Dace Berkolde Director State Aid Control Department Ministry of Finance Latvia 1

Any aid granted by a State or through state resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, insofar as it affects trade, be incompatible with the common market. 2

 All aid which existed prior to the entry into force of the accession Treaty of respective Member States, i.e. aid schemes and individual aid which were put into effect before, and are still applicable after, the entry into force of the Treaty  All authorised aid  Any aid for which the limitation period for recovery has expired 3

 Aid which is deemed to have been authorised (the Commission has not taken a decision within 2 months from the notification, the Member State has reminded on its intention to implement the measure and the Commission has not taken a decision within 15 working days following receipt of notice from the Member State)  Aid which at the moment of its implementation didn’t constitute an aid element, but became an aid due to the evoluation of the common market, and haven’t been altered by the Member State 4

 All aid - aid schemes and individual aid - which is not existing aid  it includes alterations to existing aid ! An alteration to existing aid shall mean any change, other than modifications of a purely formal or administrative nature which cannot affect the evaluation of the compatibility of the aid measure. However an increase in the original budget of an existing aid scheme by up to 20 % shall not be considered an alteration to existing aid. 5

Art 11, Law on State Aid Control  State aid grantor shall be under obligation to, before granting the state aid, notify the state aid to the Commission  In the event of any changes to the notified state aid after the notification referred to in paragraphs 1 and 2 of this Article, the state aid grantor and/or the proposer of the regulation shall notify such change to the Commission. 6

 All aid existing in Member States shall be kept under constant review (Art. 108(1) of the TFEU)  The Commission shall propose to Member States appropriate measures required by the progressive development or by the functioning of the internal market  Where the Commission considers that an existing aid scheme is not, or is no longer, compatible with the common market, it shall inform the Member State concerned of its preliminary view and give the Member State concerned the opportunity to submit its comments within a period of one month (Art 17, EC Regulation 659/1999) 7

Where the Commission concludes that the existing aid scheme is not, or is no longer, compatible with the common market, it shall issue a recommendation proposing appropriate measures to the Member State concerned. The recommendation may propose: - substantive amendment of the aid scheme - introduction of procedural requirements - abolition of the aid scheme (Art 18, EC Regulation 659/1999) 8

 Member State may accept the proposed measures and it becomes bound by its acceptance to implement the appropriate measures  Where the Member State concerned does not accept the proposed measures and the Commission still considers that those measures are necessary, it shall initiate formal investigation proceedings 9

 Modification with regard: 1) Granting authority 2) Increase of the budget by less than 20% of an individual aid (IA) project 3) Prolongation of the approved IA project by 2 years without increase of the approved aid amount 4) Change of the max aid amount, state aid intenities 10

 Dutch Corporate tax law (1969) – corporate entities are subject to corporate income tax (CIT)  Different tax regime to private and public enterprises  Public enterprises are subject to CIT insofar they carry out the pre-defined activities set in the Law, for ex., industrial enterprises, transport enterprises (except those which deals exclusively with the transport of passengers, building societies etc) 11

 The list of activities has remained basically unaltered since the introduction of the Law  The list does not cover public enterprises that provide services, for ex., public enterprises active in waste management services, municipal credit institutions, ports, airports etc. 12

 State resources - loss of tax revenue  Presence of an advantage – public enterprises are exempted from corporate tax while private enterprises are subject to corporate tax - tax exemption reduces the charges which enterprises normally would have to pay 13

 Distortion of competition – enterprises carry out economic activities and are involved in intra-community trade  Selectivity - according to normal rules enterprises established in the Netherlands are subject to corporate tax - Hence, large number of public enterprises, which compete with private undertkings, are tax exempted 14

 Non of the exemptions under Article 107(2) or 107(3) of the TFEU apply - measure do not relate to aid having soacial character or aid to make good the damage caused by natural disaster - tax exemptions are granted without making a distinction as to the goals pursued by the enterprises 15

 No proof that the measure could be justified under Article 106(2) TFEU  Tax measure cannot be considered compatible with the internal market 16

 Existing aid according to Procedural Regulation 659/1999 – a measure that was in place beore the entry into force in the Netherlands of the EC Treaty  Tax exemption existed before the entry into force of the EC Treaty in the Netherlands – was introduced in 1969 and no new derogation was created afterwards ! The measure is existing aid 17

Principle of legal certainty Elimination of measureModification of measure Appropriate measures Abolish the schemeAmend the sheme State of play Existing aidIncompatible aid 18

 Commission decided: - abolishment of the tax exemptions for public enterprises - the same corporate tax regime shall apply for both – public and private enterprises - legislation shall be adopted within 18 months - The Dutch authorities shall confirm in writing the acceptance of appropriate measures (within 1 month) ! If no confirmation received – Commission shall open formal investigation procedure 19