European Court of Justice rules in favour of broader state aid concept in landmark judgment

On 21 December 2016, the European Court of Justice (the "ECJ") handed down its much-awaited judgment in the so-called Spanish goodwill case. In this landmark ruling, the ECJ sets aside two General Court judgments which had raised the bar for finding "selectivity" — one of the key conditions that must be satisfied in order for a tax measure to be classified as ‘State aid’.

The ECJ holds that, contrary to the ruling of the General Court, in order to demonstrate the selectivity of a national fiscal measure, the European Commission (the "Commission") is not required to identify a particular category of undertakings that benefit from it. As a consequence, tax measures which are in principle open to all undertakings may nevertheless be considered selective and classified as State aid in so far as they imply a unjustified deviation from the "regular tax regime".

This ruling is likely to encourage the Commission to continue using state aid law to tackle what it perceives as unfair tax avoidance or tax advantages. However, the implications of this judgment for recent cases regarding tax rulings, such as those concerning Apple, Starbucks and Fiat, should not be overstated.

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