Spain: Spanish tax lease system does not constitute state aid

International Tax Review is part of Legal Benchmarking Limited, 4 Bouverie Street, London, EC4Y 8AX

Copyright © Legal Benchmarking Limited and its affiliated companies 2024

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Spain: Spanish tax lease system does not constitute state aid

Calvo-Rafael
Pastoriza-Salvador

Rafael Calvo

Juan Salvador Pastoriza

On December 17, the European General Court (EGC – a constituent court of the ECJ) handed down a judgment on joined cases T-515/13, Spain / Commission, and T-719/13, Lico Leasing, SA and Pequeños y Medianos Astilleros Sociedad de Reconversión, SA / Commission. That judgment overturned the Commission's decision on a proceeding finding that the Spanish tax lease system (STLS) constituted illegal state aid, because the EGC considered that the measures composing that system do not constitute a selective advantage.

The judgment, which is based on some of the most recent and important ECJ judgments on matters of state aid (judgments of November 7 2014, on cases T-219/10, Autogrill España / Commission and T-399/11, Banco Santander y Santusa / Commission), begins by analysing whether the conditions of aid are met in relation to the beneficiaries of the system – according to the decision – that is, the investors, and in particular focuses on the analysis of selectivity.

According to the European Commission, the system was selective with respect to investors because, firstly, it only applied to a certain type of investment (in vessels); and, secondly, it only applied to projects that could be selected discretionally by the authorities. Additionally, it only applied to a specific activity: the bareboat charter carried out by economic interest groupings (EIGs). The judgment analysed and rejected each of these arguments, according to the following reasoning:

  • On the supposed selectivity because the STLS only applies to investments in vesselsThe EGC applies the Autogrill / Santander case law directly to explain that, as any company of any sector and size can invest in vessels, the STLS cannot be deemed selective (section 143). The judgment underlines that, at least with respect to the investors (the supposed beneficiaries of the aid), the system was, undoubtedly, a general measure (paragraph 148).

  • On the supposed selectivity because the STLS only applies to projects that could be selected discretionally by the tax authoritiesThe EGC rules that the supposed discretion of the tax authorities in authorisation of the projects referred only to the characteristics of the assets (vessels), not to the characteristics of the investors. Moreover, it holds that any company of any sector and size could participate as an investor in the STLS (paragraph 160). In this regard, it observes that, in fact, the identity of the investors could be changed after the authorisation of the project without needing to request permission from the authorities (paragraph 162).

  • On the supposed selectivity because the STLS only applies to the bareboat charter by EIGs.The EGC affirms that this argument would require sustaining that EIGs and their investors performed that activity jointly, but the decision stated something else and, indeed, it sustained that the investors did not perform any shipping activity (paragraph 175). In view of these contradictions, the EGC identifies at least one absolute lack of reasoning that led it to also reject this ground.

In short, in view of the foregoing, the judgment concludes that the Commission has not under any circumstances established that the STLS is selective in relation to the investors (paragraph 180). As the element of selectivity has not been found, there can be no discussion of state aid.

Moreover, considering that there is no element of selectivity (necessary to identify aid), the judgment rules that the Commission has also not proven that the STLS affects exchanges and competition within the EU. In this regard, if the investors act in all sectors of the economy, the Commission should have explained with a minimum of reasoning how distortion of competition could have been generated in that variety of sectors, and it has not done so.

Effects on recovery procedures at national level

The overturning of the decision entails the unenforceability of that decision and of any acts issued in the execution thereof. Thus, as a result of the EGC judgment, operators are not obliged to reimburse any amount.

In all likelihood, the Commission will file an appeal for cassation before the ECJ (it has two months to do so), which would have the final say. In the meantime, the recovery procedures at national level should, in the very least, be suspended until a decision is handed down on the potential cassation appeal.

Rafael Calvo (rafael.calvo@garrigues.com) and Juan Salvador Pastoriza (salvador.pastoriza@garrigues.com), Madrid

Garrigues

Website: www.garrigues.com

more across site & bottom lb ros

More from across our site

Luxembourg saw the highest increase in tax-to-GDP ratio out of OECD countries in 2023, according to the organisation’s new Revenue Statistics report
Ryan’s VAT practice leader for Europe tells ITR about promoting kindness, playing the violincello and why tax being boring is a ‘ridiculous’ idea
Technology is on the way to relieve tax advisers tired by onerous pillar two preparations, says Russell Gammon of Tax Systems
A high number of granted APAs demonstrates the Italian tax authorities' commitment to resolving TP issues proactively, experts say
Malta risks ceding tax revenues to jurisdictions that adopt the global minimum tax sooner, the IMF said
The UK and what has been dubbed its ‘second empire’ have been found to be responsible for 26% of all countries’ tax losses by the Tax Justice Network
Ireland offers more than just its competitive corporate tax environment but a reduction in the US rate under a Trump administration could affect the country, experts tell ITR
The ‘big four’ firm was originally prohibited from tendering for government work until December 1 due to its tax leaks scandal, but ongoing investigations into the matter have seen the date extended
Approximately 74% of MAP cases in 2023 reached a full resolution, but new transfer pricing MAP cases fell by 16%
Brazil is looking to impose the OECD’s 15% global minimum tax on multinationals; in other news, PwC is set to pull out of Fiji
Gift this article