6 Feb 2023

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Spanish tax lease : The Court delivers its judgment

On 2 February 2023, the Court delivered its judgment in joined cases C‑649/20 P, C‑658/20 P and C‑662/20 P in relation with the Spanish tax lease system, a tax regime applicable to certain finance lease agreements for the purchase of ships.

Following several complaints in 2006 about the Spanish tax lease system, the Commission considered that the regime granted tax advantages to economic interest groupings (“EIGs”) and the investors who took part in them. The Spanish tax lease system would allow shipping companies to benefit from a price reduction for the purchase of ships built by Spanish shipyards, to the detriment of sales from such yards in other EU Member States.

In a Decision adopted in 2013, the Commission found three of the five tax measures that constituted the Spanish tax lease system to constitute state aid in the form of a selective tax advantage partially incompatible with the internal market and ordered their recovery.

The General Court annulled the Decision in 2015, but this judgment was set aside by the Court of Justice in 2018, which referred the cases back to the General Court. The General Court then dismissed the actions, notably on the basis that the existence of a broad discretionary power of the Tax Administration to authorise early amortisation was enough to consider that the measure, taken as a whole, was selective.

The Court of Justice has ruled on the assessment of the selectivity condition and considered that the granting of the tax measure in question depended on the discretionary powers of the authorities and that it should therefore not be analysed on the basis of the three-step test.

The Court also recalled that the existence of a system of authorisation does not imply in itself that the measure considered is selective. It must be analysed whether the authority has a wide discretion enabling it to determine the beneficiaries and the conditions to receive the aid so as to favour the undertakings or productions benefiting from that measure in comparison with others which do not benefit from it but are in a comparable situation in the light of the objective pursued. According to the Court, the General Court did not err in law by considering, in its conclusion on the measure consisting in early depreciation, that the existence of discretionary factors was such as to favour the beneficiaries over other taxpayers in a comparable situation.

Finally, the Court ruled on the objective pursued by the obligation to recover aid considered incompatible by the Commission and stated that the Commission had erred in law in designating the investors as the sole beneficiaries of the aid. It found that the shipping companies had also benefited from the scheme. The fact that the transfer of the tax advantage between the EIGs and the shipping companies had been done by way of contractual agreements without any state intervention was without effect as this way of proceeding was required under the applicable rules.

Consequently, the Court partly annulled the decision at issue.

For further information: Court’s press release