State Aid and Tax Rulings

April 2018

CPI Europe Column edited by Anna Tzanaki (Competition Policy International) & Juan Delgado (Global Economics Group) presents:

State Aid and Tax Rulings By By Georgios Petropoulos (Bruegel)¹

State aid is defined as an advantage in any form whatsoever conferred on a selective basis to undertakings by national public authorities. Therefore, subsidies granted to individuals or general measures open to all enterprises do not constitute State aid. Tax reliefs can be considered as state aid only when they give the recipient an advantage on a selective basis (for example to specific companies or industry sectors).

The Article 107(1) The Treaty on the Functioning of the European Union (TFEU) considers that “any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market.”. A company that receives government support gains an advantage over its competitors and distorts market competition. TFEU generally prohibits state aid unless it is justified by reasons of general economic development. The European Commission is in charge of ensuring that State aid complies with EU rules.

The European Commission based on recent case-law² considers that a measure by which the public authorities grant