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EC Calls On Spain To Retrieve Aid From Outlawed Company Tax Scheme

by Ulrika Lomas, Tax-News.com, Brussels

24 November 2009


The European Commission has sent a formal request to Spain to implement the European Court of Justice (ECJ) judgement in case C-177/06, which declared that Spain failed to recover "illegal and incompatible state aid" granted by certain Basque Provinces.

Although the ECJ judgement dates back to 2007, the Commission has concluded that Spain has still not completed the recovery of aid granted by the Provinces of Guipúzcoa and Álava. The Commission's request takes the form of a reasoned opinion, the second step of infringement proceedings for failure to respect a Court judgement (Article 228 of the EC Treaty).

If Spain continues to fail to comply with the ECJ decision, the Commission may refer it to the Court for a second time and request the ECJ to impose fines until the aid has been fully recovered. The fines can take the form of periodic penalty payments, lump sums or both.

Competition Commissioner Neelie Kroes commented: "The recovery of aid that gave companies an unfair advantage over their competitors is essential to limit distortions of competition in the Single Market."

On December 20, 2001, the Commission found that fiscal aid schemes granting a 10-year corporate tax exemption for newly created firms in the three Basque Provinces provided a selective advantage to certain companies and ordered Spain to recover aid paid under the schemes. On September 20, 2007, the ECJ held that Spain had failed to fulfil the recovery obligations stemming from these decisions.

The Commission stated that its "firm approach" towards member states that fail to recover illegal aid is "fully in line" with the State Aid Action Plan presented by the Commission in June 2005 and with the Notice on the implementation of recovery decisions.


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