Spanish LaLiga football clubs Barcelona, Real Madrid and Athletic Bilbao have today (Tuesday) received a financial boost after the General Court of the European Union overturned an earlier ruling from the European Commission concerning state aid.
The LaLiga trio, along with Osasuna, which is currently top of the Segunda Division, will now no longer have to pay back taxes that could have amounted to up to €5m ($5.68m) apiece. The case dates back to a 2016 ruling from the EC.
All Spanish professional football clubs were required to convert to sports public limited companies (SPLCs) by a law of 1990 in order to encourage more responsible management of their activities. An exception was, however, laid down through which clubs which had achieved a positive result for the tax years preceding the adoption of the law were permitted to continue to operate as sports clubs.
Barcelona, Real, Athletic and Osasuna chose that option and as non-profit organisations their income was taxed at a specific rate that was, until 2016, lower than the rate applicable to SPLCs. In its 2016 decision, the Commission declared that Spain had unlawfully implemented state aid in the form of a corporation tax privilege in favour of the four clubs.
According to the Commission, that regime was incompatible with the internal market. It therefore ordered Spain to discontinue the scheme and to recover the aid granted from the recipients. This was met by a challenge from Barcelona and Athletic to the General Court, the EU’s second highest tribunal.
In its judgement today, the Court said the Commission made several mistakes in assessing the case and used figures that only covered four tax years, while the scheme operated from 1990 to 2015. “The Commission has not shown to the requisite legal standard that the measure at issue conferred an advantage on its beneficiaries,” the ruling read.
The Court added that the Commission “erred in its assessment of the facts” when it ruled that the tax arrangements amounted to illegal state aid.