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The Court of Justice of the European Union (CJEU) has annulled the judgment of the EU General Court (EGC) on the Spanish tax lease system, which, in turn, annulled a European Commission (EC) decision that considered the Spanish tax lease to be a prohibited state aid.

The Spanish tax lease granted fiscal advantages for the construction of vessels in Spanish shipyards, allowing maritime transport companies to acquire ships in Spain at a discount of between 20% and 30%. This system was possible, thanks to the intermediation of an Economic Interest Grouping (EIG) and a leasing company, along with five fiscal measures applicable to financial leases. After receiving several complaints, the EC considered that three of the five tax measures under examination constituted prohibited state aid and, therefore, declared that the Spanish tax lease was partially incompatible with the common market and ordered the repayment of the aid.

This decision by the EC was annulled by the EGC. The EGC based its decision on two fundamental grounds: (i) it considered that only the investors benefited from the tax advantages and not the EIGs, because these are non-profit and fiscally transparent entities; and (ii) it understood that, as anyone could invest in the EIGs, the aid did not meet the selectivity requirement.

However, in its judgment, the CJEU annuls this decision and orders the EGC to reconsider the case. According to the decision, the EGC had erred in excluding EIGs from the status of beneficiaries solely based on their legal form and the tax rules on benefits. For the CJEU, given that the tax measures were applied to the EIGs and these were direct beneficiaries of the advantages derived from such measures, the EGC had disregarded the established case law that “state aid cannot depend on the legal status of the undertakings concerned.”

Also, and as a result, the EGC had incorrectly examined the “selectivity” requirement because it had done so only with respect to the investors and not the EIGs. Therefore, the EGC erred in finding that the advantages were not selective, as any investor could participate without distinction, without examining, in line with the judgment of December 21, 2016 (Cases C‑20/15 P and C‑21/15 P, Comission/World Duty Free Group) if the Commission “had established that the tax measures at issue, by their practical effects, introduced differentiated treatment of operators, despite the operators benefitting from the tax advantages and those which were excluded from it, were, in view of the objective pursued by that tax system, in a comparable factual and legal situation.

Thus, the CJEU referred the case back to the EGC, which must carry out a new analysis of the question of the selectivity of the aid from the point of view of EIGs and applying the latest CJEU case law.

The matter is significant given the other proceedings in progress and under appeal. Among others, the decision will have a relevant impact on the appeals before the EGC against EC decisions against Luxembourg, the Netherlands, Ireland and Belgium.

Access the case under reference C-128/16 P. Both the press release and the full text of the judgment are available here and here.

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Blog de Cuatrecasas, uno de los referentes en la abogacía de negocios en España y Portugal. Representamos a algunas de las principales empresas cotizadas de ambos países y asesoramos a nuestros clientes en operaciones estratégicas, así como a inversores extranjeros interesados en el mercado ibérico