On March 3, 2023 the European Commission issued a press release announcing that it ordered has ordered Italy to recover illegal State aid granted to certain non-commercial entities in the form of a real estate tax exemption. This order is the latest development in a case that started already in 2010 (13 years ago). A case in which in 2012 the European Commission concluded that in this specific case, recovery would be absolutely impossible and that it therefore did not order Italy to recover the aid from the beneficiaries. A decision that was subsequently annulled by the Court of Justice of the European Union (CJEU) in 2018.

 

A short recap on the history of this case

 

2010

On October 12, 2010 the European Commission informed the Italian Government regarding its decision to initiate the formal investigation procedure regarding the preferential real estate tax regime(s) for non-commercial entities in Italy. The European Commission’s attention was essentially to the following two schemes:

a)   a tax exemption from the municipal tax on real estate ("imposta comunale sugli immobili", hereafter "ICI") for real estate property used by non-commercial entities, which perform exclusively social assistance, welfare, health, cultural, educational, recreational, accommodation, sport, religious and cult activities [Article 7, lett. i) of Legislative Decree n. 504/92] and,

b)   a 50% company tax reduction for the entities listed in Article 6 of Presidential Decree n. 601/73, which are mainly entities having as their scope social assistance, education and research on non-lucrative basis, as well as charity and education (including ecclesiastic institutions). The provision also includes social housing entities, foundations and associations having exclusively a cultural scope.

Here you can find the English version of the Decision to initiate the formal investigation procedure that was sent to the Italian Government on October 12, 2010.  (The Italian version can be found here)

 

2012

On December 19, 2012 the European Commission decided that it was of the opinion that the former Italian system of municipal real estate tax exemptions granted to non-commercial entities for specific purposes (the ICI) between 2006 and 2011 was incompatible with EU state aid rules.

The Commission's investigation found that these exemptions provided a selective advantage to the beneficiaries with regard to the commercial activities they carried out, since these activities were in competition with services provided by other commercial operators. The Commission concluded that these exemptions were incompatible with EU state aid rules.

The Commission did not order Italy to recover the aid from the beneficiaries because the Italian authorities have demonstrated that, in this specific case, recovery would be absolutely impossible. In particular, the Italian authorities demonstrated that it would be objectively impossible to determine which part of the real estate belonging to non-commercial entities was used exclusively for non-economic activities and could therefore legitimately be exempted, and which part was used for activities that were considered as "not exclusively of a commercial nature" and whose exemption from the ICI could therefore entail state aid in the meaning of EU rules.

After the Commission opened an in-depth investigation in October 2010 (see IP/10/1319), Italy amended the system and has now adopted a new municipal real estate tax law (IMU), which  according to the European Commission does not involve state aid since exemptions only apply to premises where non-economic activities are carried out.

Here you can find the letter of December 19, 2012 by which the European Commission informed the Italian Government regarding its decision (Decision: 2013/284/EU). (The Italian version can be found here)

 

2018

On December 14, 2018 the CJEU ruled in the joined cases C-622/16 (Scuola Elementare Maria Montessori Srl), C-623/16 (European Commission) and C-624/16 (Pietro Ferracci). With respect to the case C-622/16 the CJEU amongst others annulled Decision 2013/284 to the extent that the European Commission did not order recovery of the unlawful aid granted by means of the exemption from the Imposta communale sugli immobili (municipal tax on real property);

 

March 3, 2023

On March 3, 2023, so more than 4 years after the CJEU annulled the European Commission’s decision of December 19, 2012 to the extent that the European Commission did not order the Italian Government to recover the aid that it unlawfully granted by means of the exemption from the Imposta communale sugli immobili (municipal tax on real property), the European Commission issued a press release in which it announced that it has ordered Italy to recover illegal State aid granted to certain non-commercial entities in the form of a real estate tax exemption.

In the decision of March 3, 2023 the European Commission acknowledges the existence of difficulties for the Italian authorities in identifying the beneficiaries of the illegal aid. However, the Commission concludes that those difficulties are insufficient to rule out the possibility of achieving at least a partial recovery of the aid. According to the European Commission Italy could for example use data from declarations submitted under the new real estate tax and complement it with other methods, including self-declarations. On this basis, the European Commission has ordered Italy to recover the aid.

In addition, in its decision of March 3, 2023, the Commission clarifies that recovery is not required when aid is granted for non-economic activities or when it constitutes de minimis aid (exemption of small amounts of State aid from notification).

The non-confidential version of the decision is not available. It will be made available under case number SA.20829 in the State Aid Register on the Commission's competition website once any confidentiality issues have been resolved.

 

 

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