Brussels, 08/02/2007 (Agence Europe) - The European Commission has decided that the exemption from taxation granted to certain regional production activities (imposta regionale sulle attività produttive, or “IRAP”) in Sicily is incompatible with the EC Treaty rules on state aid, as they favour certain categories of enterprises. Since no aid has yet been granted under these measures, there is no need for the Commission to demand it be recouped.
On 6 September 2005 and 21 September 2005, the Commission opened a formal examination procedure regarding tax incentives adopted by Sicily as part of its regional laws numbers 21 and 17 of 29 December 2003 and 31 December 2004 respectively. These laws grant a five-year exemption from the IRAP to certain new enterprises created in 2004 and some existing enterprises. These are new enterprises which in 2004 started exercising activities in the sectors of tourism, hotels, cultural goods, agri-foods, information technologies and crafts, as well as all the new businesses which started activities in an industrial sector from 2004 with a turnover of less than €10 m. Furthermore, these regional laws grant a five-year exemption, from 2004, from the part of the IRAP which is due on the share of the tax basis exceeding the average tax basis for the years 2001 - 2003 in favour of existing enterprises, with the exception of those active in the chemical and petrochemical sectors.
These regional laws also created a 'Euro-Mediterranean Centre of Finance and Insurance Services'. Under these laws, subsidiaries of financial and insurance companies which operate within the Centre can benefit from a 50% reduction in the rate of the IRAP for the activities carried out within the Centre. The laws also grant cooperatives a reduction in the rate of IRAP of 1% in 2005, 0.75% in 2006 and 0.5% in 2007. This advantage could be extended to security service enterprises.
In accordance with long-established Commission practice, these measures are considered operating aid as they consist of selective breaks in the taxes normally paid by businesses as part of their operations. Operating aids can only be declared compatible with the single market in regions where the standard of living is abnormally low, or where there is serious under-employment (assisted regions in the sense of article 87, paragraph 3, point a), of the EC Treaty), and with strict conditions. None of these conditions is fulfilled in the present cases.
No observation of any kind has been presented by the Italian authorities or any other party in the course of the consultation period since the examination procedure opened. The Commission can therefore only confirm the doubts expressed in its decisions to open formal examination proceedings, and declare the proposed measures incompatible with the single market. (cd)