Brussels, 01/10/2009 (Agence Europe) - On Thursday 1 October, the European Commission partly authorised a German law to modernise the general conditions for capital investments (MoRaKG). The Commission considers the positive impact of income tax benefits for private investors that provide risk capital to companies would clearly outweigh potential distortions of competition brought about by the aid. On the other hand, the Commission's endorsement is subject to several conditions, including changes that Germany should make to its scheme.
The measure in question confers certain tax advantages on private investors that invest in venture capital companies. This will have the effect of stimulating investment, without unduly distorting competition. All the more, as the Commission points out, as the maximum advantage granted to a private investor is approximately €22,500, which is relatively small in the venture capital market. The Commission, however, is not convinced some of the provisions are valid, as it deems them incompatible with guidelines on capital investment and contrary to the principle of freedom of establishment (Article 43 of the EC Treaty). In particular, the measure as notified only concerns companies whose seat is in Germany, which runs counter to freedom of establishment. Also, the measure defines a new category of investment funds, namely the Venture Capital Companies ('VCC). This new category could confer tax benefits on companies that did not benefit from such advantages before, and even within the new VCC category some would not be included in the scope of MoRaKG law. Germany is invited by the Commission to remedy these shortcomings, and to present a revised version of the law within two months. (C.D./transl.jl)