Brussels, 22/11/2001 (Agence Europe) - After its inquiry, conducted in conformity with the provisions of the Steel Aid Code, the European Commission decided that the French tax aid scheme in the form of tax exemptions for setting up branches abroad is incompatible with the European regulations. France argued in its defence that this was a general measure set out in the French General Tax Code. According to Articles 39, octies A and D, a firm may temporarily deduct from its tax base, in the case of commercial investment or services, either the losses (within limits) incurred by its subsidiaries or certain establishments located abroad. The Commission considers that it is in reality a case of State aid as it is financed from State resources, which gives preference to certain enterprises. For installations of a commercial nature, only some firms that produce in France may benefit from the scheme, and for industrial (or agricultural) investment or service installations, only companies that receive the agreement of the Ministry for Economic and Financial Affairs may benefit.
The Commission, however, did not order recovery of the aid from beneficiary companies, since they could legitimately invoke the principle of legitimate expectations since, twice in the past, in 1973 and 1992, the Commission had decided under the EC Treaty, that the scheme did not comprise any State aid.