All material subject to strictly enforced copyright laws. © 2022 ITR is part of the Euromoney Institutional Investor PLC group.

European Commission wins first round in ECJ against Spain over illegal tax incentives

Spain should have to pay the European Commission €50 million ($68 million) and the costs of the case for failing to implement a European Court of Justice (ECJ) decision against tax incentives in good time.

That was the view of an Advocate General of the ECJ on January 23 in an opinion that related to six European Commission decisions in 2001 that the introduction of the two business tax incentives - a tax credit for businesses of 45% of investments, and a “degressive” four-year reduction of the tax base for new businesses - in each of the three provinces of Spain’s Basque Country between 1994 and 1997 constituted state aid. The Commission decided that Spain had not told it about the incentives in advance, which it was required to do under the 1998 regional aid guidelines, and that the incentives themselves breached state aid thresholds.

The ECJ’s decision, which should take between three to six months, can be expected to follow the Advocate General’s opinion, though the judges are not obliged to.

The Basque Country provinces sought to annul the Commission’s decisions in the European Court of First Instance and after two years of dialogue that failed to resolve the situation, the Commission issued infringement actions against Spain in 2003.


  • 2006

The ECJ ruled that Spain had not complied with the six decisions of the Commission that ordered the abolition of the scheme and the recovery of any aid that had been paid. The two sides continued to argue up to 2010 about the amount Spain had to recover, though the member state did collect some of the money. The Commission also felt Spain was not providing enough information.

  • July 11 2007

The Commission sent a letter of formal notice to Spain

  • June 26 2008

The Commission sent reasoned opinion to Spain requiring full compliance with the 2006 judgment within two months, that is, by August 26 2008.

  • September 2009

The Court of First Instance rejected the annulment actions brought by the Basque Country provinces.

  • April 18 2011

The Commission initiated the case in the ECJ that resulted in the Advocate-General’s opinion on January 23, asking the court to declare that Spain had failed to comply with the decisions ni 2001 by the Commission and the ECJ ruling of 2006. As well as costs, the Commission asked for a lump sum of €64.543 million, based on a daily amount of €25,817.40 multiplied by the 2,500 days between delivery of the 2006 judgment and October 15 2013, when the aid declared illegal by the 2001 decisions was completely recovered.

More from across our site

Tax professionals have called on the UK government to reconsider its online sales tax as it would affect the economy at the worst time.
Tax professionals have called on companies to act urgently to meet e-invoicing compliance targets as the EU plans to ramp up digitisation.
In the wake of India’s ambitious 25-year plan for economic growth, ITR has partnered with leading tax commentators to discuss what the future will look like for India and for the rest of the world.
But experts cast doubt on HMRC's data and believe COVID-19 would have increased the revenue shortfall.
EY’s plan to separate its auditing and consulting businesses might lessen scrutiny from global regulators, but the brand identity could suffer, say sources.
Multinationals are asking world leaders to put a scale on carbon pricing to tackle climate change at the 48th G7 summit in Germany, from June 26 to 28.
The state secretary told the French press that the country continues to oppose pillar two’s global minimum tax rate following an Ecofin meeting last week.
This week the Biden administration has run into opposition over a proposal for a federal gas tax holiday, while the European Parliament has approved a plan for an EU carbon border mechanism.
12th annual awards announce winners
Businesses need to improve on data management to ensure tax departments become much more integrated, according to Microsoft’s chief digital officer at a KPMG event.
We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree