Regional taxes in Spain on large retail establishments are compatible with EU law
The Court of Justice of the European Union has just ruled that regional taxes in Spain on large retail establishments are compatible with EU law. The purpose of the taxes is to contribute to environmental protection and to town and country planning by attempting to correct and counterbalance the adverse effects of large retail establishments (judgment of The Court of Justice of European Union, April 26).
Three Spanish autonomous communities, Catalonia (Case C-233/16), Asturias (Cases C-234/16 and C-235/16) and Aragon (Cases C-236/16 and C-237/16) introduced regional taxes on large retail establishments situated in their respective territories. Those taxes are intended to offset the potential impact of those large retail establishments on the territory and the environment, as
revenue from those taxes is to be used to fund environmental action plans and make improvements to infrastructure.
The Asociación Nacional de Grandes Empresas de Distribución (‘the ANGED’), a national association of large distribution companies, challenged the lawfulness of the taxes in question before the Spanish courts and filed a complaint with the Commission on that subject. The Tribunal Supremo (Supreme Court, Spain), which will have to give a ruling on the actions brought by ANGED, is uncertain as to the compatibility of the regional taxes with freedom of establishment.
That Court also asks whether the exemptions available from those three regional taxes could constitute State aid prohibited under the FEU Treaty. It therefore referred questions to the Court of Justice to that effect.
In today’s judgments, the Court rules that neither freedom of establishment nor the law on State aid preclude taxes on large retail establishments such as those at issue. As regards freedom of establishment, the Court finds, first of all, that the criterion chosen for determining which establishments are subject to the tax, relating to the sales area of the establishment, does not give rise to any direct discrimination. It adds that that criterion does not appear in most cases to place at a disadvantage nationals from other Member States or companies whose seat is in another Member State.
Next, the Court examines whether the exemptions from the regional taxes in question constitute State aid for the purposes of the FEU Treaty. It states that it cannot be excluded a priori that the
criterion relating to the sales area enables an advantage to be given, in practice, to certain undertakings or in respect of the production of certain goods by mitigating their tax burden vis-à-vis those subject to the tax in question. The Court explains that it must therefore be determined whether retail establishments excluded from the scope of those taxes are in a comparable situation to establishments that come within their scope.
The Court points out that the purpose of the taxes in question is to contribute towards environmental protection and town and country planning, by attempting to correct and counteract the environmental and territorial consequences of the activities of large retail establishments (deriving, in particular, from the ensuing rise in traffic flows), by having those establishments contribute to the financing of environmental action plans and measures to improve infrastructure.
The Court concludes that exemptions based on the size or nature of the activities of an establishment provided for by taxes such as those in question do not constitute State aid for the purposes of the FEU Treaty, provided that the establishments exempted from the tax do not have as significant an adverse effect on the environment and on town and country planning as the others.
However, with regard to Catalonia, the effect of the criterion drawing a distinction for fiscal purposes on the basis of the individual nature of retail establishments is to exempt from the tax large collective retail establishments with a surface area equal to or above the tax threshold. The Court considers that that criterion differentiates between two categories of large retail establishment that are objectively in a comparable situation in the light of the objectives of environmental protection and town and country planning. As a result, the exemption of collective
establishments from that tax is selective and constitutes State aid, as the other conditions set out in the FEU Treaty are met.