Proposal for a COUNCIL DECISION amending Decision 2002/546/EC as regards its period of application
Date: 2013-11-12
Institutions: European Commission
Subjects: Canary Islands, Spain, derogation from EU law, indirect tax, national tax, originating product, tax exemption













EUR-Lex - 52013PC0781 - EN











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52013PC0781

Proposal for a COUNCIL DECISION amending Decision 2002/546/EC as regards its period of application /* COM/2013/0781 final - 2013/0387 (CNS) */









EXPLANATORY MEMORANDUM
1.           CONTEXT OF THE PROPOSAL
The Treaty on
the Functioning of the European Union (TFEU), which applies to the outermost
regions of the EU, which include the Canary Islands, does not in principle
allow any difference between the taxation of local products and the taxation of
products from Spain or other Member States. Article 349 of the TFEU (formerly
Article 299(2) of the EC Treaty) provides, however, for the possibility of
introducing specific measures for those regions because of the permanent
handicaps which affect the economic and social conditions of the outermost
regions.
Council
Decision 2002/546/EC of 20 June 2002[1],
adopted on the basis of Article 299(2) of the EC Treaty, authorises Spain, up
to 31 December 2011, to apply exemptions from or reductions in the ‘Arbitrio sobre Importaciones y Entregas de Mercancías en las Islas
Canarias’ (hereinafter ‘AIEM’) to certain products
produced locally in the Canary Islands. The Annex to that Decision contains a
list of products to which tax exemptions and reductions may be applied. The
difference between the taxation of locally manufactured products and the
taxation of other products may not exceed 5, 15 or 25 percentage points,
depending on the product. 
Decision
2002/546/EC sets out the reasons for adopting specific measures, which include
isolation, raw material and energy dependence, the obligation to build up
stocks, the small size of the local market and the low level of export
activity. The combination of these handicaps means that production costs, and
therefore the cost price of goods produced locally, are increased, so that
without specific measures they would be less competitive than goods produced
elsewhere, even taking into account the cost of transporting the latter to the
Canary Islands. This would make it harder to maintain local production. The
specific measures covered by Decision 2002/546/EC were thus designed to
strengthen local industry by making it more competitive. 
The AIEM is an indirect State tax levied in a
single stage on the supplies of goods in the Canary Islands effected by the
producers of the goods and on the import into the territory of the Canary Islands of comparable goods or similar goods of the same type, irrespective of their
place of origin. The taxable base for the imported goods is based on the
customs value, and that of the supplies of goods by producers in the Canary Islands is based on the total amount of the consideration. The specific measures
covered by Decision 2002/546/EC establish a form of differentiated
taxation, benefiting the local production of some products. This tax benefit
constitutes state aid that requires the approval of the Commission, which was granted by Decision on State Aid NN 22/2008.
The global
economic crisis of 2009, with its impact in the reduction of travelling, had
severe consequences on the economy of the Canary Islands, which is highly
dependent on revenues from tourism. In particular, the reduction of working
force in the tourism sector has led to a major increase in the unemployment
rate in the Canary Islands. The unemployment rate that in the period of
2001-2007 had oscillated between 10.4% and 12%, rose to 17.3% in 2008 and to 26.2%
in 2009. This evolution confirms the danger of an economy highly dependent on
tourism and the need to promote a diversification in the economic activities.
On 16 November
2010, Spain submitted a request to the Commission to extend the period of
application of Decision 2002/546/EC for two years, so that its expiry date
coincided with the one of the Guidelines on national regional aid for 2007-2013[2].
In addition, Spain also introduced a request for the extension for two years of the period of
application of Decision on State Aid NN 22/2008, according to which the aid
given by the Spanish authorities, in respect of the AIEM, was compatible with
the common market. The Commission authorized this extension for two years by
means of its Decision on State Aid SA.31950 (N 544/2010)[3], which extended the period of Decision
on State Aid NN 22/2008 up to 31 December 2013. 
As regard the
request for the extension of the period of application of Decision 2002/546/EC,
the Commission assessed it in light of the scale of the handicaps affecting the
 Canary Islands and came to the conclusion that it was justified to grant the
requested extension. 
In fact, the
report from the Commission to the Council on the application of the special
arrangements concerning the AIEM tax applicable in the Canary Islands, adopted
on 28 August 2008, confirmed that the AIEM was functioning in a satisfactory
manner and without the need to any amendments to the provisions of Decision
2002/546/EC. 
Therefore, Council Decision 895/2011/EU of 19 December 2011[4] amended Decision 2002/546/EC,
extending its period of application up to 31 December 2013.
The Spanish
authorities have requested the renewal of the special AIEM rules for goods
produced in the Canary Islands for the period 2014-2020, modifying the list of
products and the maximimum rates applicable to some of them. The renewal needs
to be approved both by a Council Decision under Article 349 TFEU and by a
Commission Decision on State Aid.
On 28 June 2013
the Commission has adopted new
regional aid guidelines for the period 2014-2020[5].
These Guidelines are part of a broader strategy to modernise state aid control,
aiming at fostering growth in the Single Market by encouraging more effective
aid measures and focusing the Commission’s enforcement on cases with the
biggest impact on competition.
Considering
that these Guidelines will enter into force on 1 July 2014, it seems justified
to extend the period of application of Decision 2002/546/EC, as amended by
Decision 895/2011/EU, for six months, so that its expiry date coincides with
the date of entry into force of the Guidelines.
Decision 2002/546/EC,
as amended by Decision 895/2011/EU, should therefore be amended accordingly.
2.           RESULTS OF CONSULTATIONS WITH THE
INTERESTED PARTIES AND IMPACT ASSESSMENTS
The relevant Directorates-General of the
European Commission were consulted on this proposal and the document was
revised to incorporate the suggestions made. 
As the present proposal only proposes to
extend the application of the existing Council Decision for a limited period of
time (six months), for the same products and with the same limits, an impact
assessment does not appear necessary.
3.           LEGAL ELEMENTS OF THE PROPOSAL
Summary of
the proposed measures
To extend the
period of application of Decision 2002/546/EC (as amended by Decision
895/2011/EU), that authorises Spain to apply exemptions from or reductions in
the tax known as AIEM for certain products produced locally in the Canary
Islands.
Legal basis 
Article 349
TFEU.
Subsidiarity
principle
Only the
Council is authorised, on the basis of Article 349 TFEU, to adopt specific
measures in favour of the outermost regions to adjust the application of the
Treaties to those regions, including the common policies, because of the
permanent handicaps which affect the economic and social conditions of the
outermost regions.
The proposal
therefore complies with the subsidiarity principle. 
Proportionality
principle
The proposal
complies with the proportionality principle for the following reasons:
Its purpose is to
extend the period of application of Decision 2002/546/EC, as amended by
Decision 895/2011/EU, for six months, so that its expiry date coincides with
the date of entry into force of the Guidelines on regional State aid for
2014-2020. 
Any further
extension will be authorised only following a fresh product-by-product
analysis. 
Choice of instrument
Proposed
instrument: Council Decision.
Other
instruments would not have been appropriate for the following reason:
The text to be
amended is itself a Council Decision, adopted on the same legal basis (Article
349 TFEU, former Article 299(2) of the EC Treaty).
4.           BUDGETARY IMPLICATION 
The proposal
has no impact on the budget of the European Union.
2013/0387 (CNS)
Proposal for a
COUNCIL DECISION
amending Decision 2002/546/EC as regards
its period of application
THE COUNCIL OF THE EUROPEAN UNION,
Having regard to the Treaty on the
Functioning of the European Union, and in particular Article 349 (formerly
Article 299(2) of the EC Treaty) thereof,
Having regard to the proposal from the
European Commission,
After transmission of the draft legislative
act to the national Parliaments,
Having regard to the opinion of the
European Parliament[6],
Acting in accordance with a special
legislative procedure,
Whereas:
(1)       Council Decision
2002/546/EC of 20 June 2002[7],
adopted on the basis of Article 299 of the EC Treaty, authorises Spain, up to
31 December 2011, to apply exemptions from or reductions in the tax known as
‘Arbitrio sobre Importaciones y Entregas de Mercancías en las Islas Canarias’
(hereinafter ‘AIEM’) to certain products produced locally in the Canary
Islands. The Annex to that Decision contains a list of products to which tax
exemptions and reductions may be applied. The difference between the taxation
of locally manufactured products and the taxation of other products may not
exceed 5, 15 or 25 percentage points, depending on the product.
(2)       The
exemptions from and reductions in the AIEM establish differentiated taxation,
benefiting the local production of some products. This constitutes state aid
that requires the approval of the Commission.
(3)       Council Decision
895/2011/EU of 19 December 2011[8]
amended Decision 2002/546/EC, extending its period of application up to 31
December 2013.
(4)       On 28 June 2013 the
Commission has adopted its Guidelines on regional State aid for 2014-2020[9], setting out how Member States
can grant aid to companies in order to support the development of disadvantaged
regions in Europe between 2014 and 2020. These Guidelines, which will enter
into force on 1 July 2014, form part of a broader strategy to modernise state
aid control, aiming at fostering growth in the Single Market by encouraging
more effective aid measures and focusing the Commission’s enforcement on cases
with the biggest impact on competition[10].
(5)       It is justified to extend
the period of application of Decision 2002/546/EC, as amended by Decision
895/2011/EU, for six months, so that its expiry date coincides with the date of
entry into force of the Guidelines on regional State aid for 2014-2020.
(6)       Decision 2002/546/EC, as
amended by Decision 895/2011/EU, should be amended accordingly,
HAS ADOPTED THIS DECISION: 
Article 1
In the first sentence of Article 1(1) of
Decision 2002/546/EC, as amended by Decision 895/2011/EU, the date “31 December
2013” is replaced by “30 June 2014”.
Article 2
This Decision shall enter into force on the
day of its adoption.
Article 3
This Decision is addressed to the Kingdom of Spain.
Done at Brussels,
                                                                       For
the Council
                                                                       The
President
[1]               OJ L 179, 9.7.2002, p.22-27
[2]               OJ C 54, 4.3.2006, p. 13
[3]               OJ C 237, 13.8.2011, p 1.
[4]               OJ L 345, 29.12.2011, p. 17.
[5]               OJ C 209, 23.7.2013, p. 1.
[6]               OJ C , , p. .
[7]               OJ L 179,9.7.2001, p. 22.
[8]               OJ L 345, 29.12.2011, p. 17.
[9]               C (2013) 3769, 28.6.2013.
[10]             COM/2012/0209 final.