22.8.2022
EN
Official Journal of the European Union
L 217/77
(159) Contrary to what Portugal says (180), companies registered in the ZFM only incur such additional costs if they effectively and materially conduct their activities in Madeira, which implies that their profits are resulting from operations directly burdened with such additional costs.
Other type of profits, not burdened by these costs because realised as a result of activities carried out outside the region, cannot be taken into account in the taxable base benefiting from the tax measure.
(160) The Commission notes that Portugal clearly stated throughout the 2015 monitoring and confirmed in the course of the formal investigation that beneficiaries did not necessarily have to conduct their activity in the region and that even activities carried out outside the region benefited from aid under the scheme (see recitals 20 and 21 of this Decision).
(161) The Commission considers that the so-called ‘geographical restriction’ of the origin of the profits denounced by Portugal is a mere translation in the 2007 and 2013 Commission Decisions of the basic principles stated in the 2007 RAG and that the implementation of the ZFM scheme on the origin of the profits is not in line with the provisions on operating aid in those Guidelines.
(162) In its Opening Decision, the Commission did not raise any doubts on the consistency of the scheme with international tax standards and tax legal requirements.
For State aid control purposes, the effectiveness and materiality of the activity carried out by the beneficiaries has to be assessed in relation to the 2007 RAG principles on operating aid recalled in recitals 156 and 157 of this Decision, and not with regard to OECD tax agreements, which pursue their own tax objectives.
(163) Similarly, the Commission points out that the legal requirement of separate accounting for income generated in the ZFM for tax purposes, described in recital (21) of this Decision is not, as such, sufficient to address the Commission’s doubts as to the adequate taxable base for the ZFM scheme, since the generation of income in the ZFM subject to this requirement is not defined in relation to the 2007 RAG principles on operating aid.
(164) On the contrary, such separation of accounts merely shows that the lower tax rate was applied to earnings resulting from transactions between, on one side, the aid beneficiaries and, on the other, entities resident in the ZFM as well as entities resident outside the Portuguese national territory.
However, such separation of accounts does not allow any conclusion as to whether those transactions resulted from activities effectively and materially performed, by the aid beneficiaries, inside or outside Madeira.
(165) Finally, the Commission notes that the in-depth tax controls conducted as regards the taxable base and the origin of profit were carried out in the light of the approach of the Portuguese authorities recalled in recital 158 of this Decision and did not take into account the link between eligible profits and additional costs incurred in the ZFM, as implied by the 2007 RAG and the following 2007 and 2013 Commission Decisions.
(166) The Commission considers, therefore, that the arguments put forward by Portugal with regard to consistency with taxation rules, legal requirements and tax related controls are not relevant for the assessment of the implementation of the ZFM scheme with regard to the 2007 RAG and the 2007 and 2013 Commission Decisions.
(167) In view of the above, the Commission considers that its doubts as to the origin of the profits benefiting from the tax reduction in the ZFM are not removed, and concludes that the implementation of the ZFM scheme with regard to this criterion is in breach of the 2007 and 2013 Commission Decisions.
Job creation/maintenance in the region
(168) As recalled in recital 151 of this Decision, the maximum aid amounts that beneficiaries registered in the ZFM can benefit from under the approved regional operating aid scheme are calculated on maximum taxable base ceilings based on the jobs held each fiscal year by the beneficiaries.
(180) Recitals 73 and 74 of this Decision.