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The Recovery Obligation and the Protection of Legitimate Expectations: The Spanish Experience

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Book cover State Aid Law and Business Taxation

Part of the book series: MPI Studies in Tax Law and Public Finance ((MPISTUD,volume 6))

Abstract

The obligation to recover illegal and incompatible State aid, even though it is a basic principle of the system for controlling State aid, is not absolute. For example, this obligation would be overridden in cases involving protection of the general principles of EU law, legitimate expectations or legal certainty. This chapter, after examining the EU’s practice in applying these principles, will look at two recent examples of State aid cases in Spain in relation to this issue, one of which concerned financial goodwill and the other, the Spanish tax lease. Finally, some observations will be made about the recent legislative developments in Spain with respect to the recovery of fiscal State aid.

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Notes

  1. 1.

    European Commission (2009), p. 1.

  2. 2.

    Mention should also be made of point 5.4 (Specific fiscal aid issues). European Commission (2014a).

  3. 3.

    Regulated in article 23 of the Spanish Corporate Tax Act (Ley del impuesto sobre sociedades). At the same time that this provision was made part of Spanish law, an Additional Provision Nine was included in the same statute, entitled “Prior declaration of compatibility with the Treaty Constituting the European Community”, which stated as follows: “The effective application of the provisions of article 23 of the Recast Text of the Spanish Corporate Tax Act, approved by Legislative Royal Decree 4/2004, of 5 March, according to the wording given by this Act, will be subject to their compatibility with Community law”.

  4. 4.

    European Commission (2014b).

  5. 5.

    European Commission (2012). This decision approved the new Spanish tax lease regime notified to the Commission.

  6. 6.

    European Commission (2004).

  7. 7.

    Cf. CJEU judgments of 4 April 1995, Case C-348/93, Commission of the European Communities v. Italian Republic; 29 January 1998, Case C-280/95, Commission v Italian Republic; 22 March 2001, Case C-261/99, Commission v. French Republic; 3 July 2001, Case C-378/98, Commission of the European Communities v Kingdom of Belgium; and 11 September 2014, Case C-527/12, European Commission v. Federal Republic of Germany.

  8. 8.

    Decision of 19 December 2012 on State aid SA.20829 (C26/2010, ex NN 43/2010 (ex CP 71/2006)) Scheme concerning the municipal real estate tax exemption granted to real estate used by non-commercial entities for specific purposes implemented by Italy (CJEU L 166, of 18.6.2013, p. 24), paragraphs 191–200.

  9. 9.

    CJEU judgments of 11 September 2014, Case C-527/12, Commission v Germany, paras 48 et seq; 18 October 2007, Case C-441/06, Commission v France, para 27; and 2 February 1989, Case 94/87, Commission v Germany, para 8, inter alia.

  10. 10.

    CJEU judgment of 15 February 1996 Case C-63/93, Duff and others, ECR. p. I-569, para 20. See also the GCEU judgment of 12 September 2007 Case T-348/03, Friesland Foods v. Commission, Rec. p. II-101, para 125.

  11. 11.

    Judgment of the GCEU of 1 July 2004 in Case T-308/00, Salzgitter v. Commission, ECR. p. II-1933, para 166.

  12. 12.

    Note that the decision recalls that this judgment has been upheld on appeal by the CJEU in Case C-408/04P. It is true that the CJEU has finally upheld in the case analysed therein that the lack of legal certainty alleged by the claimants at first instance did not exist yet it obviously does not question the principles and definition which the GCEU gives of this general principle of law.

  13. 13.

    Barciela Pérez (2010), p. 1.

  14. 14.

    See, among many others, the Judgments of the CJEU of 11 March 1987, in Case C-265/85, Van der Bergh en Jurgens BV v. Commission para 45 and of 15 April 1997, Case C-22/94, Irish farmers Association and others v. Minister for Agriculture, Food and Forestry, Ireland y Attorney General, ECR. p. I-1809, para 17.

  15. 15.

    See, inter alia, the CJEU judgment of 26 June 1990, Case 152/88, Sofrimport v. Commission, ECR. p. 2477, para 26.

  16. 16.

    See, inter alia, the CJEU judgment of 12 November 1987, Case 344/85, Ferriere San Carlo SpA v. Commission, ECR. p. 4435, para 13.

  17. 17.

    See, inter alia, the CJEU judgment of 14 September 1995, Case T-571/93, Lefebvre and others v. Commission, ECR. p. II-2379, paras 73–74.

  18. 18.

    CJEU judgment of 19 May 1983, Case C-289/81, Vassilis Mavridis v European Parliament.

  19. 19.

    GCEU judgment of 12 September 1983, Case T-348/03, Koninklijke Friesland Foods v Commission (para 127).

  20. 20.

    CJEU judgment of 22 June 2006, Case C-217/03, Forum 187 v Commission, paras. 155 and 158.

  21. 21.

    Decision 2003/755 of 17.02.2003, concerning the coordination centres established in Belgium, para. 122.

  22. 22.

    Judgments of the CJEU of 11.03.1987, Case C-285/85, Van den Bergh, para 45 and of 15.04.1997, Case C-22/94, Irish Farmers (para 17).

  23. 23.

    Albeit in the tax lease case, in relation to the principle of legal certainty.

  24. 24.

    On this point, see also the CJEU judgment of 21.3.2013, Case C-129/12, Magdeburger Mühlenwerke GmbH, although this judgment is somewhat confusing in relation to the effects of the decision to open the formal investigation procedure in relation to the recovery of the aid and the legitimate expectations.

  25. 25.

    GCEU judgment of 12.9.2007, Case T-348/03, Koninklijke Friesland Foods, para 135.

  26. 26.

    Opinion of the Advocate General Mr. Yves Bot of 23 April 2009, Case C-519/07 P, Koninklijke Friesland Foods. The AG stated that, in view of the fact that the Dutch regime had not been notified to the Commission, there were no elements that created in the beneficiaries of the regime the expectation of legality from the moment that the alleged similarities of the regime in question with that of the Belgian coordination centres. The AG stated that precisely because of the absence of any type of notification to the Commission, the decision to open the procedure and, therefore, the existence of serious doubts about the compatibility of the regime would be sufficient to deny the legitimate expectations of the appellant company.

  27. 27.

    Specifically, the Advocate General states: “In other words, the fact that the Commission is reviewing the national measure in question and the possibility that it may, once the formal investigation procedure has been completed, adopt a negative decision, is not of itself sufficient to prevent the traders concerned relying on a legitimate expectation that the existing situation will prevail.” Para 406.

  28. 28.

    Recast Text of the Spanish Corporate Tax Act (Refundido de la Ley del Impuesto sobre Sociedades), approved by Legislative Royal Decree 4/2004, of 5 March 2004.

  29. 29.

    European Commission (2007a).

  30. 30.

    1) With respect to the parliamentary question of the MEP Mr. Erik Meijer (GUE/NGL) regarding the possible nature of State aid of article 12.5 of the TRLIS (Question E-4431/05 of 30 November), the Commissioner Mr. McCreevy replied on behalf of the Commission on 9 January 2006 in the following terms: “The Commission cannot confirm whether the high bids by Spanish companies are due to Spain’s tax legislation enabling undertakings to write off goodwill more quickly than their French or Italian counterparts. They can confirm however that such national legislations do not fall within the scope of application of State aid rules, because they rather constitute general depreciation rules applicable to all undertakings in Spain”.

    2) With respect to the parliamentary question of the MEP Mrs. Sharon Bowles (ALDE) regarding the possible nature of State aid of article 12.5 of the TRLIS (Question E-4772/05 of 19/12/2005), Commissioner Mr. McCreevy replied on behalf of the Commission on 17 February 2006 in the following terms: “(…) Spanish (tax) rules related to the write off of a “goodwill” are applicable to all undertakings in Spain, independently from their sizes, sectors, legal forms or if they are privately or publicly owned because they constitute general depreciation rules. Therefore, they do not appear to fall within the scope of application of the State aid rules (…)”. It thus confirmed two fundamental aspects:

    1. a.

      This is not an advantage but rather a technical rule on fiscal amortisation.

    2. b.

      The measure is not selective.

  31. 31.

    Cf. Article 278 of the TFEU and Council of the European Union (2015), article 16.3; European Commission (2007b), section 2.2.2., and European Commission (2009), section 2.2.2.

  32. 32.

    Calvo Salinero (2015), p. 402.

  33. 33.

    Calvo Salinero (2015), p. 407.

  34. 34.

    In this regard Villar Ezcurra states that “most Member States with an interest in maritime transport have implemented tonnage tax regimes but, in terms of unfair competition, some (for example, Germany) were considered under the Code of Conduct to be questionable measures that needed to be analysed by the Group”. See Villar Ezcurra (2014), p. 440. For more information regarding the limits between harmful tax competition and the control of State, see Buendia Sierra (2015), pp. 9–12.

  35. 35.

    15 January 2015, Cases C-20/15P and C-21/15P.

  36. 36.

    European Commission (2011), p. 5.

  37. 37.

    European Commission (2014c), p. 1.

  38. 38.

    European Commission (2012).

  39. 39.

    European Commission (2006), p. 4.

  40. 40.

    The same line was taken in point 256 of the Decision, where it states that “[t]he situation of uncertainty created with respect to the lawfulness of the STL as a result of the statement made in the 2001 Commission Decision concerning Brittany Ferries stopped on the date of publication of the Commission Decision on the French GIE Fiscaux.” See European Commission (2006).

  41. 41.

    European Commission (2002), p. 33.

  42. 42.

    European Commission (2006), p. 4.

  43. 43.

    European Commission (2006), Points 256, 261 and 262 of the final decision.

  44. 44.

    European Commission (2002), p. 33.

  45. 45.

    According to the decision “the acquired ships are written off degressively over a period of around eight years. Degressive amortisation produces fiscal deficits at the beginning of the contract; given the EIG’s fiscal transparency these are passed on to the EIG members.” European Commission (2002), point 34.

  46. 46.

    European Commission (1998), p. 3.

  47. 47.

    European Commission (2006), p. 4.

  48. 48.

    This issue is clearly dealt with in point 192 of French GIEs Fiscaux. See European Commission (2006). The decision underlines the fact that in that case the regime in force was that prior to 1998.

  49. 49.

    Villar Ezcurra (2014), pp. 442 et seq.; and García Novoa and López Gómez (2014), pp. 4–5.

  50. 50.

    Norwegian Minister Letter (2009).

  51. 51.

    See, inter alia, the CJEU judgment of 24 November 1987, Case 223/85, RVS v. Commission, ECR. p. 4617, the judgment of the GCEU of 15 September 1998, Case T-95/96, Gestevisión Telecinco v. Commission, ECR. p. II-3407. In its decision-making practice, the Commission has also accepted that the excessive duration of the procedure also justifies that the recovery of aid declared to be illegal and incompatible not taking place. See Decision of 31 October 2000, C 57/1997, concerning Spanish legislation on corporate tax (OJEU, 1.3.2001 L 60), or the decision of 20 December 2006, French GIE Fiscaux (OJEU of 30.4.2007 L 112, p. 4).

  52. 52.

    See, for all, Villar Ezcurra (2014), pp. 444 et seq.

  53. 53.

    Act 58/2003, of 17 December, amended by Act 34/2015, of 21 September, on the issue of recovery of State aid.

  54. 54.

    On this point see Moreno González (2015). In particular, the draft Bill for the reform of the LGT, this point is examined in section 4, at 20 et seq of the digital edition.

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Authors and Affiliations

  1. Garrigues, Madrid, Spain

    Juan Salvador Pastoriza

  2. Garrigues, Brussels, Belgium

    Juan Salvador Pastoriza

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  1. Juan Salvador Pastoriza
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Correspondence to Juan Salvador Pastoriza .

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  1. Tax Institute, HEC-University of Liège , Liège, Belgium

    Isabelle Richelle

  2. Max Planck Institute for Tax Law and Public Finance, Munich, Germany

    Wolfgang Schön

  3. Faculté de droit et de crimonologie, Université catholique de Louvain , Louvain-la-Neuve, Belgium

    Edoardo Traversa

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Pastoriza, J.S. (2016). The Recovery Obligation and the Protection of Legitimate Expectations: The Spanish Experience. In: Richelle, I., Schön, W., Traversa, E. (eds) State Aid Law and Business Taxation. MPI Studies in Tax Law and Public Finance, vol 6. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-662-53055-9_13

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