G/SCM/N/123/EEC/Add.8
Page 1

World Trade
Organization
G/SCM/N/123/EEC/Add.8
26 August 2005
(05-3593)
Committee on Subsidies
and Countervailing Measures / Original: French

SUBSIDIES

New and Full and Updating Notifications Pursuant to Article XVI.1 of the

GATT 1994 and Article 25 of the SCM Agreement

EUROPEAN COMMUNITIES

Addendum

The following addendum to the notification of the European Community relates to the subsidy programmes of France.

______

FRANCE

Table of contents

Page

1.SME SCHEMES......

1.1Regional Premium for the Creation of Enterprises (PRCE)......

1.2Regional Employment Premium (PRE)......

1.3Regional Advisory Assistance Fund (FRAC)......

1.4SME-SMI Development Fund......

2.REGIONAL SCHEMES......

2.1Metropolitan France......

2.1.1Tax reduction for new enterprises......

2.1.2Enterprise zones......

2.1.3Land-Use Management Premium (PAT)......

2.1.4Mining reconversion programme (SOFIREM - FINORPA)......

2.1.5Industrial Development Company (SODIE)......

2.2Corsica......

2.2.1Exemption, subject to approval, from corporation tax on profits resulting from new activities created in Corsica

2.2.2Tax exemption for profits realized by enterprises set up in Corsica in the crafts, industrial, hotel, construction and public works sectors

2.2.3Profits tax exemption for industrial, commercial, crafts and agricultural enterprises operating in Corsica on 1 January 1997 or which establish operations there between
this date and 31 December 2001 (Zone franche Corse)......

2.2.4Tax credit for certain investments made and exploited in Corsica......

2.3French Overseas Departments (FODs)......

2.3.1Long-term tax treatment in French Overseas Departments......

2.3.2VAT deduction for certain exempted products......

2.3.3Deduction of investments in French Overseas Departments and Territories......

2.3.4Temporary exemption, subject to approval, from corporation tax for the creation of activities in French Overseas Departments

2.3.5Reduced taxation of profits from operations in French Overseas Departments......

2.3.6Premium for job creation in French Overseas Departments......

2.4Urban Areas in Difficulty......

2.4.1Measures on behalf of Urban Free Zones (ZFU)......

Page

3.R&D schemes......

3.1Tax Credit to Promote Research......

3.2Research and Technology Fund (FRT)......

3.3Industrial Innovation Fund (FII) (Currently the fund for enterprise competitiveness)...

3.4National Agency for the Promotion of Research (ANVAR)......

3.5Atout-puma......

3.6Aid to Research Institutions in the Civil Aviation Sector......

3.7Civil Aviation Research......

3.8Young Innovative Enterprises (JEI )......

4.Sectoral Regimes......

4.1Tonnage-based tax scheme......

1 EURO = 6.55957 FRF (FRENCH FRANCS)

1.SME SCHEMES

1.1Regional Premium for the Creation of Enterprises (PRCE)

  1. Period covered by the notification:

2003 and 2004.

  1. Policy objective of aid scheme:

Job creation and economic development.

  1. Legal basis:

Article L.1511-2 of the General Code on Local Authorities.

  1. Form of the aid:

Business grant with a ceiling of €25,000, but which may be increased to €35,000 in priority areas defined by decision of the Regional Council.

  1. Beneficiaries of the aid and allocation mechanism:

-Beneficiaries: Enterprises created less than 12 months prior to submission of the application.

-Allocation mechanism: The premium is paid directly to the enterprises by the local authorities and in particular the regions, which are responsible for the implementation of this scheme.

-Conditions: Enterprises must undertake to create a minimum number of permanent jobs by recruiting persons linked to the enterprise by open-ended employment contracts.

  1. Subsidy per unit or, where this is not possible, total amount or annual amount budgeted for the subsidy (indicating, if possible, the average subsidy per unit in the previous year):

-Total amount for 2002: €33 million;

-2003 and 2004: not available.

  1. Duration of the subsidy and/or any other time-limits attached to it:

Provision applicable until 2008.

  1. Statistical data permitting an assessment of the trade effects of the subsidy:

No precise data can be provided. However, since the total amount of aid granted annually and the maximum amount of aid that can be granted to each enterprise are low, the scheme has no significant impact on trade.

1.2Regional Employment Premium (PRE)

  1. Period covered by the notification:

2003 and 2004.

  1. Policy objective of aid scheme:

Job creation and economic development.

  1. Legal basis:

Article L.1511-2 of the General Code on Local Authorities.

  1. Form of the aid:

Business grant with a ceiling of €11,000 per job over three years, up to a total annual amount of €160,000 per enterprise.

  1. Beneficiaries of the aid and allocation mechanism:

-Beneficiaries: Small- and medium-sized enterprises, with the exception of those operating in the following sectors: the coal industry, transport, iron and steel industry, shipbuilding, synthetic fibres, automotive industry and financial services.

-Allocation mechanism: The premium is paid directly to the enterprises by the local authorities and in particular the regions, which are responsible for the implementation of this scheme.

-Conditions: As a general rule (job creation as the result of the recruitment of a person linked to the enterprise by an open-ended employment contract), the aid amounts to a maximum of 20 per cent of gross earnings, subject to the payment of social security contributions for the new employee for three years.

The enterprise must create one or more jobs, unrelated to any new investment, and not have dismissed or made redundant any staff in the twelve months prior to submitting the application.

  1. Subsidy per unit or, where this is not possible, total amount or annual amount budgeted for the subsidy (indicating, if possible, the average subsidy per unit in the previous year):

-Total amount for 2002: €43 million;

-2003 and 2004: not available.

  1. Duration of the subsidy and/or any other time-limits attached to it:

10 years from 2000.

  1. Statistical data permitting an assessment of the trade effects of the subsidy:

No precise data can be provided. However, since the total amount of aid granted annually and the maximum amount of aid that can be granted to each enterprise are low, the scheme has no significant impact on trade.

1.3Regional Advisory Assistance Fund (FRAC)

  1. Period covered by the notification:

2003 and 2004.

  1. General policy objective and/or purpose of the subsidy (or aid scheme):

To foster the development of SMIs by encouraging them to call on outside consultants, and to internationalize certain advisory functions yet to be created (recruitment of professional staff).

  1. Legal basis (reference, date):

Authorization by the Commission on 5 January 2000. Ministerial Circular of 3 August 1989 on arrangements for the use of decentralized loans for the environment and enterprise competitiveness.

  1. Form of the subsidy (i.e., grant, loan, tax concession, etc.):

Direct subsidization of the enterprise as regards:

-Recourse to consultants by enterprises with inadequate internal operational services (FRAC);

-recourse to technical advice provided by public or private laboratories, research centres, etc.: Regional Technology Transfer Assistance Fund (FRATT);

-internal advisory service involving the creation of new professional posts within the enterprise: Professional Staff Recruitment Assistance (ARC).

  1. Beneficiaries of the aid and allocation mechanism (calculation method and conditions):

Beneficiaries (who receives the subsidy, the producer, the exporter, other): SMEs from all sectors, in accordance with specific support criteria.

  1. Subsidy per unit or, where this is not possible, total amount or annual amount budgeted for the subsidy (indicating, if possible, the average subsidy per unit in the previous year):

-Total amount for 2003: €33 million;

-Total amount for 2004: €26.9 million.

Maximum level of aid:

TYPE OF COUNSELLING / LEVEL
FRAC (short) / €3,800, up to a maximum of 80 per cent of consultancy fees. / With the exception of the ECSC, shipbuilding, synthetic fibre, automobile manufacturing, fisheries and agricultural sectors.
FRAC / €30,500, up to a maximum of 50per cent of the cost of the advisory service provided or the salary, including social security contributions, of the newly appointed employee.
  1. Duration of the subsidy and/or any other time-limits attached to it:

Permanent arrangement funded on a yearly basis under the Finance Law.

  1. Statistical data permitting an assessment of the trade effects of the subsidy:

Given that the purpose of the programme is to improve enterprise management, it has no impact on production costs and consequently does not affect trade.

1.4SME-SMI Development Fund

  1. Period covered by the notification:

2003 and 2004.

  1. General policy objective and/or purpose of the subsidy (or aid scheme):

Assistance to SMEs engaging in technological and innovatory material investments, intangible investments, installation and organizational work and studies relating to such material investments.

  1. Legal basis (reference, date):

Circular of 31 August 2000;

Programme contracts between the State and the regions;

Notification by the French authorities on 1 March 2000;

Authorization by the Commission on 5 July 2000.

  1. Form of the subsidy (i.e., grant, loan, tax concession, etc.):

Subsidy.

  1. Beneficiaries of the aid and allocation mechanism (calculation method and conditions):

Beneficiaries (who receives the subsidy, the producer, the exporter, other):

-Financially sound enterprises that come within the EU definition of SMEs, i.e.,enterprises:

-employing no more than 250 persons;

-no more than 25 per cent of the equity or voting rights of which are held by one or more enterprises which fail to meet the above criteria. Shares held by public holding companies, companies with venture capital and, provided they do not exercise any control, institutional investors are not taken into consideration.

Conditions: The maximum rate of contribution is as follows:

Type of area / Small enterprise / Medium-sized enterprise
Unassisted area / 15 per cent gross / 7.5 per cent gross
Assisted area / PAT, 11.5 per cent gross / 21.5 per cent gross
Assisted area / PAT, 17 per cent / 27 per cent gross
Assisted area / PAT area, 23 per cent gross / 33 per cent gross, up to a ceiling of30 per cent net
Assisted area / FOD, 65 per cent net / 75 per cent net
  1. Subsidy per unit or, where this is not possible, total amount or annual amount budgeted for the subsidy (indicating, if possible, the average subsidy per unit in the previous year):

-Total amount for 2003: €107 million;

-Total amount for 2004: €73 million.

  1. Duration of the subsidy and/or any other time-limits attached to it:

The scheme is valid until 2006.

  1. Statistical data permitting an assessment of the trade effects of the subsidy:

The aid is intended to compensate for structural disadvantages associated with the size of small enterprises. It has no effect on trade.

2.REGIONAL SCHEMES

2.1Metropolitan France

2.1.1Tax reduction for new enterprises

  1. Title of the aid scheme:

Profits tax exemption for new enterprises set up in areas eligible for land-use management premiums for industrial projects, priority rural development areas, rural revitalization areas and urban redevelopment areas.

  1. Period covered by the notification:

2003 and 2004

  1. General policy objective and/or purpose of the subsidy (or aid scheme):

To promote the creation of new enterprises in areas with geographical, economic or social disadvantages.

  1. Legal basis (reference, date):

Article 44 sexies of the General Taxation Code, deriving from Article 14A of Law No.881149 of 23 December 1988 and last amended by Article 92-I of Law No. 99-1172 of 30December 1999 and then by Article 92 of Law No. 2003-1311 of 30 December 2003.

  1. Form of the subsidy (i.e., grant, loan, tax concession, etc.):

Tax concession. Exemption from profits tax for two years, followed by a reduction for profits earned over the next three years (75 per cent, then 50 per cent, then 25 per cent). However, enterprises which set up in rural revitalization areasbetween 1 January 2004 and 31 December 2009 are eligible for exemption from profits tax for five years, followed by a reduction for profits earned over the next nine years (60 per cent, then 40 per cent, then 20 per cent).

This tax benefit may on no account exceed €225,000 over a 36-month period.

  1. Beneficiaries of the aid and allocation mechanism (calculation method and conditions):

-Beneficiaries (who receives the subsidy, the producer, the exporter, other): New enterprises in the legal and economic sense (excluding the resumption or extension of pre-existing activities), at least 50 per cent of the share capital of which is held by natural persons, and which are set up in specified areas.

-Allocation mechanism: By operation of law.

-Conditions: Genuinely new enterprises set up in eligible areas and the headquarters and all activities and operating resources of which are established in that area. However, in the case of enterprises exercising a nonsedentary activity, conditions of establishment are considered to have been met if turnover generated outside eligible areas does not exceed 15 per cent (above this threshold, profits are taxed but on the basis of turnover generated outside such areas).

  1. Subsidy per unit or, where this is not possible, total amount or annual amount budgeted for the subsidy (indicating, if possible, the average subsidy per unit in the previous year):

-Total amount for 2003: €175 million (estimate for 2004: €170 million).

  1. Duration of the subsidy and/or any other time-limits attached to it:

Five years (or fourteen years for enterprises created between 1 January 2004 and 31December 2009 in rural revitalization areas), the scheme being applicable to enterprises set up until 31 December 2009.

  1. Statistical data permitting an assessment of the trade effects of the subsidy:

Not available.

2.1.2Enterprise zones

  1. Period covered by the notification:

2003 and 2004

  1. General policy objective and/or purpose of the subsidy (or aid scheme):

Revival of areas seriously affected by the loss of jobs in industry.

  1. Legal basis (reference, date):

Article 208 quinquies of the General Taxation Code, deriving from Article 22 of Ordinance No. 86-1113 of 15 October 1986.

  1. Form of the subsidy (i.e., grant, loan, tax concession, etc.):

Tax concession in the form of a ten-year exemption from corporation tax.

  1. Beneficiaries of the aid and allocation mechanism (calculation method and conditions):

-Beneficiaries (who receives the subsidy, the producer, the exporter, other): Legal entities subject to corporation tax that are created in order to operate an industrial or commercial enterprise in one of the eligible zones.

-Allocation mechanism: By operation of law.

-Conditions: The headquarters, activities and operating resources of the legal entity must be located in one of the eligible zones.

  1. Subsidy per unit or, where this is not possible, total amount or annual amount budgeted for the subsidy (indicating, if possible, the average subsidy per unit in the previous year):

-Total amount for 2003: €40 million (estimate for 2004: negligible cost).

  1. Duration of the subsidy and/or any other time-limits attached to it:

10 years, but the zones have been closed since 1992.

  1. Statistical data permitting an assessment of the trade effects of the subsidy:

In respect of the financial year ending in 2002, 9 industrial and commercial enterprises, with a total of 1,039 employees, were benefiting from the scheme provided for under Article 208 quinquies of the General Taxation Code.

2.1.3Land-Use Management Premium (PAT)

  1. Period covered by the notification:

2003 and 2004

  1. General policy objective and/or purpose of the subsidy (or aid scheme):

Development of employment-generating activities in the regional aid zones.

  1. Legal basis(reference, date):

Decree No. 2001-312 of 11 April 2001.

  1. Form of the subsidy (i.e., grant, loan, tax concession, etc.):

Subsidy.

  1. Beneficiaries of the aid and allocation mechanism (calculation method and conditions):

-Beneficiaries: All enterprises which manufacture products directly related to the processing of a natural or semi-finished product, provide business services or undertake research and development programmes.

-Allocation mechanism: Decision by the Minister for the Civil Service, State Reform and Town and Country Planning.

-Conditions: The programmes in question must lead, over a period of three years, to the creation of more than 15 permanent-contract jobs. Industrial projects must be accompanied by investment of more than €2.3 million.

  1. Total annual amount:

- 2003: €69.40 million

- 2004: €53.12 million

  1. Duration of the subsidy and/or any other time-limits attached to it:

General scheme valid until 31 December 2006.

  1. Statistical data permitting an assessment of the trade effects of the subsidy:

2003 / 2004
Number of jobs assisted / 11,177 / 9, 251
Investments assisted / €2,320 million / €1,062 million

2.1.4Mining reconversion programme (SOFIREM - FINORPA)

  1. Period covered by the notification:

2003-2004.

  1. General policy objective and/or purpose of the subsidy (or aid scheme):

To assist the reconversion of areas affected by the restructuring of the mining industry.

  1. Legal basis (reference, date):

Commission Decision NN 2/89 of 15 June 1989 concerning the Charbonnages de France conversion companies.

  1. Form of the subsidy (i.e., grant, loan, tax concession, etc.):

Long-term soft loans without a security requirement. These loans may always be repaid before the due date and redeemed without penalty (maximum financing: 30 per cent of the investment).

Acquisition of minority holdings.

Provision of free advice and services to the beneficiaries (SMEs) of the above measures.

  1. Beneficiaries of the aid and allocation mechanism (calculation method and conditions):

-Beneficiaries (who receives the subsidy, the producer, the exporter, other): Enterprises in the coal-mining areas (as recognized by the Commission).

-Allocation mechanism: Two to three per cent below the normal rate with a variable period of repayment.

In zones covered by SOFIREM and FINORPA that are included in the zones qualifying for a land-use management premium (PAT), the aid component is incorporated into the total regional aid anticipated for a given project in order to ensure that the regional aid ceilings imposed under the PAT schemes are respected. In zones covered by SOFIREM and FINORPA that are not included in the zones qualifying for the PAT, only SMEs are eligible for the measures.

-Conditions: All enterprises in the coal-mining area may apply under the same conditions.

  1. Subsidy per unit or, where this is not possible, total amount or annual amount budgeted for the subsidy (indicating, if possible, the average subsidy per unit in the previous year):

No funding since 1996.

  1. Duration of the subsidy and/or any other time-limits attached to it:
  2. Statistical data permitting an assessment of the trade effects of the subsidy:

The aid is intended to compensate for the disadvantages associated with establishment in the areas in question (lack of qualified subcontracting personnel, distance from markets and suppliers, etc.). Consequently, it has no effect on trade.

2.1.5Industrial Development Company (SODIE)

  1. Period covered by the notification:

2003 – 2004.

  1. General policy objective and/or purpose of the subsidy (or aid scheme):

Reindustrialization and diversification in areas affected by industrial decline.