Brussels, 20th December 2006
State aid: Commission concludes that the French tax scheme for "fiscal economic interest groupings" (EIGs) constitutes state aid
Following an in-depth investigation opened in December 2004 (see IP/04/1484), the European Commission has come to the conclusion that the tax scheme for financing assets leased by an economic interest grouping (EIG) constitutes state aid within the meaning of the EC Treaty’s rules on such aid. The scheme, which has mainly benefited the maritime transport sector, constitutes state aid owing to the selective advantage it confers on certain sectors and to the discretionary nature of its conditions of grant. The scheme is incompatible with the common market, with the exception of the aid to facilitate the development of rail transport (Article 87(3)(c) of the Treaty) and of such other aid measures as may be compatible under sectoral or regional rules. For reasons of legal certainty, the recovery of the unlawful, incompatible aid is limited to aid granted since the decision to open the formal investigation procedure was published. France must now amend the fiscal EIG scheme to bring it into line with the state aid rules.
Article 39 C, second paragraph, of the French “Code Général des Impôts” (General Tax Code) provides that the tax deductible depreciation of assets leased by an economic interest grouping (EIG) – a fiscally transparent structure - may not exceed the amount received by way of rent. Article 39 CA, however, provides for an exception to this rule, subject to prior ministerial approval, in that operations involving assets depreciable over a period of more than eight years are not subject to the above restriction.
Besides removal of the depreciation ceiling, the operations in question also benefit from a one-point increase in the depreciation coefficient normally applicable to the asset concerned and, where appropriate, from exemption from capital gains tax in the event of the asset being sold by the EIG to its user.
The Commission considers that these advantages clearly favour certain economic sectors, including primarily that of transport, in which assets depreciable over more than eight years are used (ships, aircraft, trains, etc.). An analysis of the parliamentary proceedings leading up to the tax scheme’s adoption bears out this assessment of the selective nature of the scheme. The French authorities clearly intended to promote maritime investment, following the example of the “quirat”, or share, scheme previously in force. The conditions of grant of ministerial approval were, moreover, discretionary.
Apart from the users of the assets concerned, the members of the EIG - financial institutions for the most part – also benefit from the aid at issue in that they receive a share of the benefit of the tax advantages.
During the course of the formal investigation procedure, numerous interested parties - beneficiaries of the scheme at issue belonging to the maritime and air transport sectors, but also to the financial sector - put forward their points of view and expressed serious concern about the procedure’s outcome.
Despite the unlawful nature of the tax scheme at issue (France did not notify it despite being obliged to do so under the Treaty) the Commission has limited recovery of the aid to aid granted after 13 April 2005, the date on which the decision to open the formal investigation procedure was published. The existence of exceptional circumstances, due among other things to the fact that the Commission learned of the scheme’s existence during an investigation into complaints concerning the financing of ships, justifies this temporal limit on the aid’s recovery. Any other approach would have been contrary to the principle of legal certainty.