European Union: Bolt From The Blue: The European Commission Demands Italian Port System Authorities To Pay Taxes

Last Updated: 12 June 2018
Article by Ekaterina Aksenova

At the end of April, the Directorate-General for Competition of the European Commission sent a communication to the Italian Permanent Representation notifying the results of a preliminary examination concerning corporate income tax exemption for ports in Italy.

The European Commission indeed found an infringement of Article 107 TFEU in the tax exemption granted to the authorities responsible for managing ports in Italy, deeming such exemption a State aid1.

The European Commission considers that "the differential tax treatment between Ports authorities (which are not subject to corporate taxes) and other undertakings operating in Italy (which are subject to corporate taxes) constitutes a selective advantage for the former that cannot be justified by the nature and logic of the Italian corporate tax system. Furthermore, such a favourable tax treatment threatens to distort competition and to affect intra-Union trade"2.

From a questionnaire sent by the European Commission to all Member States to obtain information on the functioning of ports and the corporate tax regimes applicable to them, it emerged that, in Italy, Port System Authorities ("PSAs") are exempted from payment of corporate tax under Article 74, paragraph 1, of the Italian Income Tax Consolidation Act 3("Testo unico delle imposte sui redditi"("TUIR")). Article 74, paragraph 2, of the TUIR however provides that such institutions be exempted from corporate tax only having regard to the exercise of their "State functions". The revenues deriving from their "commercial activities" are, instead, subject to corporate tax.

In light of the above, the European Commission decided to examine more closely the nature of the activities of the PSAs to assess whether their exemption could be deemed as falling within the scope of Article 74, paragraph 2 of the TUIR or amount to infringement of Article 107 of the TFEU.

Unlike many other European countries, all ports in Italy are considered public, as they are an integral part of the State's maritime property. Moreover, the Italian port law4, which has recently been reviewed, under Article 6, paragraph 5, provides that a PSA "is a non-economic public body of national relevance enjoying a special status and administrative, organisational, regulatory, budgetary and financial autonomy".

Among their various tasks and activities, PSAs are entrusted with the power to grant concessions over State-owned areas of the port or quays to undertakings wishing to use them for carrying out port operations5. Such concessions are granted against the payment of a fee.

Article 13 of the Italian Port Law provides for further revenue sources for PSAs6.

In response to the questions raised by the European Commission, the Italian State - in its defence - stated that "port authorities exercise only regulatory and monitoring functionsover activities carried out by private undertakings which operate in the ports. These private service providers are subject to the standard corporate tax regime" (See EC resolution - DG Competition to the Italian Permanent Representation of 30 April 2018).

Such interpretation is endorsed by the Italian Supreme Court7, which states that "the activities of public bodies, whether commercial or not, are not taxable when they are acting in their capacity as a public authoritybecause they are subject to public law; their activities are taxable when they are acting in a private capacity".

Italian law and the position of the Italian authorities, however, does not seem to take into account the settled case law of the Court of Justice of the European Union ("CJEU"), according to which "the concept of an undertaking encompasses every entity engaged in an economic activity regardless of its legal status and the way in which it is financed"8,9.

According to the CJEU, therefore, the only relevant criterion in this respect is whether the entity carries out an economic activity or not10, regardless of the formal qualification of the same. Indeed, an entity (formally part of the Public Administration) carrying out both economic and non-economic activities is to be regarded as an undertaking with regard to the former.

In its decision of 27 July 2017 relating to cases SA.3839311and SA.3839812, the European Commission, conforming itself to the CJEU's view, stated that the commercial exploitation of a port or airport terminal by making it available to users against the payment of a fee constitutes an economic activity.

Taking into account that PSAs grant state concessions against the payment of a fee, the European Commission decided that PSAs are therefore undertakings within the meaning of Article 107(1) TFEU.

Therefore, by its communication of late April, the Commission initiated a cooperation phase during which the Commission and the Member State concerned are expected to cooperate to identify "the appropriate measures that should be adopted in order to make the measures at stake compatible with the internal market".

It will therefore be interesting to see the developments of this procedure, as whatever decision will have a significant impact on both the industryconcerned and the Italian and European market.

Footnotes

1 The Commission highlights how: (a) PSAs qualify as undertakings to the extent that they perform economic activities; (b) the financing derives from a domestic law; (c) the financing takes place by the State forgoing revenues which it would otherwise collect from an undertaking in normal circumstances; (d) there is an advantage arising from the reduction of the amount of tax due.

2 See page 11 of the EC resolution - DG Competition to the Italian Permanent Representation of 30 April 2018.

3 Article 74, paragraph 2, of Presidential Decree No. 917 of 22 December 1986 provides that "State bodies and administrations, including autonomous administrations, and, where they have legal personality, the municipalities, consortia of local bodies, associations and bodies administering public property, mountain communities, provinces and regions"are not subject to corporate tax.

4 Law No. 84 of 28 January 1994.

5 See Article 18 of Law No. 84/1994.

6 The revenues of PSAs are:

  • revenues from granting concessions against the payment of a fee over maritime State-owned areas and dock/wharves under Article 18 of Law No. 84/94 and the revenues from granting concession to carry out port operations under Article 16 of Law No. 84/94;
  • any proceeds from disposals;
  • revenue from dues on goods unloaded and loaded in ports;
  • contributions by the Regions, local authorities and other public bodies and organisations;
  • miscellaneous revenues.

7 See judgement of the Italian Supreme Court No. 4926 of 27 February 2013.

8 ECJ Case No. C-41/90 Höfner/Macroton GmbH, paragraph 21.

9 See also: joined Cases No. T-455/08 and T-443/08, Flughhafen Leipzig-Halle GmbH and others/Commission and Mitteldeutsche Flughhafen AG and others/Commission; Case No. T-128/89 Aéroports de Paris/Commission, confirmed by the ECJ, Case No. C-82/01P.

10 The ECJ deems "economic activity"any activity of offering goods or services on a given market.

11 Commission Decision (EU) 2017/2115 of 27 July 2017 on aid scheme SA.38393 (2016/C, ex 2015/E) implemented by Belgium - Taxation of ports in Belgium (notified under document C(2017) 5174)

12 Commission Decision (EU) 2017/2116 of 27 July 2017 on aid scheme SA.38398 (2016/C, ex 2015/E) implemented by France - Taxation of ports in France (notified under document C(2017) 5176)

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions