Pursuant to Article 349 of the Treaty on the Functioning of the European Union (TFEU), the Council, taking into account the structural social and economic situation of the outermost regions, which is compounded by their remoteness, insularity, small size, difficult topography and climate, and economic dependence on a few products, adopts specific measures aimed, in particular, at laying down the conditions of application of the Treaties to those regions, including common policies.

Specific measures should therefore be adopted in order to establish the conditions for applying the TFEU to those regions. Such measures are to take account of the special characteristics and constraints of those regions, without undermining the integrity and coherence of the Union legal order, including the internal market and common policies.

The most significant handicap identified in the Canary Islands is the high dependence of their economy on the services sector, in particular tourism, together with the small share of industry in the Canary Islands' GDP.

Second to that is the isolation inherent in an archipelago which hinders the free movement of persons, goods and services. Dependence on certain modes of transport, air transport and maritime transport is increased, since those are modes of transport which have not yet been fully liberalised. Furthermore, production costs are greater because those modes of transport are less efficient and are more expensive than road or rail.

As a further consequence of this isolation, higher production costs result from dependence in terms of raw materials and energy, from the obligation to build up stocks and from difficulties affecting the supply of production equipment.

The small size of the market and the low level of export activity, the geographical fragmentation of the archipelago, and the obligation to maintain diversified but small production lines in order to meet the requirements of a small market restrict the opportunities for economies of scale.

It is in many cases more difficult or more expensive to obtain specialised and maintenance services, and training for managers and technicians, or to subcontract or promote business expansion beyond the Canary Islands' market. The narrow range of distribution methods also results in overstocking.

As regards the environment, the disposal of industrial waste and the treatment of toxic waste give rise to higher environmental costs. Those costs are higher because there are no recycling plants, other than for certain products, and waste has to be transported to the mainland and toxic waste has to be treated outside the Canary Islands.

On the basis of the above and of the notification from the Spanish authorities to the Commission on 4 March 2013, the authorisation concerning the application of a tax to a list of products for which exemptions for local products may be allowed should be renewed.

Council Decision 2002/546/EC, adopted on the basis of Article 299 of the EC Treaty, initially authorised Spain, up to 31 December 2011, to apply exemptions from or reductions in the tax known as ‘Arbitrio sobre Importaciones y Entregas de Mercancías en las Islas Canarias’ (‘AIEM’) to certain products produced locally in the Canary Islands. The Annex to that Decision contains a list of products to which tax exemptions and reductions may be applied. The difference between the taxation of locally manufactured products and the taxation of other products may not exceed 5, 15 or 25 percentage points, depending on the product.

Council Decision No 895/2011/EU amended Decision 2002/546/EC, extending its period of application to 31 December 2013.

Council Decision No 1413/2013/EU further amended Decision 2002/546/EC, extending its period of application to 30 June 2014.

The AIEM tax serves the objectives of autonomous development of the Canary Islands' industrial production sectors and of diversifying the Canary Islands' economy.

The maximum exemptions which may be applied to the industrial products in question vary from 5 % to 15 %, depending on sector and product.

The maximum exemption applicable to finished tobacco products is nevertheless higher, as the tobacco sector is an exceptional case. The tobacco industry, which had greatly expanded in the Canary Islands, has been declining markedly for a number of years. The traditional handicaps of insularity described above are at the root of the decline in local tobacco production in the Canary Islands. There are grounds for keeping a substantial exemption for tobacco. Exemption from taxation is directly related to the objective of maintaining production in the Canary Islands.

The objectives of promoting the socioeconomic development of the Canary Islands are reflected at national level in the purpose of the tax and the allocation of the revenue it generates. The incorporation of the revenue from this tax in the resources of the Canary Islands' economic and tax system and its use for an economic and social development strategy involving the promotion of local activities is a legal obligation.

The exemptions from or reductions in the AIEM tax should apply for 6,5 years. It will, nevertheless, be necessary to evaluate the results of such exemptions or reductions. Therefore, the Spanish authorities should present to the Commission by 30 September 2017 at the latest a report on the application of the AIEM tax exemptions or reductions, in order to check the impact of the measures taken and their contribution to promoting or maintaining local economic activities, account being taken of the handicaps affecting the outermost regions. On this basis, the scope and the exemptions authorised under Union rules will be revised, if necessary.

The fiscal advantage granted by the AIEM needs to remain proportionate so as not to undermine the integrity and the coherence of the Union legal order, including safeguarding undistorted competition in the internal market and State aid policies.

This Decision is without prejudice to the possible application of Articles 107 and 108 TFEU,