European Business Law, the fourth volume in our series, shows how the European authorities simultaneously abolish all restrictions on access to and exercise of economic activities and support the growth of domestic markets, through the harmonization the internal legislation or the enactment of genuinely unified regulations.

European Business Law

A subsidy granted by the public authorities of a non-Member State may have multiple forms. It may directly come from the public authorities in the form of a transfer of funds (for example, in the form of grants, loans, equity infusion) or potential direct transfer of funds or liabilities (for example, loan guarantees) , government revenue that is otherwise due which is forgone or not collected (fo …

Types of financial contribution

A subsidy granted by the public authorities of a non-Member State may have multiple forms. It may directly come from the public authorities in the form of a transfer of funds (for example, in the form of grants, loans, equity infusion) or potential direct transfer of funds or liabilities (for example, loan guarantees) , government revenue that is otherwise due which is forgone or not collected (for example, fiscal incentives such as tax credit) , the provision of goods or services other than general infrastructure, or purchase of goods . Financial contribution may also indirectly come from public authorities by payments to a funding mechanism or through a private body that they entrust or direct to carry out one or more of the type of functions which would normally be vested in them . Lastly, subsidy may be granted in any form of income or price support within the meaning of Article XVI of the GATT 1994 .

Where the financial contribution takes the form of a government revenue being forgone or not collected, the exemption of an exported product from duties or taxes borne by the like product when destined for domestic consumption, or the remission of such duties or taxes in amounts not in excess of those which have been accrued, is not deemed to be a subsidy only where it has been granted in accordance with the provisions in Annexes I to III of the Regulation . Annex I provides for a non-exhaustive list of export subsidies , Annex II provides for guidelines on consumption of inputs in the production process and Annex III for guidelines in the determination of substitution drawbacks systems as export subsidies .

Thus, the fact that the exporter is granted a credit in the context of the export of its goods, which it may use to pay customs duties owed on future imports is not regarded as subsidy pursuant to Annex I , provided that the amount of the remission does not exceed the amount of customs duties and that these imports relate on inputs that are consumed in the production of the exported product. Inputs that are consumed in the production process are defined in Annex II as “inputs physically incorporated, energy, fuels and oil used in the production process and catalysts which are consumed in the course of their use to obtain the exported product” . However, the grant of a credit to the exporter of a finished product which corresponds to the amount of customs duties levied on normally imported inputs used in the production of that product, does not constitute a permitted remission/drawback scheme, where it lacks a built-in obligation to import only goods that are consumed in production of the exported goods . Likewise, the provision of an automatic calculation of the credit, independently of whether the inputs have been imported, whether import duties have been paid on them or whether the inputs were actually used for export production and in what quantities, cannot benefit from the exception .

Regulation No 2016/1037, Article 3(1)(a)(i); see Commission Regulation No 618/1999 of 23 March 1999, imports of stainless steel wire importations (India, Korea), LawLex200900002886JBJ, as regards a loan.

Regulation No 2016/1037, Article 3(1)(a)(ii).

Council Regulation (EU) No 1601/1999 of 12 July 1999, imports of stainless steel wires (India, Korea), LawLex200900002507JBJ.

See, also, regarding a similar scheme: Council Regulation No 74/2004 of 13 January 2004, imports of cotton-type bedlinen (India), LawLex200900002527JBJ; See also Council Regulation (EC) No 1741/2000 of 3 August 2000, imports of polyethylene terephthalate (India, Malaysia, Taiwan, Thailand), LawLex200900002851JBJ, as regards a remission/drawback scheme described as subsidy because it is calculated from the value of prior export performance and not on a specific physical quantity of inputs actually consumed or to be consumed in the production of the exported product.

Regulation No 2016/1037, Article 3(1)(a)(iii).

Regulation No 2016/1037, Article 3(1)(a)(iv).

Regulation No 2016/1037, Article 2(1)(b), which refers to the General Agreement on Tariffs and Trade, 1994, article XVI, Sect. A(1).

Examples: direct subsidies contingent upon export performance (a); currency retention schemes or any similar practices which involve a bonus on exports (b); internal transport and freight charges on export shipments, provided or mandated by governments, on terms more favorable than for domestic shipments (c); the provision through government-mandated schemes of imported or domestic products or services for use in the production of exported goods, on terms or conditions more favorable than for provision of like or directly competitive products or services for use in the production of goods for domestic consumption (d); the full or partial exemption, remission, or deferral specifically related to exports, of direct taxes or social welfare charges paid or payable by industrial or commercial enterprises (e); the allowance of special deductions directly related to exports or export performance, over and above those granted in respect of production for domestic consumption, in the calculation of the base on which direct taxes are charged (f); the exemption or remission, in respect of the production or distribution of exported products, of indirect taxes in excess of those levied in respect of the production and distribution of like products when sold for domestic consumption (g); See Regulation No 2016/1037, Annex I, for a complete list of examples of export subsidies.

See Commission Regulation No 1556/98 of 17 July 1998, imports of stainless steel bars (India), LawLex200900002859JBJ, which describes a system exempting from income tax on export sales as financial contribution; Council Regulation (EU) No 1010/2008 of 13 October 2008, imports of sulphanilic acid (China, India), LawLex200900002481JBJ, which describes a deferral system with respect to the tax normally due as financial contribution.

Regulation No 2016/1037, Annex I(i), which retains as example of export subsidies the "remission or drawback of import charges (...) in excess of those levied on imported inputs that are consumed in the production of the exported product (making normal allowance for waste); provided, however, that in particular cases a firm may use a quantity of home market inputs equal to, or having the same quality and characteristics as, the imported inputs as a substitute for them in order to benefit from this provision if the import and the corresponding export operations both occur within a reasonable time period, not to exceed two years. This item shall be interpreted in accordance with the guidelines on consumption of inputs in the production process contained in Annex II and the guidelines in the determination of substitution drawback systems as export subsidies contained in Annex III."

See Council Regulation (EU) No 2450/98 of 13 November 1998, imports of stainless steel bars (India), LawLex200900002490JBJ, as regards the exclusion of capital goods from the concept of input as they are not physically incorporated in the exported products.

European Business Law

491. Types of financial contribution

Demandez un accès gratuit
au contenu exclusif Livv – juristes d’entreprise

Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

491. Types of financial contribution

Demandez un accès gratuit au contenu exclusif Livv – juristes d’entreprise

Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

Demandez un accès gratuit
au contenu exclusif Livv – juristes d’entreprise