2000/620/EC: Commission Decision of 22 December 1999 on aid scheme C 1/99 (ex NN 133/98)/State aid to non-residential building tenants in the Customs House Docks Area in Dublin (notified under document number C(1999) 5206) (Text with EEA relevance) (Only the English text is authentic)

• Published date: 14 October 2000
• Subject Matter: State aids
• Official Gazette Publication: Official Journal of the European Communities, L 260, 14 October 2000

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2000/620/EC: Commission Decision of 22 December 1999 on aid scheme C 1/99 (ex NN 133/98)/State aid to non-residential building tenants in the Customs House Docks Area in Dublin (notified under document number C(1999) 5206) (Text with EEA relevance) (Only the English text is authentic)

Official Journal L 260 , 14/10/2000 P. 0037 - 0046

Commission Decision

of 22 December 1999

on aid scheme C 1/99 (ex NN 133/98)/State aid to non-residential building tenants in the Customs House Docks Area in Dublin

(notified under document number C(1999) 5206)

(Only the English text is authentic)

(Text with EEA relevance)

(2000/620/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European Community, and in particular the first subparagraph of Article 88(2) thereof,

Having regard to the Agreement on the European Economic Area, and in particular Article 62(1)(a) thereof,

Having called on interested parties to submit their comments(1) pursuant to the provisions cited above and having regard to their comments,

Whereas:

I

PROCEDURE

(1) The Commission was informed on the above State aid scheme while examining notified aid scheme N 267/98, concerning tax incentives in a 12-acre site in the Customs House Docks Area (CHDA).

(2) In 1986 the Commission had approved the urban renewal scheme "Incentives for development of certain inner city areas" (N 56/86, letter to the Irish authorities SG (86) D/10282 of 19 September 1986) providing for a package of tax incentives for building owners and tenants in a 27-acre site in the CHDA (the "original" site). Following a request by the Commission, the Irish authorities informed it of the extension of the above scheme with regard to its geographical scope and its termination date, by letter of 28 June 1990. At the time, the Commission did not react to this communication.

(3) The Irish authorities further modified this scheme by way of the Finance Acts of 1992 to 1994 and 1995, without notifying these modifications to the Commission. However, by letter of 30 January 1998 the Irish authorities notified to the Commission a scheme providing for the same package of incentives for a 12-acre site in the CHDA. By letter of 8 May 1998, the Irish authorities withdrew from this notification the tax incentives offered to tenants. By letter of 20 October 1998 the authorities announced that despite their withdrawal from the notification, the tax incentives for tenants could be lawfully awarded, since, according to Ireland, they were covered by the approval in 1986 of the first urban renewal scheme (N 56/86).

(4) By letter dated 9 February 1999, the Commission informed Ireland that it had decided to initiate the procedure laid down in Article 88(2) of the EC Treaty in respect of the tax incentives for tenants awarded on the basis of the Finance Acts of 1992 to 1994 and 1995.

(5) The Commission decision to initiate the procedure was published in the Official Journal of the European Communities(2). The Commission invited interested parties to submit their comments on the aid.

(6) The Irish authorities submitted their comments to the Commission by letter of 9 March 1999. By letter dated 27 July 1999 Ireland informed the Commission that no grants had been made after 2 December 1998 and that no further grants would be made under the scheme, the scheme having terminated on that date. By letter dated 22 November 1999 Ireland informed the Commission that it would modify the scheme.

(7) The Commission has also received comments from the following interested parties: the Irish Business and Employers Confederation (IBEC), A & L Goodbody, the Dublin Chamber of Commerce and KPMG Chartered Accountants. The Commission has forwarded these comments to Ireland, which was given the opportunity to react.

II

DESCRIPTION OF THE AID

(8) The aid covered by this investigation procedure takes the form of tax incentives for tenants of non-residential property. The incentives in question are the following:

- "double rent relief", meaning that for tax purposes the company is deemed to pay double the actual annual rent. In principle, this aid is granted against trading income for 10 years,

- "local rates remission", meaning relief, in principle for 10 years, from the local property tax.

(9) The geographical area concerned consists of two sites in the CHDA, namely, a 27-acre site, designated in 1986, and a 12-acre site designated at a later stage.

(10) The aid recipients are tenant companies entering into leasing contracts in relation to non-residential buildings in the CHDA. The scheme is not sector-specific. International financial services companies are not excluded. The scheme does not apply to sectors of industrial activity subject to special rules and frameworks of Community law, including sectors falling under the ECSC Treaty, and those of shipbuilding, transport, fisheries and agriculture, together with the processing and marketing of agricultural products (as set out in the relevant guidelines(3)).

(11) Qualifying leases are long-term (at least 15 years at the 27-acre site and 25 years - with one case of 14 years - at the 12-acre site).

(12) The purpose of the scheme is to promote regional development by providing an incentive to companies to operate in the area in question, which used to be one of the most derelict and dangerous of Dublin. It is noted that the whole of Ireland qualifies, until 31 December 1999, as an assisted region under Article 87(3)(a) EC for the purposes of national regional aid and as an Objective 1 region for the purposes of the Structural Funds.

Duration of the scheme

(13) It is noted that the initial urban renewal scheme, including the modifications communicated in 1990, had a termination date set at 24 January 1993 (a time limit within which expenditure qualifying for the award of capital allowances to the building owners must have been incurred). The same date was also the deadline for entering into leasing contracts giving entitlement to tax incentives for the tenants.

(14) With the 1992 to 1994 Finance Acts the scheme's termination date was extended to 24 January 1997 and the following special clause was added:"a lease for double rent relief purposes may be entered into for up to two years after the scheme's termination date."

This clause applies when no leasing contracts have been entered into during the construction works, or before, and thus the completed building has no tenants.

(15) By virtue of this clause, the deadline for entry into qualifying leasing contracts was extended to 24 January 1999. The 1995 Finance Act also extended the scheme's termination date to 24 January 1999 and consequently, in accordance with the special clause mentioned above, the deadline for qualifying leasing contracts to 24 January 2001.

(16) By letter dated 27 July 1999 Ireland informed the Commission that the scheme had been modified, the termination date of the scheme now being 2 December 1998. In addition, during the course of the proceedings Ireland informed the Commission that it would modify the scheme. Under the terms of the modified scheme, the two reliefs will be available only until 31 December 2003 (that is, the reliefs will be available only in relation to rent and rates normally accruing up to and including 31 December 2003), unless certain conditions are fulfilled. Those conditions are either that (a) the construction of the building was completed before 1 April 1998 or (b) the construction of the building commenced before 1 April 1998 and the tenant occupation of the completed building commenced before 9 February 1999. Where either condition (a) or (b) applies, the two reliefs will continue to their intended end-date. This Decision is restricted to assessing the compatibility with the common market of the modified scheme.

Grounds for initiating the procedure

(a) Unlawfulness of the aid

(17) The non-notified modifications to the initial scheme, effected by the 1992 to 1994 and 1995 Finance Acts, extended significantly the scheme's termination date, the deadline for entering into leasing contracts and consequently the end of the enjoyment of the double rent relief and rates remission. In the Commission's view, such modifications to a scheme are not simply implementing measures and, although they do not alter the nature of the aid, they change the scheme to a substantive degree. Thus they should have been notified pursuant to Article 88(3) EC which lays down that "the Commission should be informed, in sufficient time to enable it to submit its comments, of any plans to [...] alter aid".

(b) Doubts as to the compatibility of the aid

(18) In its decision opening the procedure the Commission stated its view that the double rent relief and the local rates remission constitute operating aid because they relieve the ordinary tax burdens of a company.

(19) No derogation among those provided under Articles 87(2) and 87(3)(c) EC may apply in relation to this aid. The only possible derogation from Article 87(1) EC would be the one laid down in Article 87(3)(a) EC (aid to promote the economic development of areas where the standard of living is abnormally low or where there is serious underemployment). This is possible, first, because Ireland as a whole qualifies as an assisted area for national regional aid on the basis of that Article. Secondly, it is possible because, according to the 1988 Commission communication on the method for the application of Article 92(now Article 87)(3)(a) and (c) to regional aid(4) and specifically point 6...