CJEU confirms Commission Decision on Spanish tax lease system in shipping sector

By Greetje van Heezik | Houthoff

On 25 July 2018, the CJEU set aside a judgment of the General Court (GC) that annulled a Commission Decision declaring a Spanish tax lease system to constitute incompatible State aid.

The relevant tax system allowed shipping companies to acquire vessels via a specific contractual and financial structure. Under this structure, an Economic Interest Grouping (EIG) (formed by a bank and investors who purchased shares in the EIG) would take a lease out on a ship from a leasing company and in turn lease it to the shipping company under a ‘bareboat charter’. The EIG benefited from tax advantages, which were partly transferred to the shipping company in the form of a rebate on the vessel price. The Commission considered that this advantage constituted State aid to the EIGs and their investors.

Conversely, the GC held that it was the investors rather than the EIGs who had to be considered as the beneficiaries of the State aid because of the fiscal transparency of the EIGs (in relation to their members). However, the CJEU ruled that because the tax measures at issue were in fact applied to the EIGs (the advantages favoured the activities carried out by the EIGs), the EIGs were the direct beneficiaries of the advantages – despite being fiscally transparent. According to the CJEU, by not acknowledging that the EIGs were beneficiaries of the measures (on the grounds that those entities were fiscally transparent), the GC wrongly held that EIGs could not be the beneficiaries of the measure solely because of their legal form and the relevant rules on the taxation of profits.

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Compliments of Houthoff, a member of the EACCNY