Ptepared by Claudio Valz and Guglielmo Ginevra
During 2020, several measures were enacted by the Italian legislator in support of companies issued “in compliance with the limits and conditions” of the European Commission Communication C (2020) 1863 of 19 March 2020 “Temporary framework for state aid measures to support the economy in the current Covid-19 outbreak”, commonly known as “Temporary Framework”.
These measures – including, for example, in tax matters, the possibility for companies with a volume of revenues not exceeding EUR 250 million to not pay the IRAP balance payment for the tax year 2019 and the first instalment of the advance payment for the tax year 2020 – are characterized by their compliance with the EU state aid rules as they were drafted following the guidelines provided for in the aforementioned Temporary Framework and approved by the European Commission to which they were notified.
The “limits and conditions” dictated by the Temporary Framework to take advantage of these measures vary according to the type of aid and the way it is used, the common denominator of the same however remains their destination for the benefit of an “undertaking”.
The IRAP measure (notified and approved by the European Commission with decision C (2020) 4447 final ), for example, like all the other tax measures that fall under section 3.1. “Aid in the form of direct grants, repayable advances or tax advantages”, provides among the other conditions of applicability that “the total amount of aid does not exceed EUR 800,000 per undertaking“.
With specific reference to the definition of “undertaking” pursuant to the Temporary Framework, it was recently published on the website of the Presidency of the Council of the Ministers a circular letter (hereinafter “the Circular letter”) drawn up by the Office for the coordination on the matter of state aid and addressed to various subjects including all Ministries and all Regions and Autonomous Provinces.
The Circular dated 18 June but made public only in the last week of October, concerns the so-called Regime Quadro scheme referred to in articles 53 to 64 of the Relaunch Decree (DL May 19, 2020, n.34) which authorizes Regions and Autonomous Provinces to adopt various aid measures pursuant to the Temporary Framework. As for the IRAP measure, the aforementioned Regime Quadro was also notified to the European Commission which approved it with decision C (2020) 3482 final.
The Circular letter, after a brief introduction of the State aid rules pursuant to the Temporary Framework, provides clarifications and operational indications on the measures of the Regime Quadro and in this context gives a definition of “undertaking” pursuant to the Temporary Framework, establishing in paragraph 6 that:
«The aid measures that can be adopted within the Temporary Framework and, therefore also within the Regime Quadro, are subject to specific conditions regarding the maximum thresholds of amounts to be granted, cumulation rules, rules on eligible costs.
It is important to highlight that the European Commission specified that the notion of “undertaking” referred to in the Temporary Framework is the notion generally applied in competition law, in line with the jurisprudence of the EU Court of Justice.
It follows that the test on the compliance with the thresholds and cumulation rules must be carried out with respect not to the single company but to the concept of a single economic unit, even if that economic unit includes several legal entities».
In note no. 10 of the Circular letter, it is then specified: «for example, with reference to the measures referred to in section 3.1. of the Temporary Framework, if there are several legal entities that are part of the same group, it is the group that must be considered an “undertaking” for the purposes of the maximum threshold of EUR 800,000 of the aid to be granted».
The Circular letter therefore highlighted that the definition of “undertaking” pursuant to the Temporary Framework – and all the support measures issued in accordance with the same – must be interpreted broadly, in the sense that several companies belonging to the same group and falling within the concept of “single economic unit” could be considered as a single “undertaking” for the purposes of the Temporary Framework.
Going back to the example of the measure relating to the waive of the payments of the 2019 IRAP balance and the first advance for 2020, the maximum limit of € 800,000, in the case of several Italian companies belonging to the same group and falling within the concept of “single economic unit”, it should be considered cumulatively in the sense that the maximum amount of IRAP not paid at the level of the Italian group cannot exceed this threshold.
It is worth to note that what is affirmed in the Circular letter is in contrast with what was indicated by Assonime in document no. 12 of 24 June 2020 regarding the limit of € 800,000 in the matter of IRAP exemption, which quoting ministerial interlocutions had been reassured by the Department of the Ministry of Finance that the limit of € 800,000 shall be considered on an individual entities basis and not on the entire group to which they belong «in consideration of the specific nature of the measure envisaged by art. 24 of the Relaunch Decree».
Finally, it should be noted that immediately after the publication of the Circular letter, as reported by various press articles, the Department for European Policies of Palazzo Chigi issued a note according to which “There is no danger that some Italian companies have to return part of the aids and subsidies received this year as they could be considered by the Commission as exceeding the limits set by the Temporary Framework on State aid. […] The European Commission has opened an important space for the coverage of subsidies to businesses in the course of 2020 and has repeatedly confirmed its strong determination in this regard. Interlocutions are underway between Rome and Brussels for the correct interpretation of the complex legislation on the matter, but the feared possibility of restitution can be ruled out right now».
All that being said, it should be highlighted that the definition of “undertaking” – to be understood as a single economic unit – described in the Circular letter is actually consistent with what is expressed in various circumstances by both the European Commission and the EU Court of Justice.
Since the matter of State aid (Temporary Framework included) is of exclusive competence of the EU, it is therefore of primary importance for the purposes of calculating the “limits and conditions” referred to in the Temporary Framework to establish whether a group of companies that benefited from aids according to the Temporary Framework, can fall or not within to the concept of “single economic unit” as applied by the European Commission and interpreted by the jurisprudence of the EU Court of Justice.
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