Barcelona and Madrid clubs team up to defeat Commission over tax regimes

EU Competition Commissioner, Margrethe Vestager, had suffered to defeats in the EU court this month. [European Union 2018 / Mauro Bottaro]

Spanish football teams Real Madrid, Barcelona, Osasuna and Athletic Club Bilbao will not have to repay a few million euros in tax compensations, after EU judges said on Tuesday (26 February) that their tax regimes were lawful, contrary to the European Commission’s 2016 verdict.

The EU Court of Justice concluded that the Commission had failed to prove in July 2016 that the tax regime of these clubs as non-profit entities represented an illegal advantage compared to the legal status of the rest of the clubs (as sports public limited companies).

The four clubs were paying a corporate tax of 25%, compared with 30% for the rest of the football teams in Spain.

The case was part of a broader package brought by the Commissioner for Competition, Margrethe Vestager, against various Spanish clubs three years ago.

State aid for Spanish football clubs was 'illegal', Vestager says

Some of Spain’s top football teams – including Real Madrid and FC Barcelona – will have to pay back illegal public aid worth up to €70 million as it represented “an unfair advantage” versus other teams, the Commission said on Monday (4 July).

In particular, the judges highlighted that Real Madrid had shown that the rest of the clubs benefited more from tax deductions for the reinvestment of extraordinary profits, usually obtained from transfers of players.

Madrid’s argument was the basis of the successful case brought by Barcelona before the court. Athletic Club had tried to convince the judges by following a different legal strategy, but the Court dismissed their case as its legal arguments were “weaker”, Court sources said.

Still, all of them will benefit from the court’s ruling that annuls the Commission’s decision, and will not have to pay additional taxes in the maximum amount of €5 million, according to Commission estimates in 2016.

The Commission had argued that there was a nominal preferential tax rate applied to these four teams, and the effective taxation was also lower, on the basis of the information provided by Spain.

But the EU judges noted that the information provided by Spanish authorities covered only four years, while the period assessed was from 1990 (when the rest of clubs registered as SPLCs) to 2015.

“The court finds that the Commission erred in its assessment of the facts,” the court said in its statement on Tuesday.

The judges blamed the EU executive for not assessing other evidence submitted, such as the information provided by the Madrid club on tax deductions.

The Commission bore the burden of proof of the existence of an advantage resulting from the tax regime of non-profit entities.

But the EU Court concluded that the Commission “has not shown to the requisite legal standard” proof that the non-profit status offered an advantage to the four clubs.

This is the second time EU judges annul a decision taken by Vestager on illegal state aid. This month, the Luxembourg-based court said that the Belgian tax system applied to the “excessive profits” of multinationals did not breach EU rules, contrary to what the Commission said.

EU court rules against Commission on Belgium 'excess profit' tax scheme

The system of exception for the excess profit of Belgian entities that are part of multinational corporate groups does not constitute illegal state aid, contrary to the European Commission’s previous assessment, the EU’s top court ruled on Thursday (14 February).

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