On 14 July 2020, the Commission has recommended that Member States do not grant State aid to companies with links to countries on the European Union's list of tax havens, nor to companies that have been convicted of serious financial crimes, in particular financial fraud, corruption, non-payment of tax and social security obligations.
During the current COVID-19 pandemic, many companies have found themselves in difficulty and have asked Member States for financial support to provide the cash or capital needed to survive. Other aid has been granted to save jobs, safeguard supply chains or facilitate research and development.
In this context, some Member States have expressed a willingness to exclude companies engaged in tax evasion practices or convicted of financial crimes from accessing this type of financial support and have asked the Commission to adopt guidelines on the subject.
The Commission recommendation therefore aims to provide Member States with guidance on setting conditions for granting State aid, in order to prevent public funds from being misused by companies practicing tax fraud, tax evasion or money laundering, or being used for terrorist financing purposes.
For implementing such restrictions on granting State aid, the recommendation uses the European Union's list of “non-cooperative tax jurisdictions”, which includes in particular: Panama, Cayman Islands, Seychelles and Fiji. The recommendation sets out principles to guide Member States in establishing reasonable requirements that companies must meet to prove that they have no links to the tax jurisdictions in question.
Using this list will ensure that restrictions are imposed consistently in the Member States and will also prevent the adoption of individual measures that may violate EU law or create mismatches or distortions within the Single Market. Further, it will generate more clarity and legal certainty for undertakings.
In addition, the Commission recommends various exceptions to these restrictions, under strict conditions, to protect honest taxpayers. In particular, a company with links to one of the countries on the list could be granted State aid if it can prove that it has paid an appropriate tax in the Member State for a given period of time or if it can justify a genuine economic presence in the listed country.
Note that the Commission also recommends sanctions if companies provide false or inaccurate information to benefit from these exceptions.
Finally, Member States will also have to inform the Commission of the measures they will implement to comply with the recommendation.
The link to the text of the recommendation is here.
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