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EU opens investigations into Belgian and French ports

The European Commission has opened two "existing aid" investigations into corporate tax exemptions granted to ports under Belgian and French law, after the two countries failed to respond to an earlier request to bring their corporate tax law into line with EU state aid rules.11 Jul 2016

The Commission will investigate whether the exemptions give companies in those countries an advantage over their competitors in other EU countries, it said in a statement.

In Belgium, a number of sea and inland waterway ports are exempt from the country's general corporate income tax regime. These ports are subject to a different tax regime, with different base and tax rates, resulting in an overall lower level of taxation for Belgian ports on their commercial activities as compared to other companies in Belgium, the Commission said.

In France, most ports are fully exempt from corporate income tax. This "self-evidently results in an overall lower level of taxation for French ports on their commercial activities as compared to other companies in France", the statement said.

The Commission asked both countries in January to bring their corporate tax law into line with EU state aid rules, but they have not yet done so. It will now launch in-depth investigations into each to assess whether its concerns are confirmed, it said.

Corporate tax is payable on the main activities of ports, including the transfer of people and cargo and the provision of infrastructure to shipping companies, shipbuilders and other companies, the Commission said.

"However, ports also carry out certain activities that are linked to the exercise of essential state responsibilities such as safety, surveillance and traffic control. Such activities fall outside the scope of EU state aid control," it said.

Margrethe Vestager, commissioner in charge of competition policy, said: "Ports play a key role in the EU's economy. Our competition rules reflect that and allow member states to support the construction or upgrade of port infrastructure through investment aid. However, tax exemptions shouldn't distort competition by giving an unfair advantage to some ports over others in Europe.

"As both the Belgian and the French measures already existed before the establishment of the EU in 1958, the aid is regarded as existing aid. This means that the Commission cannot ask Belgium and France to recover aid granted in the past, nor any aid granted up until the moment that a final decision is adopted by the Commission.

Existing aid is subject to a specific procedure. When existing aid seems to be in breach of EU state aid rules, the Commission's first step is to inform the member state about its concerns. The Commission may then propose appropriate measures to bring the aid into line with EU rules. If the country does not accept the proposal, the Commission may open an in-depth investigation to verify the compatibility of the aid. Today's decisions fall into this third category, the Commission said.

In January the Commission also required the Netherlands to put an end to the corporate tax exemption it had historically granted to Dutch public seaports. The Netherlands introduced corporate tax for public companies in 2015, following a request from the Commission. However, it had maintained an exemption that had been in place since 1956 for six publicly-owned ports. This exemption was distorting competition and had to be removed within two months, the Commission said at the time.

Last week the Commission also opened an investigation into grants worth €44 million that were given to the Port of Naples by the Italian government, and whether these were in line with state aid rules.

That followed the opening of an investigation in January into reductions in compensation payments that were granted by the port of Antwerp to two container terminal operators.

In March, the Commission proposed to exempt state investment aid to port and airports from scrutiny under EU state aid rules, and asked for feedback on the extension of general block exemption regulation (GBER) to cover ports and airports, as part of the state aid modernisation (SAM) initiative. The consultation closed at the end of May.

SAM is designed to make it easier to grant aid that "contributes to a more dynamic and competitive single market", and the existing GBER allows EU countries to grant some aid without applying for authorisation. This "cuts red tape for projects that are unlikely to distort competition and allows for well-defined projects to go ahead as fast as possible. It also allows the Commission to focus its efforts on more distortive types of aid", the Commission said.