May 10, 2021

The European Justice dismisses the tax regime of Barcelona, ​​Real Madrid, Osasuna and Athletic as illegal State aid

They were state aid. This is established by the ruling of the Court of Justice of the EU this Thursday, which dismisses the appeal of Fútbol Club Barcelona and, incidentally, annuls the ruling of the General Court, contrary to the decision of the European Commission that it described as State aid the tax regime of the four Spanish professional football clubs: Barcelona, ​​Real Madrid, Osasuna and Athletic de Bilbao.

A 1990 Spanish law obliged all Spanish professional sports clubs to become public limited companies, except those that had had positive financial results in the years prior to the approval of the law. The Fútbol Club Barcelona and three other professional football clubs that could benefit from this exception –Osasuna, Athletic Club de Bilbao and Real Madrid– chose to continue operating under the legal form of a non-profit entity.

Thanks to this, they enjoyed a specific type of tax on their income. As this type of specific tax was lower, until 2016, than that applicable to sports public limited companies, the European Commission considered on July 4, 2016, that this legislation, by introducing a tax advantage in terms of corporation tax in favor of the four clubs mentioned, constituted an illegal aid scheme and incompatible with the European norm.

And it ordered Spain to put an end to it and recover the individual aid granted to the beneficiaries of said scheme.

Following an appeal filed by Barcelona, ​​the General Court annulled the decision of the European Commission with a judgment of February 2019, considering that the European Commission had not sufficiently proven the existence of an economic advantage granted to the beneficiaries of the measure.

In particular, the General Court found that the European Commission had not sufficiently examined whether the advantage resulting from this type of reduced tax could be offset by the less favorable type of deduction for reinvestment of windfall profits applied to football clubs professional that functioned with the legal form of non-profit entities compared to that applicable to those that functioned as sports limited companies.

In its judgment this Thursday, the Court of Justice has upheld the claims of the appeal filed by the European Commission and has annulled the contested judgment.

In support of its appeal, the European Commission argued that the concept of “advantage that may constitute State aid”, and, on the other hand, the obligations incumbent upon it in the framework of the examination of the existence of aid , in particular with regard to the existence of an advantage. In this context, the Court of Justice specifies the evidentiary requirements that correspond to the European Commission in the analysis leading to determining whether a tax scheme grants aid to its beneficiaries and, therefore, whether this scheme can constitute “State aid “for the purposes of the article of the Treaty on the Functioning of the EU.

The Court of Justice declares, first of all, that the General Court erred in law in considering that the contested decision should be analyzed as a decision referring both to an aid scheme and to individual aid inasmuch as the European Commission also referred to it. it had pronounced in it on the aid individually granted to the four named beneficiary clubs.

The Court observes that the contested measure concerns an aid scheme, given that the specific tax provisions applicable to non-profit organizations, in particular the reduced tax rate, may benefit, by virtue of this measure alone, to each of the football clubs that can benefit from it, defined in a generic and abstract way, for an indefinite period and an unlimited amount, without the need for additional enforcement measures and without these provisions being linked to the realization of a project specific. Therefore, the mere fact that, in this case, individual aid was awarded to the clubs under the aid scheme at issue cannot have any bearing on the examination to be carried out by the European Commission for the purpose of determining the existence of a advantage. Thus, the General Court erred in considering that such a circumstance was relevant.

Furthermore, the Court of Justice of the EU declares that this error of law incurred by the General Court vitiates the conclusions it drew in relation to the scope of the obligations incumbent on the European Commission as regards the proof of the existence of an advantage.

On the other hand, the court based in Luxembourg considers that the examination of the existence of an advantage cannot depend on the financial situation of the beneficiaries of that scheme at the time, later, of the granting of individual aid under this scheme. . In particular, the impossibility of determining, at the time of the adoption of an aid scheme, the exact amount, per fiscal year, of the advantage actually conferred on each of its beneficiaries cannot preclude the Commission from declaring that this The regime allowed conferring, from that moment, an advantage to them and, correspondingly, it cannot exempt the Member State in question from fulfilling its essential obligation to notify such regime.

Thus, the CJEU maintains, it is only in the phase of the eventual recovery of individual aid granted under the aid scheme in question that the European Commission must verify the individual situation of each beneficiary, since such recovery requires that the exact amount of aid that they have effectively enjoyed in each fiscal year is determined.

Indeed, the Court rejects the pleas raised at first instance, respectively based on errors that the Commission allegedly made in its examination of the advantage conferred by the contested measure, in violation of the principles of protection of legitimate expectations and legal certainty, in the infringement of the European norm for not having considered the European Commission that the controversial measure was justified by the internal logic of the tax system in question, and in the infringement of the norms applicable to the recovery of a existing help. Consequently, the Court of Justice dismisses the appeal filed by FC Barcelona.


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