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    Commission Implementing Regulation (EU) 2020/870 of 24 June 2020 imposing a defin... (32020R0870)
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    EU - Rechtsakte: 11 External relations
    (287) Following provisional and final disclosures, the GOE and the exporting producer noted that the 2016 special tax rule for treating foreign exchange losses as a tax loss cannot constitute a subsidy as it does not confer a benefit and is not specific. First, as this tax rule was taken to offset a loss caused by the government, no benefit is conferred. Second, as all entities similarly affected by the loss caused by the government could have recourse to this tax treatment, this scheme cannot be considered to be specific.
    (288) The Commission acknowledged in its provisional findings that this legislation was generally applicable to all companies in Egypt and was meant to offset the negative effects of the devaluation of the Egyptian currency. However, the Commission also stated that companies that are mainly export oriented and operate their business almost entirely in foreign currencies such as USD or EUR benefited disproportionately from this legislation. Indeed, these companies did not incur any significant actual losses as a consequence of the devaluation of the EGP, since the exchange rate losses suffered on their purchases/liabilities in USD could be offset by the exchange rate gains on their sales in USD. As a result, instead of offsetting a loss caused by the government, the legislation actually created a tax benefit, which specifically applied to this type of companies. Therefore, the Commission rejected the claim.
    (289) Accordingly, the recitals 93 to 102 of the provisional Regulation are hereby confirmed.

    3.5.2.   

    Revenue foregone through Indirect Tax and Import Tariff Programmes

    3.5.2.1.   

    Value Added Tax (‘VAT’) exemptions and import tariff rebates for the use of imported equipment

    (a)   Findings of the investigation

    (290) Following provisional disclosure, the GOE and the exporting producer raised various issues. First, it is not because Jushi Egypt did not always receive full timely VAT reimbursements from the GOE in the past (when they were not within the Suez Canal Economic Zone) that there is now a revenue forgone with respect to the tax treatment that applies to them under the Suez Canal Economic Zone.
    (291) Second, the Commission compared the challenged tax treatment with a hypothetical tax treatment extrapolated from Jushi Egypt’s situation before it entered the Suez Canal Economic Zone, instead of comparing the challenged tax treatment with Egypt’s VAT rules on the importation of equipment and raw materials.
    (292) Third, the Commission did not raise any question to, or discuss with, the GOE regarding the administration of VAT in Egypt during the verification visit.
    (293) Fourth, the GOE recalled that Article 27 of the SCM Agreement calls for a special and differential treatment of developing country Members of the WTO. The fact that the GOE did not always have the resources to pay back the due amount of VAT credit in time should thus not be punished by the Commission.
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