Aid No NN 67/2007 Stamp duty relief for farm consolidation

Transcription

1 EUROPEAN COMMISSION Brussels, C(2008) 5711 Subject: Sir, State aid/ireland Aid No NN 67/2007 Stamp duty relief for farm consolidation The Commission wishes to inform Ireland that, having examined the information supplied by your authorities on the aid scheme referred to above, it has decided to raise no objections to the aid as it is compatible with the EC Treaty. In reaching this decision the Commission has taken the following considerations into account: 1. PROCEDURE 1. By letters of 18 July and 20 September 2007, the Irish authorities informed the Commission of two schemes for stamp duty relief, and requested an exemption on the basis of Regulation 1857/2006. As the first scheme had been operated from 1 July 2005 until 30 June 2007 (which is before the entry into force of Regulation 1857/2006), the aid was registered as non-notified aid under number NN 67/07 pursuant to Article 1(f) of Regulation (EC) No 659/99. According to the Irish authorities, the second scheme falls under the scope of Article 13 of Regulation (EC) No 1857/2006, and has therefore been exempted under No XA328/07 1. Therefore the scope of this decision is limited to the first scheme. 2. By letters of 2 October 2007, 22 October 2007 and 3 July 2008, the Commission requested further information from Ireland; the Irish authorities replied by letters of 12 October 2007, 2 November 2007 and 25 July 2008, registered on the same day. 1 OJ C 112, , p. 17. Mr Micheál Martin Ministry of Foreign Affairs St. Stephen's Green 80 Dublin 2 Ireland

2 2. DESCRIPTION Title 3. Stamp duty relief for farm consolidation Budget 4. For the two years of its operation, the relief was availed of by only 38 farmers at a cost of just under 1 million on approximately 11 million worth of land. Duration 5. The relief has been granted for the period 1 July 2005 to 30 June Beneficiaries 6. The aid measure is part of a general programme of land reparcelling operations undertaken in accordance with the procedure laid down by the legislation of Ireland. Legal basis 7. The legal basis for the granting of the aid is Section 121 of the Finance Act Measure 8. The aim of the measure is to reduce the operating difficulties caused by land fragmentation and to improve the viability and competitiveness of Irish farms by encouraging greater levels of farm consolidation. It aims to provide access to land for those who wish to remain in farming on a full-time basis, and will work as an incentive to encourage restructuring. 9. The Irish authorities have provided data indicating that farms in Ireland were relatively small and fragmented. One of the major obstacles to increasing scale and efficiency is the low level of land mobility, caused among other things by high land prices. 10. The stamp duty relief provides that where there is a valid consolidation certificate in existence at the time of an exchange of lands, no stamp duty is charged on an exchange of such lands where the lands are of equal value. In a case where the lands exchanged are not of equal value, stamp duty is only charged on the amount of the difference in the value of the lands concerned. 11. In order to benefit from the stamp duty relief, a number of conditions were required to be met regarding exchange, type of land, consolidation, farming and ownership, to ensure that only genuine instances of land reparcelling would qualify. The eligible farmers had to apply to Teagasc with all relevant information, and Teagasc issued on that basis a 2 2

3 "consolidation certificate" as defined in the legal basis of this measure (see paragraph 7). This certificate was to be presented to the competent tax authority to obtain relief. 12. The four conditions were the following: a. The consolidation needed to take place in an exchange of land between two farmers; b. Any sale and purchase of land by a farmer had to involve: A reduction in the number of separate parcels of land comprised in a farm, or An overall reduction in the distance between existing parcels comprised in a farm; c. For 5 years the farmers had to: Retain ownership of the exchanged land, Use it for farming, and Spend more than 50% of their normal working time farming; d. The land had to be in the State, agricultural or afforested, and contained no residential buildings. 13. The aid was granted through Teagasc 3, the State agricultural and food development authority, who assessed all legal documents and maps to ensure the consolidation applications were bona fide. Aid intensity 14. The Irish authorities have indicated that the aid intensity varied and was dependent on the level of the other expenses. 15. In case the lands are of equal value, there is a total relief from stamp duty, i.e. an aid of 100 % of the stamp duty which would have been due. In a case where the lands exchanged are not of equal value, stamp duty is only charged on the amount of the difference in the value of the lands concerned. This stamp duty will then be payable by the farmer to whom the land which is of greater value is transferred The rate of stamp duty which is charged is the non-residential rate appropriate to the chargeable amount (i.e. max 9 % of the of the amount of the difference in the value) 4. This means that, in that case, the aid intensity is lower than 100 % as the farmer will have to pay a part of the stamp duty on the amount of the difference in the value

4 16. In order to show that there was no overcompensation and that the maximum aid intensities were respected, Ireland submitted data indicating that the relief was availed of at a cost of just under 1 million on approximately 11 million worth of land.. 3. ASSESSMENT Presence of State aid 17. Article 87(1) of the EC Treaty states that "any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, insofar as it affects trade between Member States, be incompatible with the common market". 18. Aid granted by a Member State or through State resources. The measure at stake is granted by Teagasc, which is the national body providing integrated research, advisory and training services to the agriculture and food industry and rural communities. It is therefore funded by the State. 19. Favouring certain undertakings or the production of certain goods. The aid takes the form of relief from stamp duty obligations, namely taxes levied on documents relating inter alia to sales of land. Stamp duty is a transaction tax imposed on the purchaser. By relieving the Irish farmers of costs they would normally have to bear, Ireland is granting them an advantage. 20. Measure distorting or threatening to distort competition and affecting trade between Member States. Pursuant to the case law of the Court of Justice, aid to an undertaking is deemed to affect trade between Member States if that undertaking operates on a market open to intra-community trade 5. The mere fact that the competitive position of an undertaking is strengthened compared with other competing undertakings, by giving it an economic benefit which it would not otherwise have received in the normal course of its business, points to a possible distortion of competition 6. The agricultural undertakings benefiting from the aid operate on a highly competitive international market 7. The aid measure could therefore distort competition and affect trade between Member States, and consequently constitutes aid pursuant to Article 87(1) of the EC Treaty. 21. Hence it must be examined whether a derogation from the general principle of the incompatibility of State aid under Article 87(1) of the Treaty might be granted. 5 See in particular judgment of the Court of 13 July 1988 in Case 102/87 France v Commission [1988] ECR Judgment of the Court of 17 September 1980 in Case 730/79 Philip Morris Holland BV v Commission [1980] ECR There is a high level of intra-community trade in the agriculture sector. In 2005 intra-community trade in agricultural products (EU-25) totalled some 199 billion (exports) and 196 billion (imports), accounting for some 63% to 64% of total agricultural production (Source: Eurostat). 4

5 Illegality of State aid 22. As the aid has been granted before being approved by the Commission, Ireland has acted in breach of Article 88(3) of the EC Treaty. Application of the guidelines 23. According to Article 87(3)(c) of the EC Treaty, aid to facilitate the development of certain economic activities or of certain economic areas can be regarded as compatible where such aid does not adversely affect trading conditions to an extent contrary to the common interest. Concerning this aid, section IV.I of the Community guidelines for state aid in the agriculture sector 8 (hereinafter "the Community guidelines") apply. 24. For an aid scheme for land reparcelling to be acceptable under the requirements of the Community guidelines, point 96 of the guidelines requires the conditions of Article 13 of Regulation 1857/2006 to be fulfilled. 25. Article 13 of Regulation 1857/2006 states that "Aid for land reparcelling shall be compatible with the common market within the meaning of Article 87(3)(c) of the Treaty [ ] if it is granted towards and limited to the legal and administrative costs, including survey costs, up to 100% of actual costs incurred." 26. As described in paragraph 18, stamp duty obligations are clearly to be considered as legal and administrative costs linked to the transfer of land ownership. The eligible costs of the measure at stake are therefore in line with the costs defined by Article 13 of Regulation 1857/ As regards the intensity of the aid, the maximum aid intensity defined by Article 13 of Regulation 1857/2006 has been respected. As indicated in par. 15 above, the maximum aid intensity at the level of the individual farmer is 100 % in case of a total exemption from the stamp duty when the lands exchanged are of equal value, and less than 100 % in case of a partial stamp duty relief, when the lands exchanged are not of equal value. Conclusion 28. The Commission concludes that the measures constitute State aid pursuant to Article 87(1) of the EC Treaty. The Commission notes with regret that Ireland has already implemented the measure before the notification in breach of Article 88(3) of the EC Treaty. 29. As these measures are, however, compatible with the common market pursuant to Article 87(3)(c) of the EC Treaty, the Commission raises no objection to them. 8 Community guidelines for state aid in the agriculture and forestry sector 2007 to 2013, OJ C 319, , p. 1. 5

6 30. The scheme is in accordance with the Community guidelines, and more particularly with the requirements applicable to aid for land reparcelling, and can therefore be considered compatible with the common market under Article 87(3)(c) of the EC Treaty. 31. If this letter contains confidential information which should not be disclosed to third parties, please inform the Commission within fifteen working days of the date of receipt. If the Commission does not receive a reasoned request by that deadline, you will be deemed to agree to the disclosure to third parties and to the publication of the full text of the letter in the authentic language on the Internet site: Your request should be sent by registered letter or fax to: European Commission Directorate-General for Agriculture and Rural Development Directorate M Office: Loi 130 5/120 B-1049 Brussels (fax (+322) ). Yours faithfully, For the Commission Vladimir ŠPIDLA 6