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PR(04)03: The EFTA Surveillance Authority has adopted a negative decision regarding the tax measures in favour of International Trading Companies in Iceland

25.2.2004

The EFTA Surveillance Authority has decided to take a negative decision closing the formal investigation procedure opened in December 2001 with respect to tax measures in favour of International Trading Companies (ITCs) in Iceland. The Icelandic Government is obliged to recover from the beneficiaries, any aid unlawfully made available to them on the basis of these measures.

In March 1999, the Icelandic Government adopted two legislative acts (Act 29/1999 and Act 31/1999) with the aim of promoting the establishment of International Trading Companies in Iceland. ITCs are subject to payment of a lower corporate income tax than the one generally applicable to any taxable undertaking in Iceland. In the Authority’s view, the tax scheme in favour of ITCs constitutes a tax credit for the reduced and more favourable taxation of profit retained by the undertakings. Additionally, ITCs are fully exempted from payment of net wealth tax and partially exempted from payment of stamp duty.

ITCs are mainly involved in international trade activities, where they are direct competitors of other undertakings established in any of the State members to the EEA. Furthermore, the scheme is selective as only undertakings having the legal form of an ITC benefit from it. The Authority has consequently concluded that the tax regime applicable to ITC fulfils the criteria as to what constitutes State aid laid down under Article 61 EEA Agreement. The Icelandic Government did not notify these measures to the Authority but implemented them without prior approval. Therefore, the measures constitute unlawful state aid. None of the compatibility clauses foreseen under the EEA Agreement are applicable to this case. For these reasons, the Authority considers that the tax scheme in favour of ITCs in Iceland constitutes state aid incompatible with the EEA Agreement. The Icelandic Government is requested to ask for the recovery of the sums granted to the beneficiary companies in the form of reduced or non existent payments since 1999.

For further information, please contact Mr. Amund Utne on tel. + 32 2 286 1850 or Ms. Maria Segura on tel. + 32 2 286 1853.

25 February 2004




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