Since 2020 we have attended a revolution in the field of state aid which has allowed Member States to have been authorized by the European Commission to adopt support measures for their companies for billions of dollars, reaching levels of aid not seen for many decades in Europe.

These changes have not been brought about by reforms in the provisions of the treaties or European regulations on the matter, but by the approval by the Commission of successive time frames in the matter with the aim of making the notification procedures more flexible and approval of state aid.

The first one was the new Temporary Framework on state aid in the context of Covid-19 which, partly following the model already adopted by the Commission in 2008 during the financial crisis, was intended, according to the statement of the Commissioner Vestager when announcing the intention to adopt it, that companies have the necessary liquidity to maintain their activities, or that they can temporarily freeze them if necessary, and, that support for companies in a Member State does not undermine the unity of the internal market.

This Temporary Framework was adopted in March 2020 and remained in force, with various modifications, until June 2022, except in relation to the solvency support measures and investment that can be maintained until December 2023, and allowed the adoption by all Member States of more than 980 aid measures for an amount exceeding 3,2 trillion euros.

The new situation created by the Russian invasion of Ukraine and the energy crisis and supplies it has caused, led the Commission to adopt in March 2022 a Crisis Time Frame to allow Member States to take certain measures to help companies affected by the crisis or by war-related sanctions and penalties, as well as to compensate companies for high gas and electricity prices. This framework, also modified on several occasions, will remain in force, in principle, until December 2023.

Finally, last week, the Commission published a new Crisis and Transition Time Frame which modifies and extends the previous Temporary Framework with the aim of facilitating and accelerating Europe's ecological transition, as part of the second Pillar of Green Pact Industrial Plan presented on February 1. The new Temporary Framework will be in force in principle until December 2025, its purpose is stimulate investments in favor of a more rapid implementation of renewable energies and support the decarbonization of the industry and the production of the necessary equipment for the transition to net zero emissions. The new Temporary Framework is accompanied, in addition to a reform of the General Regulation of Exemption by Categories with the essential purpose of expediting investment and financing for the production of clean technologies, facilitating the execution of important projects of common European interest and facilitating the granting of aid to regulate energy prices.

In parallel to the relaxation of the authorization procedures for State aid notified to the Commission, in recent years we have also witnessed a development of the jurisprudence of the Court of Justice of the European Union which, particularly in the field of fiscal State aid, has meant a certain hardening in the interpretation of some of the constituent elements of that concept.

For example, sentence Commission/FC Barcelona declared in March 2021 that the assessment of the existence of an advantage granted by an aid measure that was not timely notified before its application must be made by the Commission taking into account the when the aid was granted, and not to the actual effects of the measure in question. Therefore, the fact that in that caso the questioned measure allowed several football clubs to apply a lower tax rate to the rest of the teams in their corporation tax, it was considered to constitute State aid, despite the fact that it was shown that those same clubs were subject to certain rates of deduction for extraordinary reinvestments (income derived from the transfer of players) lower than the rest, which determined that, in practice, in several years its tax regime was less advantageous.

Likewise, in the recent judgment in the caso of the tax lease, the regime is considered selective and, therefore, constituting State aid, because the tax authorities had discretion when adopting certain decisions related to access to it, without prejudice to the fact that during the process it was demonstrated that when adopting such decisions they never incurred in arbitrariness or in discrimination against any of the applicants.

Thus, in recent years, while the Commission's authorization of aid measures notified to it is made more flexible and easier for Member States, control by the Commission itself and the CJEU of non-notified aid is stricter.

Undoubtedly, the different administrations must take note of the trend and ensure that any measure that could be questioned by the Commission is duly notified before its application. The moment could not be more opportune.  

Miguel Munoz Perez

Partner responsible for Tax Procedure at PwC Tax & Legal.

Article originally published in the Blog Fide in the withfideinitial