1. Academic Year 2018-2019 Prof. Pietro Boria
European Tax Law
Academic Year
Prof. Pietro Boria
The State aids

2. The general framework regarding the State aids – The prohibition of the State aids as measure to promote the free competition in the common market
The establishment of the Internal Market supposes the creation of a unified economic space where national ad Member State operators are enabled to act at the same conditions;
In this perspective, financial aids granted by Member State to national operators negatively interact with the function of the internal market, generating an economic benefit confined to a narrow audience of national subjects;
Therefore, national rules according financial benefits to domestic operators can collide the EU rules on competition;
The State aids
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3. The general framework regarding the State aids – The prohibition of the State aids as measure to promote the free competition in the common market
Therefore, national rules according financial benefits to domestic operators can collide the EU rules on competition;
Nevertheless, State aids are not strictly and generally forbidden;
State aids can, in fact, be granted as long as they do not distort or threaten to distort competition;
The evaluation of the distortive nature of the aid is generally evaluated by European Commission, to whom Member States are legally bound to notify forthcoming State aids;
The State aids
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4. The general framework regarding the State aids – Procedural nature and degree of competence of the EU guidelines on the State aids
Not all State aids have to be notified to the Commission before being established and allotted;
Some State aids are, in fact, automatically compatible with the internal market and do not need to be notified;
Therefore, a distinction has to be done between
Forbidden aids;
Automatically compatible aids;
Potentially compatible aids;
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5. The general framework regarding the State aids – The character of the State aids prohibited under the EU law
Article 107 §1 TFEU (Forbidden State Aids) - Any aid granted by a Member 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, in so far as it affects trade between Member States, be incompatible with the internal market;
Qualifying features of State aid:
public nature of the entity which effectively puts out the resources;
financial relevance of the aid which represents an expenditure for the public entity;
selective allocation of the resources;
potential distorting effects on European competition;
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6. The general framework regarding the State aids – The procedure for the judgment on the EU compatibility of the State aids
The aid compatibility is evaluated by the Commission (control procedure);
Member States have to notify the Commission the draft legislation figuring potential State aids (obligation to report);
At the same time, Member States cannot give effect to the potential aid as long as the Commission has not stated on the compatibility of the measure(standstill);
Aids provided during the standstill period are illegal despite a probable positive judgment of the Commission on their compatibility;
The State aids
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7. The general framework regarding the State aids – The procedure for the judgment on the EU compatibility of the State aids
On application by a Member State, the Council may, acting unanimously, decide that an aid, which that State is granting or intends to grant, shall be considered to be compatible with the internal market, in derogation from the provisions of art.107 or from the regulations provided for in art.109, if such decision is justified by exceptional circumstances;
As regards to the aid in question, if the Commission has already initiated the control procedure, the fact that the State concerned has made its application to the Council shall have the effect of suspending that procedure until the Council has made its attitude known;
If, however, the Council has not made its attitude known within three months of the said application being made, the Commission shall give its decision on the case;
The State aids
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8. The general framework regarding the State aids – A progressive perspective regarding the exceptions to the prohibition of the State aids
Art. 107 §2 TFEU (Automatically compatible State Aids) - the following State aids categories are automatically compatible with the internal market:
aids having a social character, granted to individual consumers, provided that such aid is granted without discrimination related to the origin of the products concerned;
aids to make good the damage caused by natural disasters or exceptional occurrences;
aids granted to the economy of certain areas of the Federal Republic of Germany affected by the division of Germany, in so far as such aid is required in order to compensate for the economic disadvantages caused by that division;
The State aids
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9. The general framework regarding the State aids – A progressive perspective regarding the exceptions to the prohibition of the State aids
Art. 107 §3 TFEU (Potentially compatible State Aids) - the following aids may be considered to be compatible with the Internal Market:
aids to promote the economic development of areas where the standard of living is abnormally low or where there is serious underemployment, and of the regions referred to in art. 349, in view of their structural, economic and social situation;
aids to promote the execution of an important project of common European interest or to remedy a serious disturbance in the economy of a Member State;
aids to facilitate the development of certain economic activities or of certain economic areas, where such aid does not adversely affect trading conditions to an extent contrary to the common interest;
The State aids
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10. The general framework regarding the State aids – A progressive perspective regarding the exceptions to the prohibition of the State aids
aids to promote culture and heritage conservation where such aid does not affect trading conditions and competition in the Union to an extent that is contrary to the common interest;
other categories of aids as may be specified by decision of the Council on a proposal from the Commission;
Article 109 TFEU - the Council, on a proposal from the Commission and after consulting the European Parliament, may make any appropriate regulations for the application of art. 107 and 108 and may, in particular, determine the conditions in which the obligation to report shall apply and the categories of aid exempted from such procedure;
Therefore, the Commission may adopt regulations relating to the categories of State aid that the Council has, pursuant to art. 109 TFUE, determined may be exempted from the control procedure (Exemption Regulations);
The State aids
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11. The general framework regarding the State aids – The eligibility of de minimis aid
The Commission has considered that small entity-State aids (de minimis) are automatically compatible with the Internal Market, being exempted from the obligation of report;
A certain measure fall under the de minimis category if the incentive provided to each beneficiary does not exceed ,00Eurosinathreeyear-period;
The said limit has recently been raised to ,00 Euros by the European economic recovery plan;
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12. The general framework regarding the State aids – A progressive perspective regarding the exceptions to the prohibition of the State aids
However, not all tax relieves fall under State aid description;
If the fiscal measure:
aims to promote constitutional values (such as protection of family, heath,etc.);
implements the basic structure of a certain tax regime coherently with general principles of national tax system;
It does not match State aid category, even tough being selective;
In particular, non selective fiscal incentives, whose application is extended to all domestic operators and to the whole State territory do not fall under the State aid regulation;
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13. The tax relief as a possible State aid – The qualification of tax relief as a State aid
National provisions introducing tax relieves and preferential regimes reserved to national operators fall under State aid regulation activity;
Such provisions can, indeed, distort the competition thus affecting the Internal Market;
Therefore, the State aid category includes both:
financial incentives (state expenditure);
provisions according a relief on tax burden on business (fiscal state expenditure);
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14. The tax relief as a possible State aid – The eligibility of tax incentives at a regional or local level
According to the selectivity criteria every local tax incentive or regime should represent an illegal State aid, given:
the public nature of the entity establishing the measure;
the selective allocation of fiscal benefits;
This approach might, however, result unfair when applied to tax federalism-base national system, being incompatible with the expression of local tax power;
Therefore, the ECJ has stated that the territory of local autonomies should be taken at stake in the evaluation of selectivity of their self-based fiscal incentives;
The State aids
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15. The tax relief as a possible State aid – The eligibility of tax incentives at a regional or local level
Indeed, if the local entity is entitled, a relevant level of:
institutional autonomy;
administrative autonomy;
financial autonomy:
local based tax relieves cannot be considered selective;
Those principles were enunciated for the first time in the leading case Azores (ECJ, September 6th 2006, Case C-88/03) and were confirmed and developed in the following cases Basque Countries (EJC, May 8th 2008, joined Cases C‑428/06 to C‑434/06) and Gibraltar (ECJ, November 15th 2011, joined Cases C‑106/09 P e C‑107/09 P);
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16. The tax relief as a possible State aid – The recovery of State aid
If, after giving notice to the parties concerned to submit their comments, the Commission finds that aid granted by a State or through State resources is not compatible with the Internal Market or that such aid is being misused (negative decision), it decides that the State concerned shall abolish or alter such aid within a period of time to be determined by the Commission;
If the State concerned does not comply with this decision within the prescribed time, the Commission or any other interested State may refer the matter to the Court of Justice of the European Union direct (infringement procedure);
The Commission can also order concerned Member State to recover from benefiting national operators:
State aids provided during the standstill period without reporting to the Commission (illegal State aids);
Compatible State aids misused by Member States (abusive State aids);
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17. The tax relief as a possible State aid – The recovery of State aid
The recovery has to be undertaken according to national procedures which have to ensure the immediate and effective rebalancing of the playfield;
Nevertheless, the recovery can face a limit in the beneficiaries’ legitimate entrust, which can be enforced by national courts;
The State aids
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