Proposal for a COUNCIL IMPLEMENTING DECISION authorising Italy to apply reduced rates of excise duty to gas oil used for heating purposes supplied in the municipality of Campione d'Italia and to electricity supplied in that municipality in accordance with Article 19 of Directive 2003/96/EC
Date: 2021-08-20
Institutions: Directorate-General for Taxation and Customs Union, European Commission
Subjects: Italy, Lombardy, diesel fuel, electrical energy, electricity supply, energy supply, excise duty, heating, municipality, tax relief

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   EUROPEAN COMMISSION  Brussels, 20.8.2021  COM(2021) 485 final 2021/0276 (NLE)  Proposal for a COUNCIL IMPLEMENTING DECISION authorising Italy to apply reduced rates of excise duty to gas oil used for heating purposes supplied in the municipality of Campione d'Italia and to electricity supplied in that municipality in accordance with Article 19 of Directive 2003/96/EC  
 
EXPLANATORY MEMORANDUM 

1. 

• 

CONTEXT OF THE PROPOSAL 

Reasons for and objectives of the proposal 

Taxation  of  energy  products  and  electricity  in  the  Union  is  governed  by  Council  Directive 
2003/96/EC of 27 October 2003 restructuring the Community framework for the taxation of 
energy products and electricity1 (the ‘Energy Taxation Directive’ or the ‘Directive’). 

Pursuant to Article 19(1) of the Directive, in addition to the provisions laid down in particular 
in  its  Articles  5,  15  and  17,  the  Council,  acting  unanimously  on  a  proposal  from  the 
Commission, may authorise any Member State to introduce further exemptions or reductions 
in the level of taxation for specific policy considerations. 

The  Italian  municipality  of  Campione  d'Italia  constitutes  an  exclave  of  Italy  in  Switzerland 
with  a  very  limited  geographical  scope  and  a  small  population2.  Its  territory,  which  partly 
borders Lake Lugano, is entirely surrounded by the Swiss Canton of Ticino. 

That  exclave  has  a  steep  orographic  structure  which  limits  its  urbanisation  and,  overall, 
accessibility, making the establishment of industrial activities more difficult. 

Additionally, Campione d'Italia is experiencing a serious economic crisis (further aggravated 
by the COVID-19 pandemic) caused by the closure of its casino, on which its economy was 
almost entirely based. 

Moreover, the entry of the municipality of Campione d’Italia into the Union customs territory 
on  1  January  20203  further  led  to  an  increase  in  the  costs  of  energy  products  (such  as 
electricity and gas oil used as fuel for heating purposes)4. 

According to the  Italian authorities, the particular geographical situation of the municipality 
of Campione d’Italia, coupled with the absence of a gas supply network and severe climatic 
conditions  lead  to  higher  energy  costs,  whether  they  come  from  Switzerland  or  from  the 
nearest  Italian province. In particular, the minimum road distance required for the supply of 
heating  oil  from  Italy  is  approximately  30  km  (distance  between  Campione  and  Como). 
Additionally,  the  need  to  accomplish  customs  formalities  for  crossing  the  Italian  and  Swiss 
border, is  a strong disincentive for  Italian economic operators to  carry out  those operations, 
besides constituting an additional cost. 

By letter dated 7 August 2020, the Italian authorities requested authorisation to apply reduced 
rates  of  excise  duty  to  gas  oil  used  for  heating  purposes  and  to  electricity,  supplied  in  the 
territory of the municipality of Campione d'Italia. In justification of its request for derogation, 
Italy points out the unique situation of Campione d'Italia described above. 

The  proposed  rates  are,  for  electricity,  EUR  0.0005  per  kWh,  for  its  use  in  premises  and 
places  other  than  households,  and  EUR  0.001  per  kWh,  for  its  use  in  households,  which 
corresponds  to  4%  of  the  national  excise  duty  but  equal  to  the  respective  minimum  rates 

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OJ L 283, 31.10.2003, p. 51–70. 
Approximately 2.6 km², comprising 0.9 km2 of land and 1.7 km2 of lake, and a resident population on 1 
January 2019 of 1,961. 
This new customs and tax status of Campione d’Italia was laid down in Regulation (EU) 2019/474 of 
the European Parliament and of the Council of 19 March 2019 and Council Directive (EU) 2019/475 of 
18 February 2019. 
The  cost  of  energy  for  users  located  in  Campione  d’Italia  steeply  increased  by  almost  18%  for 
electricity and 22% for gas oil since the entry into the Union customs territory on 1 January 2020 (due 
to excise duty and VAT). 

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provided for by the Energy Taxation Directive. For gas oil used as heating fuel, the proposed 
rate is EUR 201.50 per 1 000 litres, corresponding to 50% of the rate applied at national level, 
but above the minimum rate set out by the Energy Taxation Directive. 

In  this  way,  indirect  taxes  applied  to  these  energy  products  consumed  in  Campione  d’Italia 
would be broadly the same as that applied in Switzerland5. 

By the requested authorisation, Italy aims to mitigate the high energy costs for households and 
businesses supplied in that area since those  energy products are used for heating (gas oil) and 
to  meet  all  normal  daily  needs  associated  with  the  consumption  of  electricity  (lighting, 
operation of household appliances, heating and cooling etc.).  

This tax advantage would allow to alleviate the additional heating costs of the population of 
Campione  d’Italia,  which  are  due  to  cold  climate,  difficulties  with  fuel  procurement  and 
specific compliance cost. 

Hence,  this  measure  appears  to  be  an  appropriate  instrument  to  remedy  to  the  specific 
situation of the Italian municipality.  

The  requested  period  of  validity  is  six  years,  starting  from  1  July  2021  until  30 June  2027, 
which is within the maximum period allowed by Article 19 of the Energy Taxation Directive. 

The  tax  advantage  cannot  be  combined  with  other  excise  duty  reductions.  It  would  be 
reserved for consumption in the municipality of Campione d’Italia. 

The annual budgetary expenditure is estimated at EUR 0.105 million. 

• 

Consistency with existing policy provisions in the policy area 

Provisions under the Energy Taxation Directive 

Article 19(1), first subparagraph, of the Directive reads as follows:  

In addition to the provisions set out in the previous Articles, in particular in Articles 5, 15 and 
17, the Council, acting unanimously on a proposal from the Commission, may authorise any 
Member  State 
for  specific  policy 
considerations. 

further  exemptions  or  reductions 

introduce 

to 

By  means  of  the  tax  reduction  in  question,  the  Italian  authorities  pursue  the  objective  to 
reduce  the  social  and  economic  effects  of  the  crisis  affecting  the  population  of  Campione 
d’Italia by mitigating the impact of the higher cost of purchasing heating oil and electricity. 

The  possibility  to  introduce  a  favourable  tax  treatment  to  certain  energy  products  and 
electricity  supplied  in  the  Italian  municipality  of  Campione  d'Italia  can  be  envisaged  under 
Article  19  of  the  Directive  since  its  purpose  is  to  allow  Member  States  to  introduce  further 
exemption or reductions for specific policy considerations.  

Article 19(2) of Directive 2003/96/EC lays down, for this type of measure, a maximum period 
of six years, with the possibility of renewal. Taking into account the absence of any negative 
impact  of the current  arrangement on intra-EU trade and on the  general  level  of taxation of 
fuels and electricity in Italy, the Commission suggests at this stage to grant the authorisation 
requested  by  Italy  for  six  years,  i.e.  from  1  July  2021  until  30  June  2027.  However,  the 
derogation  should  not  undermine  future  developments  of  the  existing  legal  framework  and 

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Electricity and gas oil would still be between 7 and 8% more expensive. 

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should  take  into  account  the  upcoming  revision  of  the  Energy  Taxation  Directive  and  a 
possible  adoption  by  the  Council  of  a  legal  act  based  on  a  Commission  proposal  for 
amendment  of  the  Energy  Taxation  Directive.  Such  review  follows  the  evaluation  of  the 
Energy  Taxation  Directive6  and  the  Council  Conclusions  on  the  EU  energy  taxation 
framework from 28 November 20197. In its Conclusions, the Council invited the Commission 
to analyse and evaluate possible options with a view to publishing in due course a proposal 
for  the  revision  of  the  Energy  Taxation  Directive.  It  also  called  on  the  Commission  to  give 
particular  consideration  to  the  scope  of  the  Directive,  to  minimum  rates  and  to  specific  tax 
reductions and exemptions.  

Under  these  circumstances,  while  it  appears  appropriate  to  grant  the  authorisation  for  the 
requested  period,  the  validity  of  the  derogation  should  be  made  subject  to  the  entry  into 
application of general provisions in the matter at a point in time earlier than the end of June 
2027.  

State aid rules 

The measure may constitute State aid in accordance with Article 107(1) of the TFEU. Since 
the reduced rates are above the EU minima, the measure would be covered by Article 44 of 
Regulation  651/2014/EU  (the  General  Block  Exemption  Regulation).  Upon  expiry  of  the 
period of validity of the General Block Exemption Regulation on 31 December 2023 the aid 
remains exempted during an adjustment period of six months (see Article 58(4) of the General 
Block  Exemption  Regulation).  The  decision  is  without  prejudice  to  the  applicable  State  aid 
rules during the period covered by the derogation. 

• 

Consistency with other Union policies 

Each  request  for  derogation  under  Article  19  of  the  Energy  Taxation  Directive  must  be 
examined  by  the  Commission  taking  into  account  the  proper  functioning  of  the  internal 
market, the need to ensure fair competition and EU health, environment, energy and transport 
policies. 

The  tax  differentiation  partially  alleviates  the  additional  costs  of  purchasing  heating  oil  and 
electricity  in  the  municipality  of  Campione  d’Italia  that  is  particularly  disadvantaged 
compared to the rest of Italy and for which the standard tax rate would result in an excessive 
tax burden. Indeed, the particular geographical situation coupled with unavailability of access 
to  the  natural  gas  network  and  severe  climatic  conditions  translates  into  higher  costs  of 
supplying energy products. 

The reduced rates of taxation for both heating oil and electricity would allow households and 
businesses  in  Campione  d’Italia  to  avoid  an  increase  in  the  costs  of  the  energy  products.  It 
remains  equal  or  higher  than  the  EU  minimum  levels  of  taxation  set  out  in  the  Energy 
Taxation Directive.  

The  measure  has  not  been  found  to  be  incompatible  with  the  relevant  EU  policies  on  the 
energy.  

Furthermore, the measure is acceptable from the point of view of the proper functioning of the 
internal  market  and  the  need  to  ensure  fair  competition.  Given  its  limited  territorial  and 

6 
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SWD(2019) 329 final. 
Council conclusions of 28 November 2019, 14608/19, FISC 458.  

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financial  effects,  the  measure  does  not  distort  competition  or  hinder  the  functioning  of  the 
internal market.  

Finally, the tax reduction is not cumulative with any other sorts of tax reduction. 

2. 

• 

LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY 

Legal basis 

Article 19 of Council Directive 2003/96/EC. 

• 

Subsidiarity (for non-exclusive competence)  

The  field  of  indirect  taxation  covered  by  Article  113  of  TFEU  is  not  in  itself  within  the 
exclusive competence of the European Union within the meaning of Article 3 of TFEU. 

However,  pursuant  to  Article  19  of  Directive  2003/96/EC,  the  Council  has  been  granted  an 
exclusive competence, as a matter of secondary law, to authorise a Member State to introduce 
further exemptions or reductions within the meaning of that provision. Member States cannot 
therefore substitute themselves for the Council. As a result, the principle of subsidiarity is not 
applicable  to  the  present  implementing  decision.  In  any  event,  since  this  act  is  not  a  draft 
legislative act, it should not be transmitted to national Parliaments pursuant to Protocol No 2 
to the Treaties for review of compliance with the subsidiarity principle. 

• 

Proportionality 

The proposal respects the principle of proportionality. The tax reductions do not exceed what 
is  necessary  to  attain  the  objective  in  question.  The  tax  reductions  are  applicable  in  a  very 
limited geographical area. The authorised tax rates are equal or above the minimum levels of 
taxation prescribed by Directive. 

• 

Choice of the instrument 

The  instrument  proposed  is  a  Council  implementing  decision.  Article  19  of  Directive 
2003/96/EC makes provision for this type of measure only. 

3. 

• 

RESULTS 
CONSULTATIONS AND IMPACT ASSESSMENTS 

EX-POST 

EVALUATIONS, 

OF 

STAKEHOLDER 

Ex-post evaluations/fitness checks of existing legislation 

The measure does not require the evaluation of existing legislation. 

• 

Stakeholder consultations 

This proposal is based on a request made by Italy and concerns only this Member State. 

• 

Collection and use of expertise 

There was no need for external expertise. 

• 

Impact assessment 

This proposal concerns an authorisation for an individual Member State upon its own request 
and does not require an impact assessment. 

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• 

Regulatory fitness and simplification 

The measure does not provide for a simplification. It is the result of the request made by Italy 
and concerns only this Member State. 

• 

Fundamental rights 

The measure has no bearing on fundamental rights. 

4. 

BUDGETARY IMPLICATIONS 

The  measure  does  not  impose  any  financial  or  administrative  burden  on  the  Union.  The 
proposal therefore has no impact on the budget of the Union. 

5. 

• 

OTHER ELEMENTS 

Implementation plans and monitoring, evaluation and reporting arrangements 

An  implementation  plan  is  not  necessary.  This  proposal  concerns  an  authorisation  for  a  tax 
reduction  for  an  individual  Member  State  upon  its  own  request.  It  is  provided  for  a  limited 
period until 30 June 2027. The applicable tax rates will be equal or higher than the minimum 
level of taxation set by the Energy Taxation Directive. The measure can be evaluated in case 
of a request for a renewal after the validity period has expired. 

• 

Explanatory documents (for directives) 

The proposal does not require explanatory documents on the transposition. 

• 

Detailed explanation of the specific provisions of the proposal 

The tax rates will be, for electricity, EUR 0.0005 per kWh, for its use in premises and places 
other than households, and EUR 0.001 per kWh, for its use in households, which correspond 
to  the respective minimum  rates provided for by  the Energy Taxation Directive. For  gas oil 
used as heating fuel, the proposed rate is EUR 201.50 per 1 000 litres, corresponding to 50% 
of  the  rate  applied  at  national  level,  but  above  the  minimum  rate  set  out  by  the  Energy 
Taxation Directive.  

Article 1 stipulates that Italy will be allowed to apply reduced taxation rates to gas oil used for 
heating purposes supplied in the municipality of Campione d'Italia and to electricity supplied 
in that municipality.  

Article 2 stipulates that the authorisation  requested is  granted with  effect  from  1 July 2021, 
until 30 June 2027, as requested by Italy, within the maximum period of 6 years allowed by 
the Directive. 

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2021/0276 (NLE) 

Proposal for a 

COUNCIL IMPLEMENTING DECISION 

authorising Italy to apply reduced rates of excise duty to gas oil used for heating 
purposes supplied in the municipality of Campione d'Italia and to electricity supplied in 
that municipality in accordance with Article 19 of Directive 2003/96/EC 

THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty on the Functioning of the European Union,  

Having  regard  to  Council  Directive  2003/96/EC  of  27  October  2003  restructuring  the 
Community framework for the taxation of energy products and electricity8, and in particular 
Article 19 thereof, 

Having regard to the proposal from the European Commission, 

Whereas: 

(1) 

(2) 

(3) 

(4) 

By  letter  of  7  August  2020,  Italy  requested  authorisation  to  apply  reduced  rates  of 
excise  duty  to  gas  oil  used  for  heating  purposes  and  to  electricity,  supplied  in  the 
municipality  of  Campione  d'Italia  pursuant  to  Article  19  of  Directive  2003/96/EC. 
Additional  information  and  clarifications  in  support  of  the  request  were  provided  by 
the  Italian  authorities  on  19  January  2021.  The  authorisation  was  requested  for  the 
period from 1 July 2021 to 30 June 2027.   

The  municipality  of  Campione  d'Italia  constitutes  an  exclave  of  Italy  in  Switzerland 
with  a  very  limited  geographical  scope  and  a  small  population.  The  area  is 
mountainous,  which  limits  urban  development,  industrial  activities  and  its  overall 
accessibility.  Given  its  geographical  location,  its  lack  of  access  to  the  natural  gas 
network and its severe climatic conditions, the costs of supplying energy products to 
Campione d’Italia are high, whether they are supplied from Switzerland or from Italy. 
Moreover,  the  entry  of  Campione  d’Italia  into  the  Union  customs  territory  on  1 
January 2020 led to an increase in the energy costs for households and businesses.  

The excise duty differentiation aims to mitigate the high  energy costs.   

The requested measure has been reviewed by the Commission and been found not to 
distort  competition  or  hinder  the  proper  functioning  of  the  internal  market  and  it 
cannot  be  considered  incompatible  with  the  Union’s  's  policy  on  the  environment, 
energy  and  transport.  The  reduced  excise  duty  rates  for  both  gas  oil  and  electricity 
would  remain  equal  to  or  higher  than  the  minimum  levels  of  taxation  set  out  in 
Directive  2003/96/EC  and  would  partially  offset  the  increased  energy  costs  in  the 
municipality. The tax reduction is not cumulative with any other sorts of tax reduction. 

(5) 

Italy should therefore be authorised to apply, in the municipality of Campione d'Italia, 
reduced taxation rates to electricity and gas oil used for heating purposes. 

8 

OJ L 283, 31.10.2003, p. 51. 

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(6) 

Each  authorisation  granted  under  Article  19(2)  of  Directive  2003/96/EC  is  to  be 
strictly limited in time. In order to provide the municipality of Campione d'Italia with 
a sufficient degree of certainty, the authorisation should be granted for a period of six 
years. However, in order not to undermine future general developments of the existing 
legal  framework,  it  is  appropriate  to  provide  that,  should  the  Council,  acting  on  the 
basis of Article 113 of the Treaty on the Functioning of the European Union, introduce 
a  modified  general  system  for  the  taxation  of  energy  products  to  which  this 
authorisation would not be adapted, this authorisation should cease to apply on the day 
on which those general rules become applicable.  

(7) 

This  Decision  is  without  prejudice  to  the  application  of  Union  rules  regarding  State 
aid, 

HAS ADOPTED THIS DECISION:  

Article 1 

Italy is authorised to apply reduced rates of excise duty to gas oil used for heating purposes 
supplied  in  the  municipality  of  Campione  d'Italia  and  to  electricity  supplied  in  that 
municipality, provided that the minimum levels of taxation referred to in Articles 9 and 10 of 
Directive 2003/96/EC are respected. 

Article 2 

This Decision shall apply from 1 July 2021 until 30 June 2027. 

However,  should  the  Council,  acting  on  the  basis  of  Article  113  or  any  other  relevant 
provision  of  the  Treaty  on  the  Functioning  of  the  European  Union,  introduce  a  modified 
general  system  for  the  taxation  of  energy  products  to  which  the  authorisation  granted  in 
Article  1  of  this  Decision  would  not  be  adapted,  this  Decision  shall  expire  on  the  day  on 
which those general rules become applicable. 

This Decision is addressed to the Italian Republic. 

Done at Brussels, 

Article 3 

For the Council 
The President 

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