(August 14, 2015)

On August 14, 2015 the European Commission issued a press release stating that after an in-depth investigation it has found that certain Italian measures reducing company taxes and social security contributions in areas affected by natural disasters also benefitted companies that suffered no damage from natural disasters and overcompensated companies beyond the damage suffered.

 

As a matter of principle, EU state aid rules require that incompatible state aid is recovered in order to reduce the distortion of competition created by the aid.

 

Natural disasters that occurred more than ten years ago 

In the present case, for natural disasters that occurred more than ten years ago (i.e., all disasters except the 2009 earthquake in Abruzzo), the European Commission does not require recovery from companies that had an economic activity in the disaster zone. This means that under the European Commission's decision incompatible state aid paid out under the investigated measures only needs to be recovered by the Italian authorities if beneficiaries could not have suffered any damage at all because they had no economic activity in the area. The European Commission states that it takes this position because in Italy companies do not have an obligation to keep records for more than ten years, which makes it impossible to establish the amount of overcompensation a company with economic activity in the affected area would have received at the time.

 

The earthquake in Abruzzo

For the most recent measure concerning the 2009 earthquake in Abruzzo, Italian authorities also have to recover the amount of overcompensation received by companies. Finally, in both instances recovery is only required if the amount of incompatible state aid received by the company is high enough to be able to distort competition, and if it is not covered by any other approved or exempted state aid measure.

 

Background information

In the press release it is stated that in 2011, through a request by an Italian court, the Commission was made aware of various measures Italy had introduced between 2002 and 2011 reducing taxes and social security contributions due by companies located in areas affected by natural disasters. In particular, the measures concerned six natural disasters that occurred in Italy between 1990 and 2009. Subsequently the European Commission opened an in-depth investigation in October 2012 to examine whether these measures were in line with EU state aid rules.

 

In its press release the European Commission states that it fully supports the need to intervene in areas affected by natural disasters, and understands the importance of supporting the local social and economic environment. It is also stated that EU state aid rules explicitly allow and provide ample scope for Member States to compensate companies for the actual damage they have suffered as a consequence of natural disasters.

 

The press release continues by stating that the European Commission's investigation showed that the Italian measures under assessment were not well-targeted for the purpose of compensating companies for damages suffered from natural disasters. In particular:

·        The measures (with the exception of the measure concerning the 1994 floods in Northern Italy) did not require companies to show that they had suffered any damage at all: A company located in an eligible area could benefit from the aid irrespectively of whether it actually suffered damage from a specific natural disaster. For example, this means that a company registered in the area but without any physical presence or economic activity in the area would also have been eligible to receive aid.

·        The measures also did not require companies to establish how much damage they had suffered, meaning that they did not link the aid amount to the actual value of the damage suffered.

 

According to the European Commission, as a result, some companies received compensation without having suffered any damage and some companies received more compensation than the value of the damage. This gives those companies an undue economic advantage over their competitors, who have to operate without such public financing, and amounts to incompatible state aid under EU rules.

 

As a matter of principle, EU state aid rules require that incompatible state aid is recovered in order to reduce the distortion of competition created by the aid. In the present case, for natural disasters that occurred more than ten years ago (i.e., all disasters except the 2009 earthquake in Abruzzo), the European Commission does not require recovery from companies that had an economic activity in the disaster zone. This is because in Italy companies do not have an obligation to keep records for more than ten years, which makes it impossible to establish the amount of overcompensation a company with economic activity in the affected area would have received at the time.

 

The press release states that under the Commission's decision incompatible state aid paid out under the investigated measures only needs to be recovered by the Italian authorities if beneficiaries could not have suffered any damage at all because they had no economic activity in the area. For the most recent measure concerning the 2009 earthquake in Abruzzo, Italian authorities also have to recover the amount of overcompensation received by companies. Finally, in both instances recovery is only required if the amount of incompatible state aid received by the company is high enough to be able to distort competition, and if it is not covered by any other approved or exempted state aid measure.

 

Click here to be forwarded to the press release as issued by the European Commission in this respect (the press release is also available in Italian, French and German).

 

 

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