2008/734/EC: Commission Decision of 4 June 2008 on State aid C 57/07 (ex N 843/06) which the Slovak Republic is planning to implement for Alas Slovakia, s.r.o. (notified under document number C(2008) 2254) (Text with EEA relevance)
Date: 2008-06-04
Institutions: European Commission
Subjects: Slovakia, State aid, control of State aid, investment aid, mining industry, regional aid, tax relief

17.9.2008

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Official Journal of the European Union

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

II

DECISIONS

COMMISSION

COMMISSION DECISION

of 4 June 2008

on State aid C 57/07 (ex N 843/06) which the Slovak Republic is planning to implement for Alas
Slovakia, s.r.o.

(notified under document number C(2008) 2254)

(Only the Slovak version is authentic)

(Text with EEA relevance)

(2008/734/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

for investment activities by Alas Slovakia, s.r.o. at nine
different locations (2).

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,

Whereas:

I. PROCEDURE

(1)

By letter dated 15 December 2006, registered by the
the
Commission on 18 December 2006 (A/40324),
Slovak authorities,
in accordance with Article 88(3) of
the EC Treaty, notified their intention to grant regional
individual investment aid in the form of a tax concession

(2)

(3)

(4)

Requests for information were sent out on 13 February
2007 (D/50598), 8 May 2007 (D/51936), 25 July 2007
(D/53139) and 12 October 2007 (D/54058) respectively.
The Slovak authorities transmitted additional information
by letters dated 12 March 2007 (A/32162), 4 June 2007
(A/34580), 13 August 2007 (A/36769) and 31 October
2007 (A/39017).

‘the
By letter dated 11 December 2007 (hereafter
opening decision’)
the Commission informed Slovakia
that it had decided to initiate the procedure laid down
the
in Article 88(2) of
measure.

the EC Treaty in respect of

The Commission Decision to initiate the procedure was
published in the Official Journal of the European Union (3).
The Commission called on interested parties to submit
their comments.

(2) By letter dated 13 February 2006, the Commission asked the Slovak
authorities to submit for evaluation nine different notifications so
that it could assess the compatibility of each of the nine projects on
the basis of their individual merits. In their reply of 12 March 2007,
the Slovak authorities explained to the Commission that Alas
Slovakia s.r.o., constituted a single tax entity with several estab­
lishments, with a single tax liability. The applicable Slovak legislation
does not allow taxpayers to calculate the tax base and the corporate
tax for each organisational unit separately. Therefore, the Slovak
authorities consider that it is not possible to calculate the amount
of aid received by each establishment.

(1) OJ C 30, 2.2.2008, p. 13.

(3) See footnote 1.

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(5)

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

(6)

(7)

(8)

(9)

II. DETAILED DESCRIPTION OF THE MEASURE

2.1. Aim of the measure

The aim of the aid measure is to promote the regional
development of the regions of Nitra (4), Trnava (5) and
Trenčín (6), all situated in Western Slovakia, which was
at the time of notification an assisted area pursuant to
Article 87(3)(a) of the EC Treaty; the aid intensity ceiling
according to the Slovak regional aid map 2004-2006 (7)
is 50 % NGE.

The proposed project constitutes an individual aid
measure notified by the Slovak authorities, i.e. it is not
granted under an existing aid scheme within the meaning
of Council Regulation (EC) No 659/1999 of 22 March
1999 laying down detailed rules for the application of
Article 93 of the EC Treaty (8).

2.2. The form and nature of the aid

The notified measure is to be provided in the form of a
tax concession applied on an annual basis between 2007
and 2011. The annual concession is limited to 50 % of
the corporate tax liability of Alas Slovakia, s.r.o. The total
limited to SKK
amount of
tax concession is
100 813 444 at current value (9)
(approximately EUR
2,89 million). The aid cannot be utilised concurrently
with aid from other sources to cover the same eligible
costs.

the

The notified aid follows earlier aid in the form of a tax
concession (based on Section 35a of the Income Tax Act)
which was approved by the Slovak Office for State Aid
before the accession of
the Slovak Republic to the
EU (10).

(4) In the municipalities of: Nitra, Komjatice, Veľký Cetín, Hontianske

Trsťany-Hrondín.

(5) In the municipalities of: Červeník, Veľký Grob, Okoč.
(6) In the municipalities of: Kamenec pod Vtáčnikom, Prievidza.
(7) State aid SK 72/2003 — Slovak Republic — ‘Regional State aid

map of the Slovak Republic’.

(8) OJ L 83, 27.3.1999, p. 1.
(9) Expressed at 2007 value and calculated at a reference rate of 5,62 %

applicable on the date of the notification.

(10) By notification No 1108/2003 of the Slovak Office for State Aid,
issued on 25 August 2003, State aid was approved for Alas
Slovakia, s.r.o. (2003 to 2012),
in accordance with Section 35a
of Act No 472/2002, as amended, and Act No 366/1999, for a
maximum level of SKK 87 145 485. Under the interim procedure,
this State aid (SK 53/03) was considered ‘existing aid’.

(10) According to Section 35a of the Income Tax Act, an aid
beneficiary is granted a corporate tax credit of 100 %
over a period of five consecutive years and afterwards,
it has the possibility to apply for a further tax credit of
50 % during the subsequent five years. The submitted
notification concerns this second period of five years.
The notified aid concerns other eligible expenditure and
partially also other establishments than those covered by
the pre-accession aid.

(11)

(12)

2.3. Legal basis of the individual aid

The national legal basis for the aid is Act No 231/1999
Coll. on State aid, as amended, Act No 595/2003 Coll.
on income tax, as amended, and Act No 366/1999 Coll.
on income
in force on
taxes,
as
as
in particular Section 52(3) of Act
31 December 2003,
No 595/2003 Coll. on income tax, as amended, under
the conditions
specified in Section 35a of Act No
366/1999 Coll. on income taxes, as amended, as in
force on 31 December 2003 (11).

amended,

2.4. Beneficiaries

s.r.o.,

The aid beneficiary, Alas Slovakia,
is a large
enterprise. It took over the activities carried out by the
former state enterprises ‘Západoslovenské kameňolomy a
štrkopiesky’ and ‘Strmáč Comp.Ltd’. The beneficiary is
active in the extraction and processing of non-reserved
fall under Division 08,
minerals (gravel, stone)
that
Group 08.1, Classes 08.11 and 08.12 of
the NACE
statistical classification of economic activities. It is also
involved in the production and sale of cement and
concrete mixes — Division 23, Group 23.6 of
the
NACE classification.

(13) According to the information provided on the website of
the company, Alas Slovakia, s.r.o.
ranks among the
leading stoneware producers in the Slovak Republic. Its
market share in Slovakia is around 15 %.

(14)

The major shareholder (67,45 %) of Alas Slovakia, s.r.o.
is Alas International Baustoffproduktions AG (hereafter
‘Alas International’) based in Ohlsdorf (Austria), which
in turn belongs to the ASAMER holding group. Alas
a holding
International was
company to carry out
international activities in the
field of aggregates and concrete.

founded in 1998 as

(11) Act No 231/1999 Coll. on State aid, as amended, Act No
595/2003 Coll. on income tax, as amended, and Act No
366/1999 Coll. on income taxes, as amended, as in force on
31 December 2003,
in particular Section 52(3) of Act No
595/2003 Coll. on income tax, as amended, under the conditions
specified in Section 35a of Act No 366/1999 Coll. on income
taxes, as amended, as in force on 31 December 2003.

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2.5. The investment project

(15) According to Slovakia, the aid concerns both the setting-up of three new establishments (Červeník,
Okoč and Prievidza) and the modernisation, rationalisation and diversification of six existing
production facilities (Veľký Grob, Veľký Cetín, Komjatice, Kamenec pod Vtáčnikom, Hontianske
Trsťany — Hrondín and Nitra). The investment project will involve purchasing modern and envir­
onmentally friendly technical equipment from third parties and constructing and improving various
sites for the extraction of raw materials (stone and gravel, aggregates). It would appear that all these
establishments are completely independent from one another since there is no functional connection
or any economic link between them.

(16)

Through these investment activities the company wishes to improve the quality of its products and
services and guarantee the reliability of the supply of the required quantities and varieties for
construction investors. The eligible costs of the project are estimated at SKK 345 026 285 (approxi­
mately EUR 9,90 million) at current value.

(17)

The works on the investment projects were notified to start in 2007. The project implementation
should be completed by 2011. Details are given in the table below.

Establishment

Type of initial investment

Investment
period

Number of
newly created
jobs

Amount of
investment in
nominal value
(in SKK 000)

Veľký Grob

Rationalisation Extension of
existing establishment

an

2007, 2008

Veľký Cetín

Modernisation

Komjatice

Modernisation

2007

2008

Kamenec pod
Vtáčnikom

Hontianske Trsťany
— Hrondín

Modernisation Diversification

2007, 2008
2010, 2011

Diversification

2008, 2009

Červeník

Okoč

Nitra

Setting-up of a new establishment 2007, 2009

Setting-up of a new establishment 2007

Diversification

2008

Prievidza

Setting-up of a new establishment 2009, 2010

Total

—

—

—

27

20

16

14

—

4

81

26 400

9 000

10 200

151 000

49 000

40 000

29 000

14 000

51 000

379 600

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III. GROUNDS FOR INITIATING THE PROCEDURE

(18)

the formal

In its decision to initiate
investigation
procedure in the present case the Commission, noted
that it had doubts on 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
Aid (12)
(hereinafter referred to as RAG 1998) for the
following reasons.

regional

investment

— First, the Commission had doubts as to whether the
aid to initial
limitation of
investment, as laid down in point 4.4 of the RAG
1998, was respected. According to point 4.4 of RAG
1998, initial investment is defined as an investment
in fixed capital relating to the setting-up of a new
establishment,
the extension of an existing estab­
lishment or the starting-up of an activity involving
a fundamental change in the product or production
process of an existing establishment (through ration­
alisation, diversification or modernisation). This defi­
nition
replacement
investment. Aid to replacement investment is to be
considered as operating aid, which is allowed only if
specific conditions are met (cf. points 4.15, 4.16 and
4.17 of RAG 1998).

from its

excludes

scope

of machinery/equipment

— It appeared that in at least three establishments
(Veľký Grob, Veľký Cetín and Kamenec pod
Vtáčnikom)
the beneficiary is purchasing the
same
it
type
currently uses and rents. The improved quality
of
the purchased equipment or the significant
increase in the production concerned may be
questioned, although the beneficiary claimed that
new equipment would be more modern than the
one currently leased.

as

— At

its Nitra establishment,
customers only

the beneficiary will
‘complementary’
a
offer
its
to ‘maintain the company’s
service in order
economic
cash
market
results’ (13). It seemed difficult to justify aid in a
situation where no additional activity is to be
carried out.

flow and

share,

— Second, the measure at issue constitutes individual
aid, to be granted to a company active in a specific
sector of extraction of raw materials. Consequently,

this aid measure is to be considered selective with a
greater impact on other companies active in the same
sector. According to point 2 of RAG 1998, an indi­
vidual ad hoc aid made to a single firm, or 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 fairly limited.
Such aid generally comes within the scope of specific
sectoral industrial policies and is not in line with the
spirit of regional aid policy as such. The latter must
remain neutral towards the allocation of productive
resources between the various economic sectors and
the RAG 1998 take a
activities.
In conclusion,
negative stance towards
individual aid measures
unless it can be proved that the regional contribution
of the aid outweighs the distortion of competition
and the effects on trade. In this case, the Commission
had doubts whether
the limited contribution to
regional development can justify the relatively high
amount of aid per job created.

— It transpires from the information submitted that
only 81 direct
jobs would be newly created,
whereas some 57 direct jobs created by the bene­
ficiary in the past would be maintained by the
aided investments. The new jobs would concern
only five of the nine establishments of the project
(see table above). The Commission noted that 34
the 81 newly created jobs should be
out of
new establishments
created
envisaged (14). Consequently,
the Commission
had doubts as to whether the relatively high
amount of aid per direct job created, in particular
job
in a low wage sector (the aid per direct
created would correspond to around seven
annual salaries), was justified.

three

the

in

in their

jobs would

they referred to the statistics of

— Concerning the number of indirect jobs, in their
letter dated 17 February 2007 the Slovak auth­
orities initially indicated that 100 indirect jobs
would be created. Later on,
second
letter of 4 June 2007 providing additional infor­
mation,
the
European Aggregates Association, claiming that
amount
indirect
to 414-690.
According to this study,
in the sector in which
the company is pursuing its business activities,
approximately 3-5 jobs are created in respect of
each newly created job.
information
submission dated 13 August 2007, the Slovak
authorities referred finally to a survey furnished
to Alas by the University of Leoben (Austria),
according to which in the sector of processing
of raw materials, each new direct job corresponds

In the

(12) OJ C 74, 10.3.1998, p. 9.
(13) Letter from the Slovak Ministry of Finance, dated 31 May 2007 (ref.

MF/8790/2007-832).

(14) In this respect, it should be underlined that 16 new jobs out of 81
should be created at the site of Červeník, for which the permit for
extraction has not yet been granted.

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to 30-40 indirect jobs (15). The Commission had
doubts as to whether this general statement on
mineral
to the
situation of building materials.

extraction was

transferable

— Moreover, the aid is granted to activities in the
extraction industry whose location is determined
not by the granting of aid, but by the availability
of minerals; this is less affected by the regional
handicaps that normally hamper regional deve­
it can be assumed that
lopment. Consequently,
the resources
it would be possible to exploit
In addition, since Alas
even without
the aid.
was already operating in most of
the estab­
lishments on the basis of long-term licences, the
incentive effect of additional regional aid was
doubtful.

— Third, the likely limited contribution to regional deve­
lopment has to be balanced against the effect on
trade and distortion of competition of
the aid
measure which, according to the Slovak authorities,
is also expected to be small. The selling radius of the
products concerned is limited (approximately 50 km
by road or 150 km by rail) owing to their relatively
small value with regard to the cost of transport. The
Slovak authorities indicated that only one estab­
lishment (Hontianske Trsťany — Hrondín) would be
in a position to export part of its production (up to
50 thousand tonnes of building stone annually worth
SKK 9 million)
to Hungary. Three other estab­
lishments (Veľký Cetín, Okoč and Komjatice) are
expected to compete with imports from Hungary.
to compete
Alas Slovakia, s.r.o. does not expect
with other
and processing
minerals
the Czech Republic.
However, this seemed to be in contradiction with
the information contained in the application for the
first part of the aid, submitted to the Slovak authori­
ties on 16 April 2003, where potential competitors
from these two countries were mentioned.

companies mining

from Austria or

of Community competition law (16), in certain cases,
even if the deliveries from a given plant are limited to
a certain area around that plant, the distribution of
the areas around the
plants may be such that
is
If
different plants overlap significantly.
possible that the pricing of those products would
be affected by a chain substitution effect, leading to
impacts on a broader geographic market.

so,

it

the Commission had doubts as

As a result,
whether
regional development would offset
effects on trade.

the expected contribution of

to
the aid to
its negative

IV. COMMENTS FROM THE SLOVAK REPUBLIC AND
INTERESTED PARTIES

(19) No comments were received from the Slovak authorities
or from third parties to dispel the doubts 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. 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.

the location of
the estab­
Taking into account
lishments concerned,
the Commission had doubts
about the extent to which trade with other Member
States (e.g. Austria or the Czech Republic) would be
distorted.

V.2.1. P r e s e n c e o f s t a t e r e s o u r c e s

(22)

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

— Finally, as laid down in the Commission notice on
the definition of the relevant market for the purposes

V.2.2. E c o n o m i c a d v a n t a g e

(15) ‘Socioeconomic study in the sector of final products made from
minerals reveals that the number of
jobs created in the sector
minerals processing is 30-40 times higher than the number of
jobs in the mineral sector’
the study
entitled ‘Survey of minerals planning politics in Europe’ commis­
sioned by DG Enterprise and Industry).

(quoted on page 31 of

(23)

The measure relieves Alas Slovakia, s.r.o. of costs it
would have to bear under normal market conditions. It
will
therefore provide an advantage to Alas Slovakia,
s.r.o. over other companies.

(16) OJ C 372, 9.12.1997, p. 5.

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V.2.3. P r e s e n c e o f s e l e c t i v i t y

(24)

The measure is selective since it addresses only one
undertaking.

(25)

(26)

V.2.4. D i s t o r t i o n
t r a d e

o f

c o m p e t i t i o n

a n d

Finally, the production covered by the project is subject
trade between Member States is
to trade. Therefore,
affected.
the advantage granted to Alas
Slovakia, s.r.o. and its production distorts competition
or is liable to distort competition.

In addition,

V.3. Compatibility

In so far 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 to be an important project of
common European interest or aid to remedy a serious
disturbance in the Slovak economy, as provided for by
Article 87(3)(b) of the EC Treaty. The measure does not
qualify
by
Article 87(3)(c) of the EC Treaty that provides for the
authorisation of aid to facilitate the development of
certain economic
certain economic activities or of
areas, where such aid does not adversely affect trading
conditions to an extent that is contrary to the common
interest. In the same way, it does not have as its objective
the promotion of culture and heritage conservation as
provided for by Article 87(3)(d) of the EC Treaty.

exception

allowed

either

the

for

(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 regions
of Nitra, Trnava and Trenčín (Western Slovakia) are
eligible under this derogation.

(28)

investigation
In its decision to open the
procedure,
reasons,
summarised in Section III of this Decision, for which it

the Commission explained the

formal

doubted that the measure under scrutiny could qualify
the EC
for the derogation under Article 87(3)(a) of
Treaty.
from the
Slovak Republic or third parties, the Commission can
deem these doubts to be confirmed.

In the absence of any comments

VI. CONCLUSION

(29)

The Commission finds that the measure notified by the
Slovak Republic, as set out in paragraphs 6 to 10 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 yet been granted and, therefore, there is no need
for its recovery,

HAS ADOPTED THIS DECISION:

Article 1

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

The State aid which the Slovak Republic is planning to
SKK
implement
100 813 444 (approximately
is not
compatible with the common market.

EUR 2,89 million)

for Alas

Slovakia,

s.r.o.

for

up

to

In view of this, the aid may 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 the Decision.

Article 3

This Decision is addressed to the Slovak Republic.

Done at Brussels, 4 June 2008.

For the Commission

Neelie KROES
Member of the Commission