Brussels, 02/11/2000 (Agence Europe) - On closing its investigation, the European Commission has decided that tax credits for foreign investments provided for by Spanish law on corporate tax are incompatible with the code of aid to the steel industry (ECSC). At the request of rivals of Spanish steel firms, the Commission initiated a formal investigation on 7 August 1997 on tax credits provided for by Article 34 of the Spanish law on corporate tax, implemented in a similar manner in the provinces of Biscaye, Gipuzcoa and Alava. Entitled "Deduction for export related activities", the Article in question states that companies have the right to benefit, for the export activities, from a tax credit representing up to 25% of the cost: i) of investments made in the creation of branches or permanent establishments abroad, as well as the acquisition of shares in foreign companies or the setting up of subsidiaries directly associated with exporting activity of goods and services or the transaction of tourism services in Spain; ii) the advertising and publicity costs for product launches, on a multiannual basis; iii) the costs of market entry and market research abroad; iv) the cost of taking part in fairs, exhibitions and other similar events, including those of an international character in Spain.
The Commission does not consider relevant the arguments of the Spanish authorities by which tax credits are not State aid because they are open to all economic agents. According to the Commission, these credits do represent a specific measure in the sense that they are reserved to a well-defined category of companies, those exercising export activities. They are not granted to companies that do not export, nor exporters that carry out export activities not included in the provision, or even exporters that carry out in Spain the type of investments included in the provision. Given that this measure is State aid that may not benefit from any exemptions provided for by the Code of aid to the steel industry, the Commission regards the scheme to be incompatible with the common market. It has not, however, ordered the aid to be recovered, given that the beneficiary companies could, rightly, claim that they legitimately believed they were entitled to it.
Still under the code for aid to the steel industry, the Commission has initiated a proceeding regarding a similar French scheme. It is a question in this case of a system of temporary exoneration for subsidiaries created abroad (Article 39, A and D) of the General Code for taxes for the creation of subsidiaries abroad).