On 28 July 2011, the European Court of Justice issued its judgements which dismissed the appeals for reversal lodged by Foral Deputations against the judgements of the Court of First Instance of 9 September 2008 that ratified the legality of the Decisions adopted by the European Commission that regarded the measures in question (45% tax credit on certain investment and reduction of the tax base for start-ups) as state aids incompatible with the common market.

These Decisions mark the end of a long debate regarding the legality of these aids that dates back to the 1990s.  The ECJ also ordered the aid to be recovered, which, according to the Foral Deputations repeated announcements, has already been done.  However, the European Commission deems that this is not the case and has started proceedings in the Court of Justice to force the Foral Deputations to recover the whole amount of the aid received along with the corresponding interests from the beneficiaries, or otherwise pay huge fines.

ECJ judgement on the 45% tax credit

ECJ judgement on the mini tax holidays

ECJ press release

These documents have been included in the documentation section:

Academia Doctrine:

“La impugnación de las normas forales fiscales”, by the tax inspector Mr Carlos David Delgado Sancho, in Tributos Locales 95.

“El criterio de la selectividad de facto en las ayudas de estado (aplicación en relación con las medidas forales fiscales)”, by Ms Begoña Pérez Bernabeu, in Crónica Tributaria 138.

Board of Arbitration of the Economic Agreement:

Resolution 12/2011, May 2nd, concerning the transfer of VAT balances after  business reorganization operations.

Two recent judgements issued by Spain’s Supreme Court have been added to the legal documents section:

The first, dated 2 June 2011, involves the appeal lodged by the Autonomous Community of La Rioja against a ruling of the Basque Supreme Court (TSJPV) of 2 November 2004, whereby article 26 of the Provincial Regulation (Norma Foral) on Corporation Tax is declared unlawful, with all the other contested articles being declared lawful. Spain’s Supreme Court declares the appeal to be groundless regarding some of the articles contested and rejects the appeal against all the others.

The second, dated 3 June 2011, following a prior analysis of the rules of coordination contained in article 3 of the Basque economic agreement (Concierto Económico), rejects the appeal lodged by the Spanish government against the ruling of the TSJPV dated 26 December 2003 that contested Norma Foral 2/2001 of 12 February, of the Provincial Council of Gipuzkoa, whereby approval was granted to certain tax measures for the province of Gipuzkoa.

On 9 June 2011, the European Court of Justice proceeded to issue its judgement on the appeal lodged by the Foral Deputations regarding the sentence of the Court of First Instance of 9 September 2009, which found that the so-called Basque “tax holidays” were incompatible with the common market.  The Basque tax holiday system was approved by the Historical territories of Bizkaia, Araba-Álava and Gipuzkoa in 1993 and consisted in a ten-year tax exemption for start-ups in the Corporate Income Tax. This sentence implies the end of the Court action questioning the legality of the system and upholds the position of the Commission and the need to recover the aid enjoyed by the companies that benefitted from the system. The Foral Deputations rushed to confirm, yet again, that the ruling has no relevance in practice, as the aids have already been effectively recovered. 

ECJ Judgement of 9 June 2011

When the Arbitration Board was set up in 2007, the Basque administration and the central Spanish administration agreed that the post of Secretary would initially be held by a civil servant employed by the administration of the Autonomous Community of the Basque Country and that the headquarters of the Arbitration Board would be based at Portal de Castilla nº 15 in Vitoria-Gasteiz. The initial three year mandate set by the Regulation for this rotating position has now concluded, and by means of an Order of the Basque Government Minister for Economic and Treasury Affairs dated May 23, 2011 a civil servant employed by the central Spanish administration was appointed as Secretary. As a result the headquarters of the Arbitration Board has been transferred to the Regional Offices of the Central Spanish Tax Authorities for Araba-Álava, at c/ Olaguibel, 7, 01001 Vitoria-Gasteiz.

Ministerial Order of 23 May 2011