Whether a Tax Measure Grants New Aid Must also be Assessed in the Context of the Relevant National Case Law


The application of the concept of selectivity to tax measures requires a comparison of undertakings or activities that are in a similar factual or legal situation. A tax measure that differentiates between similar undertakings or activities is selective in the meaning of Article 107(1) TFEU, unless the differentiation can be justified on objective reasons. It follows that the proper application of the concept of selectivity depends on the correct identification of those undertakings or activities that are in a similar situation. This, in turn, depends on the aim or purpose of the tax measure in question. Therefore, the starting point of the analysis of whether a tax measure is selective is the text of the measure and the relevant national case law. In this connection, the interpretation by national courts is even more important than the interpretation of national tax authorities.

Correct understanding of the national case law is also important for determining whether a new interpretation by the national tax authorities is consonant with the national case law. This is relevant for assessing whether the new interpretation results in new aid or whether the new interpretation of the national tax authorities would not be endorsed by a national court and, therefore, would not result in new aid.

On 27 September 2023, in case T-12/15, Banco Santander v European Commission, the General Court faulted the Commission for failing to understand correctly the interpretation of the Spanish tax provisions on amortisation of goodwill.1 Although the case was lodged eight years ago, the General Court had stayed the proceedings to await the judgment of the Court of Justice in case C-51/19 P, World Duty Free v Commission. The facts of the present case are similar to that of World Duty Free.

The applicant, Banco Santander, sought the annulment of Commission decision 2015/314 concerning the tax amortisation of financial goodwill stemming from the acquisition of foreign shareholdings by Spanish companies. This tax scheme was known as “TRLIS”.

Financial goodwill is the difference between the purchase price of a share and its book value. In this case, the financial goodwill from the acquisition of at least 5% of the equity of a foreign company was deductible from the tax base, up to a certain maximum amount.

In 2006, in response to a number of questions by members of the European Parliament, the Commission replied that the tax amortisation of financial goodwill did not constitute State aid.

Later on, however, the Commission examined the Spanish tax measure more closely and after opening the formal investigation procedure in October 2007, the Commission concluded in decisions 2011/5 and 2011/282 that the amortisation of goodwill from the acquisition of foreign companies established within the EU and outside the EU, respectively, constituted incompatible State aid.

Because its earlier replies to the MEP questions could have created legitimated expectations on the part of the aid beneficiaries, the Commission allowed the measure to continue to apply for the entire amortisation period for certain acquisitions of shareholdings such as those that took place before the publication in the Official Journal of the decision to initiate the formal investigation procedure in December 2007.

The new administrative interpretation

In April 2012, the Spanish authorities informed the Commission that they had adopted a new interpretation of the scheme in question [TRLIS]. According to that new interpretation, the scheme also covered indirect acquisition of foreign shareholdings. The Commission examined the new interpretation in its decision 2015/314 and held that the previous decisions of 2011 did not apply to indirect acquisitions. The Commission concluded that the tax amortisation of financial goodwill arising from indirect acquisitions was a new aid measure and that the aid was also incompatible with the internal market.

Was the new interpretation a new aid measure?

The applicant contended that the Commission incorrectly characterised the new administrative interpretation as new aid in decision 2015/314. The applicant’s aim was to show that indirect acquisitions were already covered by the initial decisions in 2011 and that, accordingly, the Commission was not entitled to adopt the contested decision specifically in respect of that type of transaction.

The General Court, first, confirmed that “(43) the Commission classified the new administrative interpretation as new aid in the contested decision.”

“(48) The Commission considered that, […], the scope of the initial decisions had to be determined not only by reference to the actual wording of those decisions, but also by taking into account the aid scheme notified by the Member State concerned”.

“(49) However, it must be stated at the outset that, in the present case, as the applicants claim, […], the scheme set up by […] TRLIS was not notified to the Commission by the Kingdom

of Spain and that the finding in the initial decisions was not that the scheme was compatible with the internal market, but that it was incompatible with the internal market.”

“(50) The Court also recalls that, under Article 4(3) TEU, the principle of sincere cooperation between the Member States and the Union applies throughout the procedure for the examination of a State aid measure”.

“(51) The principle of sincere cooperation requires the Member State concerned to provide the Commission with the information enabling it to take a decision on whether the measure at issue constitutes State aid. It also requires the Commission, by virtue of its duty to conduct a diligent and impartial examination, to carefully examine the information provided to it by that Member State”.

“(52) Furthermore, it should be recalled that the principle of legal certainty – which is one of the general principles of EU law – requires that rules of law be clear and precise and predictable in their effect, so that interested parties can ascertain their position in situations and legal relationships governed by EU law […]. That principle also applies where the Commission adopts a decision on State aid on the basis of Article 4 or 7 of Regulation No 659/1999 given that the Member State to which a decision requiring recovery of illegal aid is addressed is obliged, under the fourth paragraph of Article 288 TFEU, to take all measures necessary to ensure implementation of that decision […] and that that decision is binding on all organs of the State to which it is addressed, including its courts”.

Then the General Court referred to communications between the Commission and Spain and held that “(56) the Commission had intended to examine the scheme set up by […] TRLIS only in so far as it applied to direct acquisitions, it should have made that clear in the initial decisions, which it did not do.” “(57) On the contrary, it is clear that the initial decisions contain numerous explicit references to indirect acquisitions.” “(59) Lastly, the Court notes that the Commission acknowledged, […], that the distinction between direct and indirect acquisitions of shareholdings had not been deemed relevant for the purposes of the assessment required in the initial decisions.”

The General Court concluded that “(60) it is apparent from the wording of the initial decisions that the Commission examined the scheme set up by […] TRLIS as an aid scheme as a whole, covering both direct and indirect acquisitions.”

The Court went on to state that “(61) contrary to what the Commission found, […], it cannot be reasonably inferred from the evidence which it put forward that the new administrative interpretation enlarged the scope of […] TRLIS.”

The Court explained why the Commission was wrong. The assessment of the Court was based on the provisions of the Spanish tax law.

“(62) First of all, in view of the matters of Spanish law brought to the attention of and discussed before the Court, such an interpretation is based on a misunderstanding of how the corporate tax assessment system works under Spanish law. As the applicants have explained,

Spanish corporate tax operates on the basis of a self-assessment system provided for in […] TRLIS”.

“(63) Thus, […], the self-assessment system implies that the taxpayer calculates his or her own tax burden in application of the corporate tax legislation. It is not necessary for the tax authorities to take any action in order for that tax debt to be recognised as having been discharged. While it is true that in certain cases self-assessment may be subject to inspection by the authorities, this is by no means mandatory and, in the vast majority of cases, tax debts are submitted for self-assessment without being inspected by the authorities.”

“(64) Next, […] only the bodies of the tax authorities responsible for applying the tax are bound by the DGT’s administrative interpretation. Thus, while it is true that, as the Commission submits, the Spanish tax authorities are bound by their administrative practice and that they are required, in the event of an inspection of self-assessments submitted by taxpayers, to apply the same criteria to all taxpayers in the same situation, the fact remains that that binding effect does not affect taxpayers.” “(65) The same applies, […], to the case-law of the Tribunal Económico-Administrativo Central (Central Tax Tribunal), which binds the other bodies of administrative economic channels and the tax authorities, but not taxpayers.”

“(66) Thus, it is apparent from the documents before the Court […], certain undertakings applied the deduction to indirect acquisitions of shareholdings, even before the adoption of the new administrative interpretation.”

Then the General Court made a strong statement: “(67) As in any State governed by the rule of law, undertakings are not required to adopt the same interpretation of the law as that advocated by the tax authorities. They may apply the rule in a different manner, by relying directly on the text of the law, and, if necessary, bring an action before the competent courts to challenge the acts of the administrative authorities responsible for amending their self-assessments pursuant to the tax notices in question. As the applicants rightly submit, it is for the legislature or, in the event of doubts or disputes, the courts, and not the administrative authorities, to determine the scope of the statutory provisions. The Commission has not demonstrated that indirect acquisitions were excluded from the scope of […] TRLIS by the legislature or by the Spanish courts before the new administrative interpretation was adopted.”

“(72) Therefore, in finding that the new administrative interpretation had ‘enlarged’ the scope of […] TRLIS, the Commission failed to take due account of Spanish law, since, under Spanish law, the scope of that provision could not be determined by a mere administrative interpretation.”

“(73) In the light of all the foregoing considerations, it must be held that, contrary to what the Commission concluded in the contested decision, the initial decisions already covered both direct and indirect acquisitions of shareholdings.”

Was the Commission entitled to adopt the contested decision in view of the scope of the initial decisions?

The Commission may withdraw a previous decision when the Member State concerned submitted incorrect information that had a material impact on the conclusions of that decision.

“(75) In the present case, although it is true that the initial decisions and the contested decision find that the scheme set up by […] TRLIS is incompatible, the fact remains that […] the contested decision requires the Kingdom of Spain to recover all the aid granted under that scheme, as applied to indirect acquisitions, whereas some of that aid was not subject to the recovery obligation under the initial decisions because of the legitimate expectation recognised by the Commission in those decisions”.

“(76) Such a result is tantamount to withdrawing the initial decisions, in so far as they already related to indirect acquisitions and recognised them as legitimate expectations, subject to certain conditions.”

However, “(81) since indirect acquisitions have already been taken into account in the initial decisions and since it has not been shown that those decisions were based on incorrect information, the Commission cannot ‘revoke’ the initial decisions under Article 13(3) of Regulation No 659/1999 in so far as they related to that type of transaction.”

“(83) However, the Commission has never claimed that the initial decisions were unlawful in that they related to indirect shareholdings”.

“(84) In reality, […], the case at hand does not by any means concern the withdrawal of an unlawful act, but the withdrawal of two legal decisions, namely the initial decisions in so far as they related to indirect shareholdings.”

“(85) The retroactive withdrawal of a lawful administrative act which has conferred individual rights or similar benefits is contrary to the general principles of law”.

“(86) In that regard, […], the Court finds that the initial decisions conferred on the Kingdom of Spain, subject to certain conditions and on the basis of the existence of a legitimate expectation, an individual right to implement the aid scheme at issue, notwithstanding the fact that it had been declared incompatible, and, incidentally, on the undertakings which had benefited from that scheme an individual right not to have to repay certain unlawful aid. The Court also finds that the contested decision subsequently withdrew that right in respect of indirect acquisitions.”

“(87) Thus, in addition to undermining the principle of legal certainty, the contested decision called into question the legitimate expectation which the Spanish authorities and the undertakings concerned had been able to derive from the initial decisions that those decisions would be applicable to indirect acquisitions. In that regard, it is sufficient to recall that the initial decisions referred to both direct and indirect acquisitions”.

Was Spain obliged to recover the aid?

The General Court first recalled that “(94) according to Article 14 of Regulation No 659/1999, where negative decisions are taken in cases of unlawful aid, the Commission is to decide that the Member State concerned is to take all necessary measures to recover the aid from the beneficiary, except if this would be contrary to a general principle of EU law”.

“(95) In this respect, it is settled case-law that the principle of the protection of legitimate expectations is a general principle of EU law”.

“(96) However, in view of the mandatory nature of the supervision of State aid by the Commission pursuant to Article 108 TFEU, undertakings to which aid has been granted may not, in principle, rely on a legitimate expectation that that aid is lawful unless it has been granted in compliance with the procedure provided for in that article, and furthermore, an economic operator exercising due care should normally be able to determine whether that procedure has been followed. In particular, where aid is implemented without prior notification to the Commission, with the result that it is unlawful under Article 108(3) TFEU, the recipient of the aid cannot, in principle, rely at that time on a legitimate expectation that its grant is lawful. This is true both in cases of individual grants of aid and aid granted under an aid scheme”.

“(97) It is therefore only in exceptional circumstances that beneficiaries of non-notified aid can rely on the principle of the protection of legitimate expectations”.

“(98) The right to rely on legitimate expectations presupposes that the EU institution in question has given the beneficiaries of the aid precise, unconditional and consistent assurances, in accordance with the applicable rules, such as to give rise to a legitimate expectation on their part”.

“(99) In the present case, the Court notes at the outset that, even if the beneficiaries could be recognised as having a legitimate expectation, such a legitimate expectation would concern only deductions made under […] TRLIS for the acquisition of shareholdings in companies established in the territory of a Member State of the European Union or in certain third countries prior to 21 December 2007 or, in the case of certain types of transactions, prior to 21 May 2011”.

“(105) The Court has already held, in respect of all shareholdings acquired before 21 December 2007, that […] the Commission’s replies [to questions of MEPs] […] were sufficiently precise to give rise to a legitimate expectation that the scheme was not selective and therefore did not constitute State aid”.

“(112) Therefore, even it was entitled to adopt the contested decision, the Commission could not, without erring in law, refuse to recognise, in that decision, a legitimate expectation on the part of the beneficiaries of the aid scheme at issue in respect of their indirect acquisitions before 21 December 2007, or even before 21 May 2011, in the same terms as in the initial decisions.”

“(116) Only statements and conduct originating from the Commission must be taken into account in order to assess the legitimate expectation of the beneficiaries of the aid scheme at issue”.

“(117) Thus, in the same way that, […], the conduct of a national authority responsible for applying EU law, which acts in breach of that law, cannot give rise to a legitimate expectation on the part of an economic operator of beneficial treatment contrary to EU law […], the interpretation of the national tax authorities as to the scope of the scheme set up by […] TRLIS cannot affect the scope of the legitimate expectation arising from declarations made, at EU level, by the Commission.”

“(119) Even if the Commission was unaware, at the time of its declarations, that the scheme set up by […] TRLIS covered both direct and indirect acquisitions, that fact is irrelevant for the purposes of recognising a legitimate expectation on the part of the beneficiaries of that scheme in the present case. All that matters is that, by its public statements, the Commission implied that the scheme did not constitute State aid, without further clarification.”

“(120) Furthermore, as the applicants acknowledged at the hearing, they were aware of the initial administrative interpretation, but had deliberately chosen not to follow it, since they considered it to be incorrect.”

“(124) Thus, the applicants, as reasonably prudent, discriminating and diligent economic operators […], could legitimately consider, on the basis of the replies given by the Commission to the parliamentary questions, that the scheme set up by […] TRLIS did not constitute State aid, as regards both direct and indirect acquisitions.”

“(125) In the light of those factors, and even if the Commission were entitled to adopt the contested decision, it must be held that the Commission erred in law by refusing to recognise a legitimate expectation on the part of the beneficiaries of the aid scheme at issue in respect of their indirect acquisitions in the contested decision.”


This case does not add anything new to the landmark judgment of the Court of Justice in World Duty Free with respect to the concept of selectivity. But, it makes the important point that to determine the undertakings or activities which are covered by an existing tax measure, it is necessary to understand correctly how the relevant national law is interpreted by courts, not just by national tax authorities.



Phedon Nicolaides

Dr. Nicolaides was educated in the United States, the Netherlands and the United Kingdom. He has a PhD in Economics and a PhD in Law. He is professor at the University of Maastricht and the University of Nicosia. He has published extensively on European integration, competition policy and State aid. He is also on the editorial boards of several journals. Dr. Nicolaides has organised seminars and workshops in many different Member States, and has acted as consultant to several public authorities.

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