Tax Advantages and Competitive Bidding


Award of contracts or sale of state assets through competitive bidding procedures or tenders are presumed to result in a market prices and to confer no advantage to the winner in the meaning of Article 107(1) TFEU.

However, on 25 January 2023, the General Court ruled, in case T-666/21, Società Navigazione Siciliana v European Commission, that certain tax advantages were not neutralised by the fact that a sale was conducted through a competitive tender.[1]

Società Navigazione Siciliana [SNS] sought partial annulment of the 2020 Commission decision 2020/1412 concerning State aid measures SA.32014, SA.32015, SA.32016 in favour of Siremar and its purchaser, SNS. The Commission had found certain Italian tax exemptions to constitute incompatible aid and ordered its recovery. The amount that was to be recovered was about EUR 1.7 million. Siremar, a state-owned shipping company, belonged to the former Tirrenia group which was privatised in stages. It was sold for the amount of EUR 55 million to SNS.

Competitive bidding and tax exemptions

According to the sale contract, SNS was liable for certain taxes concerning the change in ownership [registration duties, mortgage and land registration fees and stamp duties]. However, it paid only a fixed amount, instead of a percentage of the total amount.

The General Court examined whether the applicant received an advantage. In this regard, it noted that the Italian law regulating the privatisation of the Tirrenia group exempted it from any tax that is normally applicable to privatisation transactions. [paragraph 46 of the judgment]

It considered that the Commission correctly found that the fixed amount of EUR 200 paid by the applicant, instead of EUR 1.7 million, conferred an advantage. [paras 48-49]

SNS, however, argued that it was wrongly identified as the beneficiary of that aid. According to SNS, the tax advantages in question were intended to facilitate the sale of Siremar which was the real beneficiary of that aid.

The Court recalled that Article 107(1) TFEU does not distinguish according to the causes or objectives of the measures concerned, but defines them according to their effects. [para 52] The objective of the Italian measure was not relevant for the purposes of examining the existence of State aid to the applicant. [para 53]

On this issue, SNS made a rather clever argument. In the absence of the tax measure at issue, the prices in the bids for the purchase of Siremar would have been lower by an amount corresponding to the cost of that measure. According to SNS, the advantage absorbed in full by Siremar.

However, the Court rejected that argument on the grounds that the recovery of State aid involves the repayment of the advantage conferred to its recipient and not the repayment of any economic benefit derived by that beneficiary from the exploitation of that advantage. The economic benefit may be larger or smaller than the aid advantage. [para 55]

At this point the Court cited case C-164/15 P concerning exemptions from certain Irish travel taxes that benefitted Ryanair and Aer Lingus. I think the facts of that case are similar but the effects are significantly different from the present one. In that case, the two airlines did receive an advantage. However, they claimed, at the recovery stage, that they should not repay the aid because they had passed it on to passengers in the form of lower fares. But, of course, even if they did lower their fares, they could still have benefitted from economies of scale or from flying their aircraft at a higher capacity. The applicant here is also claiming that the benefit went on to Siremar, but the channel is different. It contended that it received no advantage because it offered a higher price for Siremar. The higher price in a way neutralised the tax exemptions. Please note that in the Irish airlines case the advantage came first to the airlines and the economic benefit to passengers later on. Because the advantage goes through the recipient, the economic benefit achieved by the recipient depends on how well or badly the recipient exploits the advantage. In essence, SNS argued that it received no advantage at all, not that it derived no benefit because it passed the advantage to a third party.

It is also worth noting that the Court of Justice ruled, in case C‑362/19 P, European Commission v Barcelona Football Club, that the Commission must make a “global assessment” of the aid measure, taking into account the “context” of the aid. Since a competitive procedure, such as an auction, necessarily incorporates into prices all relevant features and terms of the sale, shouldn’t the resulting price be considered to have taken into account the existence and magnitude of the tax exemptions?

Nonetheless, the Court observed next that the recovery of tax aid is achieved by subjecting the transactions in question to the relevant tax. [para 56]

It further added that the recovery of incompatible aid does not imply a different reconstruction of the past on the basis of hypothetical factors, such as the choices, often multiple, which could have been made by the operators concerned, especially since the choices actually made with the benefit of the aid may prove irreversible. [para 57]

This is correct, but a competitive bidding process is supposed to take into account all relevant factors. In this context, it is not necessary to reconstruct the past.

The Court noted that there was nothing to prevent the applicant from making an offer of a lower amount, not including the amount corresponding to the economic benefit of the measure at issue, or from not submitting a tender at all. [para 58]

This argument of the Court is disingenuous and it actually attempts to reconstruct the past choices of SNS. Even if the price was lower, the Court could not have known ex post whether the tax exemption was or was not taken into account.

At any rate, what the Court said was that a tax exemption always results in an advantage in the meaning of Article 107(1), even if the advantage is in practice offset by higher costs borne by the beneficiaries.

Analysis of the compatibility of the aid under Article 106(2) TFEU

SNS claimed that the Commission erred in its assessment of whether the aid was compatible Article 106(2) on services of general economic interest [SGEI].

The Court, first, recalled that the Commission considered that there was no need to assess the compatibility of the aid under Article 106(2) because the aid was not linked to the SGEI provided by SNS. The aid facilitated the sale of Siremar, not the provision of SGEI.

Then the Court noted that the mere fact that the sale of Siremar intended to ensure the continuity of the maritime transport services, which constituted an SGEI, was not sufficient to conclude that any tax advantage granted in the context of that transaction, such as the measure at issue, was necessary for the provision of that SGEI. [para 79]

The measure at issue consisted of a one-off tax advantage, linked to the sale of the Siremar, whereas the SGEI was provided daily over a period of twelve years, first by Siremar and then by SNS, and gave rise to significant compensation, which, moreover, was declared compatible with the internal market. [para 80]

Although the tax exemptions were not linked to the provision of the SGEI, I do not see the relevance of the argument that the tax advantage was one-off. According to the SGEI rules all advantages are quantified and taken into account at the moment the public service obligation is imposed to ensure that the provision of the SGEI is commercially viable [i.e. revenue + compensation can cover costs + reasonable profit] and to prevent overcompensation.

The Court went on to observe correctly that there was no proof that the tax advantage resulting from the measure at issue was necessary for the applicant’s provision of the SGEI in question. It was not apparent that the SGEI could not have been provided in the same way in the absence of that tax advantage. [paras 81-82]

This observation indirectly confirms that one-off advantages can also be taken into account if they are necessary to bridge the net present value of the difference between costs and revenue.

In the end, the General Court dismissed the appeal in its entirety.

[1] The full text of the judgment in languages other than English can be accessed at:



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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