EC Takes Issue With IRAP Exemptions In Sicily

by Ulrika Lomas, for LawAndTax-News.com, Brussels

12 February 2007

The European Commission announced last week that fiscal incentives adopted by Sicily in two regional laws are incompatible with EC Treaty state aid rules.

The schemes provide for exemptions from the Italian tax on regional production activities (IRAP) in favour of companies operating in certain sectors in Sicily.

The sectors in question include tourism, hotels, cultural goods, agricultural feed, information technology and craft activities, plus all new firms starting their activities in an industrial sector as of 2004 with a turnover smaller than EUR10 million.

According to the EC, these tax exemptions would be liable to distort competition with the EU's Single Market by selectively favouring certain categories of undertakings, and therefore cannot be implemented.

However, as no aid has yet been granted under these measures, there is no need for the Commission to ask for recovery.

Competition Commissioner Neelie Kroes announced on Thursday that:

“These two decisions illustrate my determination to crack down on aid which distorts competition without promoting growth."

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