L_2007112EN.01004101.xml
| 30.4.2007 | EN | Official Journal of the European Union | L 112/41 |
COMMISSION DECISION
of 20 December 2006
on the aid scheme implemented by France under Article 39 CA of the General Tax Code — State aid C 46/2004 (ex NN 65/2004)
(notified under document number C(2006) 6629)
(Only the French version is authentic)
(Text with EEA relevance)
(2007/256/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 pursuant to the provisions cited above (1) and having regard to their comments,
Whereas:
I. PROCEDURE
| (1) | By letter dated 9 February 2004 (D/51178), the Commission sent a request for information to the French authorities concerning the tax-oriented leasing provisions in favour of certain undertakings approved by the Minister for the Budget introduced by Article 77 of Law No 98-546 of 2 July 1998 on various economic and financial measures (2). By letter dated 18 March 2004, the French authorities requested an extension of the period they had been allowed for furnishing the information requested. The Commission received the said information from the French authorities by letter dated 3 May 2004 (A/33117). By letter dated 6 July 2004 (D/54933), the Commission asked the French authorities to produce further information, which it received on 2 August 2004 (A/36007). |
| (2) | By letter dated 14 December 2004 (D/205909), the Commission notified the French authorities of its decision to initiate the formal investigation procedure laid down in Article 88(2) of the EC Treaty. The decision was published in the Official Journal of the European Union (3). In it, the Commission invited France and interested parties to submit their comments within a certain time limit. |
| (3) | By letters dated 6 January 2005 (A/30266) and 4 February 2005, the French authorities requested an extension of the time limit, which was granted by letters dated 11 January 2005 (D/50220) and 16 February 2005 (D/51190). |
| (4) | The Commission received the French authorities’ comments on 15 March 2005 (A/32251). It also received, within the deadline, comments from 16 interested parties, which were forwarded to the French authorities on 9 June 2005 (D/54454). |
| (5) | By letter dated 7 July 2005 (A/35587), the French authorities asked the Commission to extend the time limit granted to it for commenting on the interested parties’ comments. The Commission granted the request and the French authorities finally submitted their comments by letter dated 20 July 2005 (A/35981). |
| (6) | By e-mail dated 2 March 2006 (A/31655), the French authorities sent the Commission further comments on the scheme at issue. |
II. DETAILED DESCRIPTION OF THE SCHEME
| (7) | Pursuant to the first paragraph of Article 39 C of the General Tax Code, the depreciation of assets leased out or otherwise made available is spread over the normal period of use. |
| (8) | Article 77 of Law No 98-546 introduces two provisions into the General Tax Code aimed at combating tax avoidance by partnerships and economic interest groupings (EIGs) (4) when they carry out movable asset financing operations. |
| (9) | The second paragraph of Article 39 C of the General Tax Code provides that the tax-deductible depreciation of an asset leased out by an EIG may not exceed the amount of any leasing charges collected by it, less any other charges relating to the asset. |
| (10) | Since the declining depreciation and the financial charges are, by definition, concentrated on the first few years of the asset’s use, the EIG’s results show an exceptional loss during that period and become positive only during a later period when the amount of the leasing charges collected exceeds total costs (depreciation and financial charges included). Because EIGs are governed by the law on partnerships, they can deduct the losses thus posted during the first few years of the operation from the taxable profits earned by their members from their current activities. The ceiling on depreciation provided for in the second paragraph of Article 39 C of the General Tax Code is intended, therefore, to combat abusive recourse to this type of financing for the purpose of tax avoidance. |
| (11) | An exception to this limitation, introducing a depreciation system favourable to certain undertakings, has nevertheless been inserted in the General Tax Code. Article 39 CA of the General Tax Code thus stipulates that the ceiling laid down in the second paragraph of Article 39 C of the Code shall not be applicable to the financing by EIGs of depreciable movable assets according to the declining balance method over a period of at least eight years (5) provided that the operation has been approved in advance by the Minister for the Budget. |
| (12) | Such approval is subject to a number of criteria. These are essentially as follows:
| — | the acquisition price of the asset must correspond to the market price |
| — | the investment must be of significant economic and social interest, particularly in relation to employment |
| — | the user of the asset must show that the asset is necessary to his business and that the financing arrangements adopted are not of a purely tax-related nature |
| — | two thirds at least of the tax advantage accruing from the approval must be passed on to the user of the asset. | |
| (13) | As a rule, the EIG — which is generally made up of financial institutions — acquires the asset to be financed at the market price and leases it out to its user. The leasing charges paid by the user and the price of the end-of-contract purchase option enable the EIG to cover its own financing costs, including capital and interest. |
| (14) | Apart from the removal of the depreciation ceiling (6), the grant of ministerial approval makes it possible to increase by one point the declining depreciation coefficient normally applicable to the asset concerned. Moreover, the resale of the asset by the EIG to its user once two thirds of the normal period of use of the asset has elapsed is exempt from transfer capital gains tax. |
| (15) | As to the criterion relating to the existence of a significant economic and social interest (7), the French authorities have indicated that there are no guidelines for assessing such an interest and that the examination is carried out in the light, firstly, of the indirect fallout from the investment in the labour market area, the conditions of competition and the development of the activity in the economic area concerned, including the contribution to the growth or establishment of a production, management or decision-making centre, and, secondly, of the investment’s contribution to improving safety and protection of the environment. |
| (16) | Article 39 CA of the General Tax Code provides that the passing-on to the user of the asset of two thirds at least of the tax advantage which the EIG derives from the grant of approval (8) must take the form of a reduction in the amount of the leasing charge or of the purchase option. Moreover, the exact amount of the advantage to be passed on by the EIG to the user must be determined at the time of grant of the approval. |
| (17) | At the Commission’s request, the French authorities furnished a breakdown by area of activity of all applicants for approval and of the actual beneficiaries of the scheme at issue:
| Area of activity | Applications for approval submitted | Approval decisions granted | | Maritime investment | 142 | 110 | | Aeronautical investment | 32 | 18 | | Railway investment | 5 | 2 | | Industrial investment | 7 | 3 | | Space investment | 3 | 0 | |
| (18) | The French authorities pointed out in this connection that, of the 56 applications which did not form the subject matter of an approval decision, 21 were withdrawn, 13 led to no further action being taken and 22 were rejected. According to the French authorities, of the 22 applications that were rejected 15 concerned the financing of an asset in the maritime transport sector and the remaining 7 the financing of an asset in the air transport sector. |
| (19) | The French authorities also pointed out that approval procedures under Article 39 CA of the General Tax Code have been suspended since 14 December 2004, the date on which the decision to initiate the formal investigation procedure was notified to them. |
III. REASONS FOR INITIATING THE FORMAL INVESTIGATION PROCEDURE
| (20) | In its decision of 14 December 2004 the Commission found that an advantage seemed to granted under Article 39 CA of the General Tax Code to investors belonging to tax EIGs and to the users of assets financed by EIGs. As far as the selectivity of the measure in question was concerned, the Commission noted, firstly, that the Minister for the Budget seemed to enjoy a discretionary power when it came to assessing the approval grant criteria and that this enabled him to select the beneficiaries of the scheme at issue according to subjective standards. Secondly, it appeared that the tax arrangements provided for in Article 39 CA of the General Tax Code constituted an aid measure for the benefit mainly of the transport sector. The Commission thus took the view that the measure at issue did not appear to be justified by the nature or general scheme of the French tax system. In its opinion, the advantages in question also involved the use of state resources, distorted competition and affected intra-Community trade. |
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