FC Barcelona and Real Madrid to be forced to repay illegal state aid
FC Barcelona and Real Madrid will be forced to repay millions of euros in illegal state aid after the EU’s highest court ruled that Brussels was correct in declaring that the favorable tax deals they enjoyed during a quarter of a century were illegal.
The decision of the European Court of Justice upholds previous decisions of the European Commission and comes as Barcelona, the highest paying football club in the world, is going through one of the biggest crises in its history.
This week, police arrested the club’s former president, current chief executive and general counsel, in a separate court case ahead of a vote on Sunday to decide on its next president. Barcelona, which recorded a loss of € 100m last year, also face debt of more than € 1bn.
In 2016, EU supreme competition chief Margrethe Vestager ordered four Spanish football clubs to repay tens of millions of euros received since the 1990s in the form of real estate transactions, tax breaks and loans on favorable terms.
FC Barcelona then challenged the decision before the General Court, the second highest court in the EU, which overturned the commission’s judgment. However, after a final call from Brussels, the ECJ ruled in favor of the EU.
In its decision of Thursday – which is final – the ECJ ruled that the tax regime “is likely to favor clubs operating as non-profit entities over clubs operating as sports companies with limited liability”, considering that it could therefore be characterized as unlawful State aid. in accordance with EU rules.
The General Court had previously overturned the Brussels decision for what it described as lack of sufficient evidence of the illegality of the tax regimes offered to the four football clubs, which also include CA Osasuna and Athletic Bilbao.
But the commission questioned the “heavy burden of proof” on regulators in its appeal, arguing that a lower tax rate was obviously more favorable than a higher rate.
The ECJ argued that the difficulty of assessing the extent of state aid – due to the complexity of tax deductions – did not prevent the commission from prohibiting government practices which it believed provided unfair benefits. to sports clubs.
She declared: “The impossibility of determining, when adopting an aid scheme, the exact amount, per tax year, of the advantage actually conferred on each of its beneficiaries, cannot prevent the commission to note that this scheme was capable, from that moment, of conferring an advantage on these beneficiaries.
The Spanish government said Thursday it had “absolute respect” for the court ruling.
Real Madrid have said they have not received state aid and that the legal regime that sets them apart from other joint-stock football clubs has led them to pay a higher tax bill. FC Barcelona did not immediately respond to requests for comment.
The stop will be seen as a big victory for Brussels regulators who have tried for years to prevent high-performing business clubs from freeriding at the expense of taxpayers.
Thursday’s decision is the second time that Brussels has won an appeal of its state aid rulings in recent weeks. Last month, General Court judges dismissed a legal challenge by low-cost airline Ryanair against state aid granted to competitors on discriminatory grounds.
At the moment, Barcelona are facing the fallout from what the Spanish media are dubbing Barçagate – allegations, denied by the club, that they have bribed outside groups to defame opponents of former president Josep Maria Bartomeu on Facebook.
Bartomeu was temporarily detained by Catalan police earlier this week. He, the club and others involved in the case, which is under investigation by a Barcelona court, have all denied any wrongdoing.