treat
costs and it
groups in the same way in relation to taxation.

The Swedish authorities also argue that the special nature
of the requirements of professional fishermen justify the
special tax provision, and that, as the fishermen generally
operate on a small scale, simplifying the deductions will
make administration easier for both the tax authorities
and the fishermen themselves. The Swedish authorities
therefore maintain that
the proposed regulation is
necessary to the effectiveness of the Swedish tax system
and justified by the nature or general scheme of the
Swedish tax system.

that

state

(27) With regard to the budget, the Swedish authorities finally
argue that the calculation of the loss for the Swedish
the effect should be
Exchequer is incorrect and that
considered marginal. They
existing
the
scheme results in a shortfall of SEK 41 100 000 (EUR
4 566 667) and that if all professional fishermen were to
make use of the new notified scheme the tax shortfall
would
(EUR
3 811 111). Furthermore, as the scheme would be to
fishermen who
the disadvantage of
some of
currently make use of the present rules,
it is believed
that around 500 fishermen would not make use of the
next scheme and would continue to apply the existing
rules.

SEK 34 300 000

amount

only

the

to

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Official Journal of the European Union

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(28) On that basis the Swedish authorities have calculated that
for 2005 would be
SEK 49 700 000 (EUR 5 522 222),
in
SEK
the

the impact on public finances
calculated
equivalent
deductions
8 600 000 (EUR 955 556)
proposed scheme.

at
to SEK 41 100 000 (EUR 4 566 667)

scheme
in deductions under

existing

under

and

the

V.

ASSESSMENT

A. Existence of State aid

(29)

In order for there to be a State aid the measure must first
confer on recipients an advantage which relieves them of
charges that are normally borne from their budgets. The
advantage may be provided through a reduction in the
tax burden in various ways, including a reduction in the
tax base, which is the case with the present notified
scheme.

(30)

Secondly, the advantage must be granted by the State or
through State resources. A loss of
tax revenue is
to consumption of State resources in the
equivalent
form of fiscal expenditure. This is also the case with
the present notified scheme.

(31)

Thirdly, the measure must affect trade between Member
States and distort or threaten to distort competition. By
favouring a certain sector, aid in any form distorts or
threatens
to distort competition. The trade between
Member States is affected when the sector concerned
carries on an economic activity involving trade between
those States, which is the case for the fisheries sector.

(32)

The fact that a measure brings charges in the relevant
sector more into line with those of its competitors in
other Member States does not alter the fact that it is an
aid (1).

(33)

Lastly, the measure must be specific or selective in that it
favours certain undertakings or the production of certain
goods. However, the selective nature of a measure may
the
be justified by the nature or general scheme of

system. However,
provide such justification.

it

is up to the Member State to

(34)

(35)

Firstly, it needs to be made clear that the existing system
of tax deductions is applied equally to all sectors of the
economy.
It is thus not a selective advantage for the
fisheries sector, and therefore not a State aid, but a
general measure.

absence

requiring an
By allowing the tax deduction without
overnight
the
notified scheme would provide a selective advantage to
the fisheries sector which is not available to other sectors
and therefore the scheme constitutes State aid.

from home by

fishermen,

B. Compatibility with the common market

Article 87 of the EC Treaty

(36) As

is
the notified measure constitutes State aid,
necessary to determine if such aid is compatible with
the common market under the exceptions laid down in
Article 87(2) and 87(3).

it

(37) None of the exceptions under Article 87(2) EC can be
applied in this case, as the reform of the tax system is
not aimed at the objectives listed in those provisions.

(38)

(39)

Similarly, the exceptions under Article 87(3)(a), (b) or (d)
EC do not apply because the aid is not directed at a
region where the standard of living is abnormally low
It is not
or where there is serious underemployment.
intended to promote the execution of an important
project of common European interest or to remedy a
serious disturbance in the economy of Sweden, nor is
it intended to promote culture or heritage conservation.

for

It is also necessary to examine the measure in the light of
the examination of State aid to
the Guidelines
fisheries and aquaculture (2). According to point 1(2) of
these Guidelines, State aid which is granted without
imposing any obligation on the part of the recipients
and which is intended to improve the situation of under-
takings and increase their business liquidity and which
has the effect of improving the recipient’s income is, as
operating aid, incompatible with the common market.

(1) Case 173/73 Italy v Commission [1974] ECR 709, paragraph 17.

(2) OJ C 19, 20.1.2001, p. 7.

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(40)

For the purposes of establishing compatibility with the
common market, the Court of Justice has established that
the Commission is bound by the guidelines and notices
that it issues in the area of supervision of State aid where
they do not depart from the rules in the Treaty and are
accepted by the Member States (1). Secondly, under
Article 253 EC, the Commission must give reasons for
its decisions, including decisions refusing to declare aid
compatible with the common market under Article
the Treaty (2). Since Sweden has provided
92(3)(c) of
further arguments, the Commission will examine those
in accordance with its obligations under
arguments,
Article 10 of the EC Treaty,
in its assessement of the
compatibility of the scheme.

their trips include an overnight stay, the proposed system
must be considered to adversely affect trading conditions
within the Swedish fisheries sector and thus to be incom-
patible with 87(3)(c) of the EC Treaty.

(45)

The argument that the new system would create a neutral
competitive situation for Swedish fishermen in relation to
Danish and Norwegian fishermen is in this respect irre-
levant as the scheme in itself adversely affects trading
conditions within the Swedish fisheries sector.

Equality in terms of taxation

(46)

(41) According to the Swedish authorities the scheme has
been proposed to offset the imbalance between those
tax
fishermen who may have access to the present
deduction (i.e. who spend the night away from home)
and those who may not (coastal/lacustrian fishermen).
Under the scheme the fishermen who spend the night
away from home and those who do not will be placed
on an equal footing from a taxation point of view. For
other sectors the existing rules for the tax for increased
cost of living remain the same.

The Swedish authorities’ argument
that many profes-
sional fishermen in Sweden undertake long fishing trips
in part because Sweden is a geographically long country
with long coastlines both to the North Sea and especially
to the Baltic Sea cannot be considered to support the
argument that the system offsets the imbalance between
sea and lacustrian fishermen as regards access to the tax
deduction system. On the contrary, this aspect shows
that there is a significant difference in fishing activities
fishermen which would
between the two groups of
justify difference in treatment under the tax regime.

(42)

(43)

The Swedish authorities consider that fishermen who do
not spend the night away from home on their fishing
trips do not, generally speaking, have lower costs than
those professional
longer
fishing trips involving an overnight stay. Therefore the
authorities consider that it is reasonable to treat these
two groups of fishermen equally in terms of taxation.

fishermen who undertake

In spite of this being one of the main arguments for the
notified scheme, the Swedish authorities were only able
to provide a rough estimate of how many of the 2 000
operating licensed fishermen undertake fishing trips
which involve spending the night away from home.
And more importantly they are unable to provide any
data on what kind of costs are involved which would
allow a comparison to be made between the costs
involved for the two groups of fishermen.

(47)

(48)

(44) Without data showing that both groups of professional
fishermen do in fact incur the same costs, whether or not

(1) Case C 313/90 Comité international de la rayonne et des fibres synthé-

tiques v Commission [1993] ECR I-1125.

(2) Case C 482/99 France v Commission [2003] ECR I-1487.

Better use of administrative resources

Finally, the Swedish authorities state that the proposed
tax deduction system will provide a better use of admin-
istrative resources as it will no longer be necessary to
calculate the deductions on the basis of a calculation of
the total number of fishing days, but by applying a yearly
lump sum calculated on the annual income derived from
fishing.

It might indeed be expected that the system involving a
lump sum amount for the year will provide a better use
of administrative resources than a lump sum amount
calculated per day. However, there are no specific rules
in place for professional fishermen as regards accounting
and bookkeeping and the Swedish authorities have not
been able to provide statistics on the income of profes-
sional fishermen derived from just fishing. In view of the
fact that most fishermen have income from more than
therefore
one professional
be
for the year,
considered that
income derived from fisheries,
based on the annual
is
In particular, as the number of
to establish.
difficult
fishing days is registered in line with the provisions
under
the Common Fisheries Policy and thus easily
accessible, the Commission fails to see the advantage of
changing the system to a calculation based on the yearly
income.

should
the lump sum amount

activity,

it

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Official Journal of the European Union

7.4.2006

(49)

that

suggest

in the letter of 9 November 2004 the
Furthermore,
Swedish authorities
for around 1 500
fishermen it might remain more advantageous to apply
for deductions of actual costs, as pointed out in point 10.
Thus, the new scheme will most likely only be applied to
the 500 fishermen who are not entitled to receive these
deductions under the existing scheme. Therefore, even
though the system applied might be more efficient,
it
would amount to an increase in overall administrative
burden compared to the current situation where such a
deduction is not applied for those fishermen.

Conclusion

(50) With regard to the foregoing the Commission considers
the scheme to be State aid incompatible with Article 87
of the EC Treaty.

fishermen regardless of whether
living to professional
their fishing activities include nights away from home.

HAS ADOPTED THIS DECISION:

Article 1

The draft Bill amending the Income Tax Act (1999:1229) ‘Tax
deductions for professional fishermen’ as proposed by Sweden,
is incompatible with the common market.

Sweden may not implement the aid scheme referred to in the
first paragraph.

Article 2

This Decision is addressed to the Kingdom of Sweden.

VI.

CONCLUSION

Done at Brussels, 8 February 2006.

(51)

In the light of the assessment made in Paragraph IV, the
Commission considers that this aid scheme is incom-
patible with the common market to the extent that it
provides certain tax deductions for the increased cost of

For the Commission

Joe BORG
Member of the Commission