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Tax benefit for La Liga four was illegal

Europe’s highest court has upheld a European Commission finding that a Spanish tax law that benefited four of the country’s top football clubs constituted illegal state aid.

The lower General Court had overturned the decision after a challenge brought by Barcelona, but the Court of Justice of the European Union (CJEU) yesterday (4 March) backed the commission.

1990 law

A Spanish law adopted in 1990 obliged all Spanish professional sports clubs to convert into public limited sports companies, with the exception of professional sports clubs that had achieved a positive financial balance during the financial years preceding adoption of that law.

Barcelona, Osasuna, Athletic Bilbao and Real Madrid came within that exception and chose to continue operating in the form of non-profit legal entities. As a result, they enjoyed a special rate of income tax.

As that rate remained, until 2016, below the rate applicable to public limited sports companies, the commission took the view that the legislation constituted unlawful and incompatible state aid, and ordered Spain to discontinue it and to recover the tax from the clubs.

In a 2019 ruling, however, the General Court said the commission should have taken into account separate tax advantages other Spanish football clubs enjoyed as a result of their decision to become public limited companies.

More problems for Barcelona

But the CJEU ruled that the aid scheme at issue was, from the time of its adoption, “liable to favour clubs operating as non-profit entities over clubs operating in the form of public limited sports companies, thereby conferring on them an advantage capable of falling within the scope of Article 107(1) TFEU”.

The court said it followed that, as a result, the commission was not required to examine whether other tax rules would neutralise the advantage to the four clubs of the lower tax rate.

The ruling means the four clubs face tax repayments of millions of euro. It also adds to the turmoil at Barcelona ahead of presidential elections later this week, after star player Lionel Messi (pictured) told the club last summer that he wanted to leave.