Barcelona got illegal tax benefit – European Court of Justice

The EU’s highest court ruled Thursday that the European Commission was right to classify as an illegal subsidy a Spanish tax regime that benefitted FC Barcelona, setting aside a judgment from the lower court, via Politico EU.

The European Court of Justice held that Brussels was right to consider that an exemption to an obligation for Spanish football clubs to change their legal status infringed EU state aid rules.

FC Barcelona’s appeal against the Commission’s decision is definitively rejected, the judges said, adding to the financial and political crisis at the Catalonia club.

Four Spanish football clubs — Barcelona, Atlético Osasuna from Pamplona, Athletic Club de Bilbao and Real Madrid — were exempted from a law requiring all clubs to become “sports public limited companies,” allowing the four clubs to pay a reduced income tax rate over 20 years.

EU Competition Commissioner Margrethe Vestager in 2016 ordered Spain to recover money from seven clubs in total (Valencia, Elche and Hercules were found to have received government loan guarantees).

The lower court, the EU General Court, in 2019 ruled that the Commission could not demonstrate an advantage for Barcelona as it failed to take into account the fact that the other clubs, which had become sports public limited companies, benefitted from another tax advantage, namely a higher deduction for the reinvestment of extraordinary profits.

But the ECJ, following the opinion of Advocate General Giovanni Pitruzella, dismissed that argument, saying that “the General Court erred in law” in ruling that the Commission was obliged to examine the effect of the deduction.

The ECJ also overruled the lower court’s finding that the Commission officials had to analyze both the general advantage (for all the clubs) and the advantage for each individual club. The court’s guidance on the difference between an aid scheme and an individual measure could be of broader significance beyond this case.