Greece Asked To Recover Aid From Illegal Tax Exemptions

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

20 July 2007

The European Commission announced on Wednesday that under EC Treaty state aid rules, certain sector-specific tax breaks granted under Greek law are incompatible with the Single Market and need to be recovered from the beneficiaries.

Under the legislation in question, approximately EUR200 million of incompatible aid has been given to thousands of companies.

The EC explained that:

"Article 2 of Greek Law 3220/2004 reduced the tax base of companies in certain specific sectors by 35% of their profits, thus giving them an unfair advantage. The sectors included among others the production of textile materials and basic metals, manufacturing, energy production, mining, intensive agriculture and fishery and certain tourism activities. The measure was never notified to the Commission and is therefore illegal."

"Based on its in-depth investigation, the Commission has now decided that the aid is also incompatible with EC Treaty state aid rules (Article 87) because it distorts competition and trade between Member States and that the Greek authorities must recover the aid, plus interest, from the beneficiary companies."

Competition Commissioner Neelie Kroes added:

“When a Member State distorts competition with incompatible state aid, the prior situation has to be re-established. This means that such aid needs to be fully recovered, including interest."

To re-establish the situation prior to the granting of the aid, the Commission decision requires Greece to immediately and effectively recover the incompatible aid, including interest, from the beneficiaries. Only aid that, at the time of its granting, fulfilled all the conditions of the de-minimis regulations, block exemption regulations or aid programmes previously approved by the Commission does not have to be returned.

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