2008/551/EC: Commission Decision of 11 December 2007 on State aid C 12/07 (ex N 799/06) planned by the Slovak Republic for Glunz&Jensen s.r.o. (notified under document number C(2007) 6045) Text with EEA relevance
Date: 2007-12-11
Institutions: European Commission
Subjects: Slovakia, State aid, control of State aid, distributive trades, investment aid, printing, regional aid, tax exemption

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(Acts adopted under the EC Treaty/Euratom Treaty whose publication is not obligatory)

II

DECISIONS

COMMISSION

COMMISSION DECISION

of 11 December 2007

on State aid C 12/07 (ex N 799/06) planned by the Slovak Republic for Glunz&Jensen s.r.o.

(notified under document number C(2007) 6045)

(Only the Slovak version is authentic)

(Text with EEA relevance)

(2008/551/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty
Community,
and in particular
Article 88(2) thereof,

establishing the European
subparagraph of
the

first

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

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

(2)

(3)

(4)

A request for information was sent on 26 January 2007
(D/50360). The Slovak authorities replied by letter dated
20 February 2007 (A/31585).

By letter dated 24 April 2007 (hereinafter ‘the opening
decision’) the Commission informed Slovakia that it had
down in
decided
Article 88(2) of the EC Treaty in respect of the measure.

the procedure

to initiate

laid

The Commission’s decision to initiate the procedure was
published in the Official Journal of the European Union (2).
The Commission called on interested parties to submit
their comments.

Whereas:

I. PROCEDURE

(1)

as

received

the Commission

By electronic notification dated 29 November 2006,
registered
on
by
30 November 2006 under reference number A/39718,
the Slovak authorities, in accordance with Article 88(3)
of
their
the EC Treaty, notified the Commission of
intention to grant regional ad hoc investment aid in
favour of the company Glunz&Jensen s.r.o.

(1) OJ C 189, 14.8.2007, p. 2.

(5)

The Commission did not receive any comments from
interested parties or from the Slovak Republic.

II. DETAILED DESCRIPTION OF THE MEASURE

II.1. Aim of the measure

(6)

The aim of the aid measure is to promote regional de-
velopment in the Prešov region (eastern Slovakia), which
was an assisted area under Article 87(3)(a) of the EC
Treaty in accordance with the Slovak regional aid
map (3) applicable at the date of the notification, with a
regional aid ceiling of 50 % net grant equivalent (NGE).

(2) Idem.
(3) SK 72/2003 — Slovak Republic — ‘Regional State aid map of the

Slovak Republic’; C(2004) 1757/7, 28.4.2004.

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(7)

(8)

(9)

The proposed project constitutes an ad hoc aid measure
notified by the Slovak authorities. The aid in question is
not being granted under an existing scheme (i.e. its legal
basis is not listed in the Accession Treaty as an existing
aid scheme, nor was it the subject of the so-called interim
mechanism, nor has the Commission approved an aid
scheme based on these legal provisions since Slovakia’s
accession to the EU).

II.2. The form and nature of the aid

The notified aid is to be provided in the form of a tax
exemption, applied on an annual basis between 2007-
2010, of up to 100 % of the corporate tax liability of the
aid recipient, Glunz&Jensen s.r.o. The total amount of the
tax exemption is limited to SKK 42 million at present
value (1) (approx. EUR 1,15 million). The aid cannot be
cumulated with aid received from other sources for the
same investment project.

II.3. Legal basis of the ad hoc aid

The legal basis of the ad hoc aid is State Aid Act No
231/1999, as amended; Income Tax Act No 595/2003,
as amended; and Income Tax Act No 366/1999, as
amended at 31 December 2003,
in particular Section
52(3) of Income Tax Act No 595/2003, as amended,
under
laid down in Section 35a of
Income Tax Act No 366/1999, as at 31 December
2003 (2).

the conditions

II.4. Beneficiaries

(10)

The beneficiary of the aid, Glunz&Jensen s.r.o., is a large
enterprise,
i.e. not an SME within the meaning of
Commission Regulation (EC) No 70/2001 on the appli-
cation of Articles 87 and 88 of the EC Treaty to State aid
to small and medium-sized enterprises (3). Glunz&Jensen
s.r.o. is the Slovak subsidiary of Glunz&Jensen A/S (here-
inafter ‘Glunz&Jensen’) which has its headquarters in
Ringsted (Denmark), with other subsidiaries at the time
of notification in Virginia (USA) and in Thetford (UK).

(12)

(13)

(14)

(15)

(16)

II.5. Investment project

In 2004, Glunz&Jensen s.r.o. started work on an initial
investment in Slovakia involving an investment volume
of SKK 213 million (approx. EUR 5,8 million). The
the
investment project
period 2004-2009, according to the Slovak authorities,
in two phases: 2004-2006 and 2007-2009.

is being implemented over

The project aims to relocate the production activities that
existed in 2004 in the UK and Denmark to Prešov. As a
result of the relocation project, the Thetford plant was
closed down at the end of 2006.

The Prešov plant is to be developed into the firm’s main
production centre.
In fact, as indicated by the Slovak
authorities, all machinery to be installed in the Slovak
plant is being transferred directly from Denmark and the
UK. The eligible costs of the project therefore include
only the buildings and some minor additional equipment.

step of

The first
the 2004-2006 investment phase
consisted in the purchase of a production hall and a
greenfield site for
future expansion. The subsequent
and
second step involved renovating the
purchasing equipment (not directly linked to production).
The total amount for the first phase of the investment
was SKK 128 million (approx. EUR 3,5 million). As
annexed to the notification,
stated in declarations
Glunz&Jensen s.r.o. did not receive any State aid for
this part of the project, nor is any application pending.

facilities

The second phase of the investment, to be carried out
over the period 2007-2009, is the project notified by the
Slovak authorities on 29 November 2006. This part
covers continuation of
the initial project with the
further buildings and the purchase of
construction of
further equipment (IT, trucks and office equipment) for
a total of SKK 84 million at present value (approx. EUR
2,3 million).

(11) Glunz&Jensen is the world’s leading manufacturer and
processing
and plateline
approximately

of
for offset printing plates
share of

distributor
equipment
equipment, with a market
[…] % (4) in Europe.

pre-press

graphic

arts

(1) Expressed in terms of the 2007 value and calculated at a reference

rate of 5,62 %, the rate applicable at the date of notification.
(2) Zákon č. 231/1999 Z.z. o štátnej pomoci, v znení neskorších
predpisov, Zákon č. 595/2003 Z.z. o dani z príjmov, v znení
neskorších predpisov a Zákon č. 366/1999 Z.z. o daniach z
príjmov, v znení neskorších predpisov, v znení účinnom k
31. decembru 2003, najmä §52 ods.3 zákona č. 595/2003 Z.z. o
dani z príjmov, v znení neskorších predpisov, za podmienok
uvedených v §35a zákona č. 366/1999 Z.z. o daniach z príjmov,
v znení účinnom k 31. decembru 2003.

(3) OJ L 10, 13.1.2001, p. 33.
(4) Confidential information.

(17)

The production unit in Slovakia opened in April 2005.
Since then, production at
the factory has increased
markedly and productivity has improved considerably (5).

III. GROUNDS FOR INITIATING THE PROCEDURE

(18)

in its decision to initiate the formal
The Commission,
investigation procedure in the present case, noted that
it had doubts as to the compatibility of the aid with
the common market based on Article 87(3)(a) of the
EC Treaty and on the Guidelines on National Regional
(hereinafter referred to as ‘RAG 1998’) for the
Aid (6)
following reasons:

(5) Information from the Annual Report 2005-2006, available on

Glunz&Jensen’s website.
(6) OJ C 74, 10.3.1998, p. 9.

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— First,

the

two phases of

it appeared that

the
investment belong to the same investment project
since they constitute part of an overall plan to
accommodate the production lines to be relocated
In the
gradually from Denmark and the UK.
submitted notification the Slovak authorities them-
selves also referred to the two phases as one single
investment project. ‘The investment project submitted
by the company Glunz&Jensen is being implemented
over the period 2004-2009 in two phases: 2004-
2006, 2007-2009’.

Furthermore, on page 6 of the ‘Application for the
tax relief’
provision of State aid in the form of
submitted by the beneficiary to the Slovak authorities,
which was annexed to the notification, Glunz&Jensen
s.r.o. indicated that the investment period runs from
2004 till 2008 (1), and the total
investment costs
amount to ‘more than SKK 200 million’, which is
the amount corresponding to the total
investment
made by Glunz&Jensen s.r.o. in Slovakia.

In light of the above,
it appeared that the notified
project concerned the second phase of a single
had
comprehensive
already started in 2004.

project which

investment

Moreover, since the aid application by the beneficiary
itself did not distinguish between the two phases of
investment, the Commission could not rule out the
possibility that the investment period was artificially
split into two phases so that the beneficiary would be
eligible to apply for the aid in 2006.

an investment decision which led to work starting in
2004 and production activities getting under way in
April 2005.

for

reasons

— Third, the idea that the availability of the aid was not
a decisive factor for the beneficiary’s decision to start
work on relocation, seemed to be confirmed by the
beneficiary’s own statement
in its aid application
which explained the
relocating its
‘The Board (of Glunz&Jensen)
activities to Slovakia:
decided during the course of 2003 to investigate the
possibility of establishing a production unit in a low-
the
country. The objective was
cost
production cost, develop sub-suppliers
in central
and eastern Europe … Glunz&Jensen has conducted
a comparative analysis of 11 central and eastern
to decide on the optimal
European countries
the subsidiary …. Out of
location of
these 11
countries, the Czech Republic, the Slovak Republic
and Bulgaria were investigated. The conclusion was
the Slovak Republic was deemed the most
that
considering Glunz&Jensen’s
appropriate
business
combinations on the
and the
assessed markets (2)’.

to lower

location

factor

— Fourth,

the Slovak authorities explained why the
beneficiary did not apply for aid for the first phase
of the investment project. According to their expla-
to the
the company assumed that prior
nation,
Slovak Republic’s accession to the EU it was not
necessary to seek authorisation for State aid in the
form of tax relief. In their understanding, the appli-
cation for the aid had to be submitted only in the tax
declaration for the year in which the company first
incurred a tax liability.

— Second, according to the information provided by the
Slovak authorities, the application for aid, signed on
29 of June 2006, was not submitted until November
2006, i.e. after the first stage of the investment had
started in 2004.

According to the Slovak authorities, this means that
Glunz&Jensen s.r.o. planned to apply for state aid
from the very beginning of the investment project’s
implementation in 2004.

State

Consequently, the Commission had doubts whether
the condition regarding the incentive effect of the aid
as laid down in point 4.2 of RAG 1998 was being
respected. The Commission underlined that, as a
general principle,
aid which distorts or
threatens to distort competition and affects trade
between Member States can only be approved if
these negative effects are more than outweighed by
the aid’s positive contribution to a Community
objective
The
Commission considered that an aid applied for at
the end of 2006 could not retrospectively trigger

development).

regional

(here:

that

granted

the fact

automatically

In the Commission’s view,
the be-
neficiary did not know the proper procedure to be
followed cannot be taken into account. It should be
stressed that the aid under Section 35a of Slovak
Income Tax Act No 366/1999, as amended, was
Slovakia’s
not
accession, nor is it granted automatically now, since
there is no existing aid scheme referring to the above
this type of aid
mentioned Section. Consequently,
was
to the
Commission as ad hoc aid, as is shown by approxi-
mately 40 ad hoc notifications submitted by Slovakia
applying this legal base under the so-called interim
procedure.

individually notifiable

and remains

prior

to

(1) 2008 seems to be a typing error made by the beneficiary in the
application for the aid. In all other documents submitted the year
2009 is indicated as the end of the project.

(2) Point 3 of the Application for the provision of State Aid in the form

of tax relief.

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— Finally, even if the aid had had an incentive effect,
substantial doubts would need to be raised: in fact,
RAG 1998 (point 2) takes a negative stance towards
ad hoc aid unless it can be proved that the regional
contribution of the measure outweighs the distortion
of competition and the effects on trade.
In this
context, the Commission noted the following:

V.2. State aid character of the measure

(21)

The Commission considers that the measure constitutes
State aid within the meaning of Article 87(1) of the EC
Treaty for the following reasons, already indicated in the
opening decision.

— Although the measure provides a significant
(155
regional
its negative

contribution to
direct jobs, some 30 indirect jobs),
effects seem to be equally substantial.

development

closest

— The relevant product market of the beneficiary is
graphic arts pre-press processing equipment,
in
(CtP) processors.
computer-to-plate
particular
The Commission noted that
the aid is to be
granted to a company which has a market share
of approximately […] % on the European market.
The
competitors of Glunz&Jensen in
shares are:
Europe along with their market
Height Design […] %, Agfa (Lastra) Belgium
[…] %, E-graf,
Italy […] %, Haase, Germany
[…] % and Ovit, Italy […] %. Given the market
position of the beneficiary, the Commission was
of the opinion that the planned measure could
have a major
impact on competition in the
relevant, very specific market in which the be-
neficiary is active.

and machinery

— Furthermore, the project concerns the relocation
of production activity
from
Denmark and the UK. Because it was solely a
production facility, the plant in Thetford in the
UK was closed down at
the end of 2006,
following the transfer of production to Slovakia.
According
the
information
company’s web site, 77 employees were made
redundant
in Thetford. The Danish company
will focus in future on sales, customer services,
R&D and the operation of a pilot plant. The relo-
cation therefore has a significant effect on trade
between Member States.

found

on

to

IV. COMMENTS FROM THE SLOVAK REPUBLIC AND
INTERESTED PARTIES

(19) No comments were received from the Slovak authorities
or from third parties to allay the doubts which were
raised when the formal investigation was initiated.

V. ASSESSMENT OF THE MEASURE

V.1. Legality of the measure

(20)

By notifying the aid measure with a standstill clause until
the Slovak authorities
authorised by the Commission,
have complied with the procedural
requirements of
Article 88(3) of the EC Treaty.

V.2.1. Presence of state resources

(22)

State resources are involved since an exemption from the
payment of corporate income tax is planned.

V.2.2. Economic advantage

(23)

The measure would relieve the beneficiary of the aid
from costs which it would have had to bear under
normal market conditions.
It would therefore provide
an advantage
to Glunz&Jensen s.r.o. over other
companies.

V.2.3. Presence of selectivity

(24)

The measure is selective since it relates to only one
undertaking.

V.2.4. Distortion of competition and trade

(25)

The measure affects trade between Member States since
(i) the beneficiary is active in a sector where strong intra-
Community trade exists and (ii)
the relocation of
activities from Denmark and the UK has a strong effect
on sectoral trade flows.

V.3. Compatibility

(26)

Insofar as the measure constitutes State aid within the
meaning of Article 87(1) of the EC Treaty, its compati-
bility must be assessed in the light of the exceptions
provided for in Article 87(2) and (3) of the EC Treaty.
The exceptions provided for in Article 87(2) of the EC
Treaty, which concern aid of a social character granted to
individual consumers, aid to make good the damage
caused by natural disasters or exceptional occurrences
and aid granted to certain areas of the Federal Republic
of Germany, do not apply in this case. The measure
cannot be considered an important project of common
European interest or a measure intended to remedy a
serious disturbance in the Slovak economy, as provided
for by Article 87(3)(b) of the EC Treaty. Nor does the
measure
by
the
Article 87(3)(c) of the EC Treaty, which provides for
the authorisation of aid to facilitate the development of
certain economic activities or of certain economic areas if
the aid does not adversely affect trading conditions to an
extent contrary to the common interest. In the same way,
it does not have as its objective the promotion of culture
and
by
as
Article 87(3)(d) of the EC Treaty.

conservation

exception

provided

heritage

allowed

qualify

for

for

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(27) Article 87(3)(a) of the EC Treaty provides for the auth-
orisation of aid to promote the economic development
of areas where the standard of living is abnormally low
or where there is serious underemployment. The Prešov
region (eastern Slovakia) is an eligible region under that
derogation.

The State aid which the Slovak Republic is planning to
implement
for Glunz&Jensen s.r.o., amounting to SKK 42
million (EUR 1,15 million), is incompatible with the common
market.

(28)

(29)

formal

the Commission explained the

In its decision to open the
investigation
procedure,
reasons,
for which it
summarised in Part III of this Decision,
doubted that the measure could qualify for the dero-
gation under Article 87(3)(a) of the EC Treaty. In the
absence of any comments from the Slovak Republic or
third parties, the Commission can only find that these
doubts are confirmed.

VI. CONCLUSION

The Commission finds that the measure notified by the
Slovak Republic, as set out under paragraphs 6 to 9
above,
is not compatible with the common market
under any derogation laid down in the EC Treaty and
must be prohibited. According to the Slovak authorities,
the aid has not been granted, and therefore there is no
need for it to be recovered,

The aid may therefore not be implemented.

Article 2

The Slovak Republic 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 Slovak Republic.

Done at Brussels, 11 December 2007.

HAS ADOPTED THIS DECISION:

Article 1

The notified tax exemption constitutes State aid within the
meaning of Article 87(1) of the EC Treaty.

For the Commission

Neelie KROES
Member of the Commission