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Spanish tax lease system is not state aid, says EU court

A Spanish tax lease system for the shipbuilding industry does not constitute state aid because it is open to any investor, the General Court of the EU has ruled.21 Dec 2015

The system allows a bank to act as an intermediary between a maritime shipping company and a shipyard. The bank sets up an economic interest company (EIG) to buy the vessel and sells shares in that company to investors who gain tax advantages based on depreciation rules.

The majority of that advantage – 85%-90% - is then passed to the shipping company in the form of a rebate on the price of the vessel. The investors keep the rest of the advantage as a return on their investment.

The General Court annulled a decision by the European Commission that the system represents illegal state aid and was incompatible with the EU internal market. The Commission's decision contained errors and an "insufficient statement of reasons" to classify the scheme as state aid, the Court said.

The tax lease system only benefits investors, not the EIGs themselves, the Court found, and the advantages of the system are open to any investor taxable in Spain.

The Commission had also failed to show that the measure is likely to distort competition and affect trade between member states, it said.

Tax expert Heather Self of Pinsent Masons, the law firm behind out-Law.com said: "The General Court’s decision that this tax treatment was not selective is very interesting in the light of the recently-announced decisions on Starbucks and Fiat, and the expected decisions on Apple and Amazon. It remains to be seen whether the taxpayers in those cases will be able to argue, on similar grounds, that any economic advantages were 'open to all operators without distinction' and hence that no selective aid has been given."

"It is also helpful, in the light of the Commission’s strong focus on member states’ tax ruling processes, that the Court also held that the authorisation system in this case did not make a difference to the outcome," Self said.