Under the Treaties, the European Union is required to respect the status of churches in the member states and not to prejudge that status, but certain tax exemptions granted to religious communities could fall under the State aid ban controlled by the European Commission.
Advocate General Juliane Kokott came to this conclusion, which she presented to the Court of Justice of the EU on Thursday 16 February. This conclusion concerned a case (C-74/16) regarding a tax exemption granted to the Catholic Church in Spain for work carried out on a school building. Before Spain joined the European Economic Community, it had concluded an agreement with the Vatican providing for various tax exemptions for the Catholic Church.
Recently, on the strength of this agreement, the Catholic Church as the entity responsible for a church school near Madrid claimed a tax exemption on work carried out on school building. The premises in question are used mainly for compulsory education equivalent to that provided in state schools and the majority of which is covered by public funding. However, the premises are also used for non-compulsory education, for which registration fees are charged.
The Advocate General took the view that this tax exemption constitutes illegal state aid, even if it is the result of an agreement under public international law, if the building in question is used for purely commercial purposes. Is that the case here? It is up to the national jurisdiction to check. However, this could well be the case, as the non-compulsory education appears to have a commercial nature, such that it is indeed an economic activity subject to the principle of the state aid prohibition. Kokott argues that one could assume that the activity in question is not commercial in nature only if this education represents less than 10% of the whole of the activity. (Original version in French by Jan Kordys)