(1)

Council Decision No 376/2014/EU (2) authorised Portugal to apply a reduced rate of excise duty in the autonomous region of Madeira on locally produced and consumed rum and liqueurs and in the autonomous region of the Azores on locally produced and consumed liqueurs and eaux-de-vie which may be lower than the minimum rate of excise duty set by Council Directive 92/84/EEC (3), but not more than 75 % lower than the standard national excise duty on alcohol.

(2)

In February 2019, the Portuguese authorities asked the Commission to submit a proposal for a Council Decision extending the time limit of the authorisation set out in Decision No 376/2014/EU, under the same conditions, as well as extending the geographical scope to mainland Portugal with a more limited reduction, for another seven-year period, from 1 January 2021 until 31 December 2027.

(3)

The producers in the autonomous regions of Madeira and of the Azores face difficulties in accessing markets outside those regions, and the regional and local markets are the only possible outlets to sell certain alcoholic products. Those producers face additional costs because the raw materials of agricultural origin are more expensive than under normal conditions of production, due to the small size, fragmented nature and low mechanisation of agricultural holdings. In addition, output from processing of sugarcane is lower than in other outermost regions, due to the topography, climate, soil and artisanal production. Moreover, the transport to the islands of certain raw and packaging materials which are not produced locally leads to additional costs.

(4)

In the case of the Azores, the insularity is twofold since it is a group of islands which are widely spread. Transport in those remote and insular regions further increases the additional costs. The same applies to certain necessary travels and shipments to the mainland. Additional costs are also required for the storage of finished products as local consumption does not absorb all output, especially in the case of rum production. The small size of the regional market increases per unit costs, notably through the unfavourable relationship between fixed costs and output. Finally, the producers concerned also bear extra costs generally borne by the local economies, in particular increased labour and energy costs.

(5)

Rum production has increased as a result of increased sugarcane production. While some rum is aged or used as a base for liqueurs, the unsold quantities of rum are stored at a cost which further adds to the additional costs for producers. As a result of the additional costs, producers in the autonomous regions of Madeira and of the Azores are unable to compete with producers from outside those regions due to a higher price of the final product and therefore they cannot access other markets. Access to the market in mainland Portugal with reduced rates of excise duty would address this issue.

(6)

In order to avoid severely restraining development of the autonomous regions of Madeira and of the Azores and to retain the alcohol industry and the jobs it provides in those regions, it is necessary to renew and widen the scope of the authorisation set out in Decision No 376/2014/EU.

(7)

Decision No 376/2014/EU applies until 31 December 2020. For reasons of clarity, it is necessary to adopt a new Decision authorising Portugal to apply a reduced rate of excise duty in the autonomous regions of Madeira and of the Azores.

(8)

Since the tax advantage does not go beyond what is necessary to offset additional costs, and since the volumes at stake remain modest and the tax advantage is limited to consumption in the autonomous regions of Madeira and of the Azores and mainland Portugal, the measure does not undermine the integrity and coherence of the Union legal order.

(9)

In order to allow the Commission to assess whether the conditions justifying the authorisation continue to be fulfilled, Portugal should submit a monitoring report to the Commission by 30 September 2025.

(10)

This Decision is without prejudice to the possible application of Articles 107 and 108 of the Treaty on the Functioning of the European Union (TFEU),