2022-04-19-KPMG_s_EU_Tax_Centre-Euro_Tax_Flash_from_KPMG_s_EU_Tax_Centre_5页_320kb

Background:
The case involves the European Commission's investigation into Gibraltar's corporate income tax exemption regime for interests and royalty income, leading to a State aid decision. Spain initiated the complaint, and the Commission found that tax rulings from 2011 to 2013 granted selective advantages, particularly for companies generating those incomes in Holland. The General Court upheld the Commission's finding that the general exemption before December 31, 2013, was unlawful State aid due to creating an economic advantage and lacking justification under the reference tax system.

General Court Decision:
The Court dismissed arguments about double exemption and double non-taxation, confirming that not taxing income constitutes State aid if it provides benefits. It upheld the Commission's decision on general exemption but partially annulled the part related to individual aid granted to the plaintiff from 2014 onward, based on procedural errors during the State aid investigation. The annulment included the recovery order, and the Court ruled that tax rulings can be used after legislative changes but must follow essential procedural requirements. This decision does not affect other tax rulings or the beneficiaries of similar cases.

EU Tax Centre Comment:
The Court's ruling emphasizes the need for procedural compliance in State aid cases. Gibraltar's historical royalty exemption was confirmed as unlawful, but the case highlights potential for State aid post-legislative changes if processes are correct. The Commission can appeal the decision, and this case sets a precedent in ongoing investigations into national tax practices and EU law compatibility, with a notable parallel case pending involving the UK tax exemption scheme.

• Gibraltar changed its tax legislation from January 2014.
• Procedural errors by the Commission may invalidate some State aid decisions.