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State aid in relations to taxes: Spanish experience and current context

The Tax and Competitiveness Foundation’s interest in international legislative developments in taxation and their effects on the economic competitiveness of Spain and the European Union is well known. It is hard to find a matter that fits more fully the study and research purpose voluntarily established by the Foundation’s trustees than State aid.

The relationship between tax legislation and State aid is doubtless complex, partly because the laws have different purposes. Tax law seeks to regulate the duty to contribute towards public expenditure, while the prohibition on the grant of State aid is intended to maintain optimal conditions of competition among businesses within the European Union, removing advantages or privileges (also of a tax nature, of course) that distort such competition among undertakings of different Member States.

For analysis purposes, the project is structured in five areas or approaches:

  • General matter, addressing whether the regime and the requirement for competition on equal terms target the Member States or the undertakings, as well as whether this mechanism is designed to foster harmonisation, though indirectly, specifically from a tax viewpoint.
  • Selectivity analysis, a substantial aspect the evolving interpretation of which is undertaken from the viewpoint of “Spanish experience” in connection with financial goodwill cases, the ship finance lease scheme and Basque tax holidays.
  • Evolution of the “post-BEPS” aid regime by reference to tax rulings, negative aid in relation to sectoral taxes and aid in the fields of energy and the environment.
  • Procedural aspects, providing a comprehensive vision of the research, decision and recovery process according to the Treaty on the Functioning of the European Union and implementing legislation; the prominent role of national judges and the Spanish perspective once again, focusing on the inclusion of the legislation in the General Tax Act.
  • Impact of Covid-19 on the regime, analysing the extraordinary solutions imposed by the economic crisis and the so-called “temporary framework”, and evaluating possibly excessive measures adopted and the threat to fair competition among the Member States.

The outcome is an ambitious work comprising a total of 14 chapters (“State aid in relation to taxes: Spanish experience and current context”) which, under the coordination of GARRIGUES, addresses multiple profiles of the institution studied, with a broad trajectory particularly in connection with State aid cases that have affected Spanish national or regional tax measures, some of which had a considerable impact on the tax situation of Spanish undertakings. Some cases are pending a final ruling, following years of proceedings and various contradictory European Court rulings, highlighting the complexity of the matter and the absence of settled interpretations of the main aspects, such as the delimitation of the selectivity of measures judged, or identification of the beneficiaries.

A final milestone to be addressed in the near future relates to the extraordinary Covid-19 measures and the impact they might have from the viewpoint of equal competition between EU undertakings and Member States, it being desirable for the European Commission not to neglect its obligations in this area and to avoid new imbalances that conflict with the proper functioning of the single market and which could arise from this exceptional situation.

We must point out that this project has been undertaken with the help of the business groups ABERTIS, IBERDROLA, REPSOL, SANTANDER and TELEFÓNICA under corresponding collaboration agreements.