Bill on the recovery of state aid submitted to House of Representatives
This bill provides for a sound set of national law principles for the recovery of unlawful state aid. In terms of support for tax purposes the existing instrument of additional assessments is used, but without any restrictive conditions.
12 july 2017
Unlawful state aid
The European Commission checks whether EU Member States correctly apply the state aid rules under Union law. In short, any unlawful state aid should meet the following conditions:
- the advantage should be imputable to the State and funded by the public purse;
- the measure must benefit certain (categories of) undertakings;
- the beneficiary could not have obtained the economic advantage under normal market circumstances;
- it affects the trade between the Member States.
The European Commission must be notified of any intended aid measures, after which it assesses whether the measures meet the state aid criteria. An EU Member State could implement a measure without presenting it to the European Commission for approval. If it does and if the European Commission considers the introduced measure to be unlawful state aid, the State could be ordered to recover the full amount of the advantage, including interest. The objective is to undo the market advantage obtained by the beneficiary through the state aid compared to its competitors and remedy the previously existing market situation. Although all this takes place according to the national law provisions, in this respect the Member States have an obligation of result to recover the state aid within the period set.
Bill on recovery of state aid
As it turns out, there may be cases in which Dutch law is not adequately suited to situations in which unlawful state aid must be recovered. To this end, a bill was submitted to the House of Representatives on 6 July 2017. It includes a sound set of rules for such recovery operations. The bill thus provides for an independent legal basis. Legal protection is ensured through objection proceedings with the administrative body that determines the recovery decision and appeal proceedings in the first and only instance with the Trade and Industry Appeals Tribunal (College van Beroep voor het bedrijfsleven - CBb).
As an exception to the rule, the existing instrument of additional tax assessments and the related legal protection is used in respect of state aid for tax purposes. This is rooted in the idea that it should be beyond any doubt that support for tax purposes is recovered in the form of a tax. Likewise, the tax court is deemed to be best suited to assess whether the amount recovered has been calculated correctly. An essential difference with ordinary tax law is that the conditions and periods applicable to imposing additional tax assessments do not apply to recovery of state aid. The sole limitation in time is based on Union law itself. This is due to the competence of the European Commission to order recovery it expires ten years after the date on which the state aid was granted. Still, circumstances can arise in which this period can be interrupted.
Principle of legitimate expectations
Another issue is noted in the explanation to the bill. Case law of the Court of Justice of the European Union shows that taxpayers have little chance of successfully invoking the circumstance that they could have expected the national institution to have lawfully provided the state aid. National law provisions and principles, such as the principle of legitimate expectations, are subordinate to requirement under European law of effective implementation of the recovery decision. According to the legislature undertakings will solely be able to derive legitimate expectations from the legitimacy of the aid granted if the European Commission has been notified of this in accordance with article 108 TFEU. On top of this, beneficiaries have a far-reaching duty to examine and they should assure whether it regards an aid measure for which a notification requirement applies and whether it has indeed been approved by the European Commission.
The bill now submitted, of which a draft version was offered for internet consultation last year, will substitute a bill that had been submitted as early as 2008, but that failed to ever cross the finishing line. The legislature has now opted for a regulation that solely offers a basis for recovery in situations in which the obligation to do so is a given. On top of this, the new regulation provides for an independent legal basis for recovery operations. After the House of Representatives and the Senate have adopted the bill, it will become effective on a date to be determined by Royal Decree. A target date has not been set in this respect. We will keep you informed on any further developments.
Source: Parliamentary documents II 2016-2017, 34, 753, no. 2 (bill) and no. 3 (explanatory memorandum)