BRATISLAVA, December 22, (WEBNOVINY) — The legal dispute over controversial write-off of tax-arrears of the spirits producer Frucona Kosice, a.s. by the Kosice tax office, which goes back to 2004, has come to its end. The Slovak Republic has lost the lawsuit filed by the European Commission, which sued the country on unlawful provision of state aid to the company. The Court of Justice of the European Union said that the Slovak Republic failed to submit sufficient evidence that it took all steps in its power to recover from the beneficiary the unlawfully granted assistance by the set deadline. Slovakia therefore has to cover all costs related to the court proceedings.
The court said in its verdict that measures adopted by the respective Slovak authorities did not lead to prompt and effective recovery of the unlawful assistance, as Slovakia failed to recover the aid even 29 months after the announcement of the EC decision in the matter. The court also thinks that the Slovak Republic did not sufficiently explain why it failed to apply also further process tools in accordance with its national law, the thorough application of which would enable to claim back the unlawful assistance.
State aid was granted to Frucona in the form of a waiver of a part of a tax debt confirmed by the court in the context of an arrangement procedure. The Slovak Republic applied to recover the unlawfully granted aid in legal proceedings. Slovak courts of various instances however several times confirmed the legality of the Kosice tax office’s decision to forgive Frucona’s tax debt of more than SKK 416 million. In June 2006, however, the European Commission entered the dispute. It decided that the write-off of tax debt of Frucona Kosice, representing SKK 416.5 million, constituted illegal state aid and was incompatible with the Single Market. The Commission has decided that Slovakia must recover the unlawful aid from Frucona with interest.
Frucona generated tax arrears amounting to SKK 641 million in 2004, mainly consisting of unpaid excise and value-added taxes. Frucona asked its creditors for an arrangement under applicable insolvency legislation. The tax office approved a 65 percent write-off of the debt in July 2004, two months after Slovakia jointed the European Union.
SITA
