The European Commission ordered Italy to abolish the
corporate tax exemptions granted to its ports. Profits earned by port
authorities from economic activities must be taxed the antitrust regulators
said under normal national corporate tax laws to avoid distortions of
competition.
Today's decision resulted from inquiries the EC conducted
into the taxation of ports across EU member states. The commissions said that
these steps would align Italy’s tax regime with EU State aid rules. Currently,
in Italy, port authorities are fully exempt from corporate income tax.
"EU competition rules recognize the relevance of ports
for economic growth and regional development, allowing Member States to invest
in them,” said Commissioner Margrethe Vestager, who is in charge of competition
policy. “At the same time, to preserve
competition, the Commission needs to ensure that, if port authorities generate
profits from economic activities, they are taxed in the same way as other
companies. Today's decision for Italy – as previously for the Netherlands,
Belgium and France – makes clear that unjustified corporate tax exemptions for
ports distort the level playing field and fair competition. They must be
removed."
In January 2019, the EC requested that Italy adapt its
legislation in order to ensure that ports would pay corporate tax on profits
from economic activities in the same way as other companies in Italy and in
line with EU State aid rules. In November 2019, the Commission opened an
in-depth investigation to assess whether or not its initial concerns regarding
the compatibility of the tax exemptions for Italian ports with EU State aid
rules were confirmed.
Having concluded its assessment, the EC concluded that the
corporate tax exemption granted to Italian ports provides them with a selective
advantage, in breach of EU State aid rules. In particular, the tax exemption
does not pursue a clear objective of public interest, such as the promotion of
mobility or multimodal transport. The tax savings generated can be used by the
port authorities to fund any type of activity or to subsidize the prices
charged by the ports to customers, to the detriment of competitors and fair
competition.
According to the EC regulators, Italy now has to take the
necessary steps to remove the tax exemption in order so that starting with
January 1, 2022, all ports are subject to the same corporate taxation rules as
other companies. However, since the corporate tax exemption for ports existed
prior to 1957 enactment of the treaties that formed the EC, it is considered
existing aid, and as such Italy is not required to recover the corporate tax
that was not paid in the past.
The ruling regarding Italy’s ports follows similar actions
by the EU with other member states. In 2019, Spain agreed to amend its
corporate income tax legislation to bring it in line with EU aid rules. Normal
corporate income tax rules were applied to Spanish ports starting in 2020.
Removing unjustified tax advantages does not mean that ports
can no longer receive state support the EU commented. Member states can support
ports in line with EU aid rules, for example to achieve EU transport objectives
or to put in place necessary infrastructure investments that would not have
been possible without public aid.
In May 2017, the EC simplified the rules for public
investment in ports. Public authorities, for example, are permitted to cover
the costs of dredging in ports and access waterways or to compensate ports for
the cost of undertaking public service tasks that support general economic
interests.
The European Commission said that it will continue to assess
the functioning and taxation of ports to ensure fair competition in the EU port
sector.