An investigation under EU state aid rules has commenced to establish whether the municipal tax exemption granted by Italy to real estate used by certain non-commercial entities constitutes illegal state aid. At this stage, the Commission considers that the real estate in question could also be used for commercial activities and that these tax exemptions could therefore distort competition. The Commission will also investigate Article 149 (4) of the Italian Unified Law on Income Tax, which provides a favourable tax treatment for ecclesiastic institutions and amateur sports clubs.

The Commission started its investigation following a number of complaints alleging that Italy had granted illegal state subsidies to non-commercial entities that also perform commercial activities. The subsidies would come in the form of an exemption from the municipal tax on real estate used for activities such as social assistance, welfare, health, cultural, educational, recreational, accommodation, sport, religious and cult activities.

The complainants have also alleged that a 50% corporate tax reduction granted to certain entities was in breach of EU state aid rules. Given that the special tax treatment for such entities existed before the entry into force of the EU Treaty, the Commission will deal with it separately, in the context of the specific procedure for existing aid measures. Aid considered existing prior to the creation of the EU, or the accession of the country concerned to the EU, cannot give rise to recovery even if ruled illegal. But in this case, the law would need to be changed.

Full details of this press release are available at http://europa.eu/rapid/pressReleasesAction.do?reference=IP/10/1319&format=HTML&aged=0&language=en&guiLanguage=en