On Wednesday 21 December, the Court of Justice of the European Union overturned two judgements of the General Court of the EU, on the grounds that it had incorrectly interpreted European State aid rules in the framework of two cases regarding a Spanish taxation scheme (cases C-20/15 and C-21/15).
Following questions brought by three Spanish companies (World Duty Free Group, Banco Santander and Santusa Holding), the General Court in November 2014 overturned two decisions of the European Commission from 2009 and 2011 judging certain provisions of Spanish tax law to be illegal State aid. Since 2002, Spanish law has allowed resident companies holding at least 5% in companies established and active abroad for at least one year to deduct the resulting added value of this stake for taxation purposes. This measure is not available for stakeholdings in companies established in Spain. The General Court found that the Commission had failed to demonstrate the selective nature of the measure, as it had not identified a category of businesses favoured by the contested scheme.
The Court has overturned this interpretation, cancelled the two judgements of the General Court and is sending the cases back to it. It takes the view that the General Court committed an error of law in failing to verify that the Commission had established the discriminatory nature of the measure in question. It finds that the only relevant parameter to establish the selective nature of a national tax regime consists of establishing whether it favours certain companies over others in a similar factual and legal situation, without necessarily identifying a specific category of companies.
On Wednesday, the Commission described this judgement as important, because it confirms that a measure may be selective if it departs from a general tax regime and applies differentiated treatment to companies in comparable situations, unless a differentiation is justified by the nature of the tax regime. It goes on to stress that this is the case even though the measure was theoretically open to all companies and the fact that the criteria to be met by the companies were not strict and that the benefits were open to a large number of companies does not diminish the selective nature of the measure, simply the degree of selectivity.
Stressing that its decisions of 2009 and 2011 had been reinstated, the Commission states that it will work with the Spanish authorities to allow them to recover the State aid granted. Furthermore, Spain must apply another decision from 2014, which found that the new interpretation of the Spanish authorities extended the measure. This decision was frozen pending today's judgement. (Original version in French by Mathieu Bion)