European Competition Law provides a wide-ranging review of the European rules relating to competition: restrictive agreements, abuse of a dominant position, impact of intellectual property rights, procedure, merger control, State aid.

European Competition Law

Article 107(1) prohibits selective advantages. An advantage derogating from the tax system under ordinary law can for example be the result of the aim of the national legislature to promote financial support for organizations regarded as socially deserving. It cannot however avoid being categorized as State aid since Article 107 TFUE does not distinguish by reference to the causes or aims set out  …

Justification by the nature and general scheme of the system of charges

Article 107(1) prohibits selective advantages. An advantage derogating from the tax system under ordinary law can for example be the result of the aim of the national legislature to promote financial support for organizations regarded as socially deserving. It cannot however avoid being categorized as State aid since Article 107 TFUE does not distinguish by reference to the causes or aims set out in the State measure. The fiscal nature, the economic or social aim or objectives relating to environmental protection or the safety of persons pursued by a measure cannot in principle shield it from the prohibition . However, according to the Court of Justice, “the concept of State aid does not refer to State measures which differentiate between undertakings and which are, therefore, prima facie selective where that differentiation arises from the nature or the overall structure of the system of charges of which they are part” .

When assessing the selective nature of a measure, the review authority determines whether the differentiation between undertakings, as regards advantages or burdens, introduced by the measure in question, arises from the nature or the general structure of the overall scheme which applies. Where such a differentiation is based on objectives other than those pursued by the overall scheme, the measure in question will, in principle, be considered as satisfying the condition of selectivity . If it is based on both the general system of the overall scheme and another objective, the EU court  considers that it is not subject to the prohibition: a tax measure is not selective insofar as it remains consistent with the pursued aim - environmental protection  - and the internal logic of the system. 

An advantage may be justified by the nature and general scheme of the system where it is aimed at offsetting an alteration in the legal framework  or unequal treatments , or ensures that for the purpose of redistribution the criterion of ability to pay is observed . By contrast, tax concessions which do not seem to mitigate any unequal treatment are most often deemed unjustified . This is the case where an authorization system allows losses to be carried forward to the next tax year, insofar as, when assessing the application for authorization, the relevant authority determines the beneficiaries on the basis of criteria unrelated to the tax regime, such as the maintaining of employment . Likewise, the restructuring clause which does not cover all undertakings whose ownership has changed substantially, but applies only to those in difficulty, is selective insofar as its objective - to support ailing companies in the context of the economic crisis  - does not come within the founding principles of the tax system . On the othe hand, a legislature which makes a distinction between statutory and fiscal levies on bets place on races depending on the country where they take place does not confer an advantage within the meaning of Article 107(1) TFEU insofar as it accords with the scheme of the system characterized by amounts staked on races run abroad being subject to the statutory and fiscal retentions of each country in which the horse races concerned are run . However, the Commission cannot limit itself to finding that an exemption reserved to certain public undertakings is justified by the nature and general scheme of the system on the ground that it is based on a law specifically applying to public undertakings without seeking whether the recourse to the legislative instrument was not chosen with the aim of enabling them to escape the EU provisions on State aid .

Case 173/73 Italy v Commission [1974] ECR 709, LawLex200400003458JBJ.

Case C-88/03 Portugal v Commission [2006] ECR I-7115, LawLex200700001455JBJ: the State aid in the form of automatic reduction in the tax rates in favor of all economic operators in the Azores, granted by the Autonomous Region of the Azores in order to compensate for the disadvantages related to the insularity, cannot be justified by the nature or overall structure of the Portuguese tax system due to the mere fact that it is adopted as part of a regional tax system conceived in such a way as to ensure the correction of such inequalities. See also Case 173/73 Italy v Commission, cited above: holding that the nature or general scheme of a social security system could, according to the Court of Justice, justify a partial reduction of social charges, in particular where the difference in the basis for the calculation of social security contributions and the potential loss of tax revenue because of the low rates of pay arising therefrom are inherent in the system in question.

Case T-287/11 Heitkamp BauHolding GmbH, Judgment of 4 February 2016, LawLex201800000311JBJ.

Case T-471/93 Tiercé Ladbroke v Commission [1995] ECR II-2537, LawLex200500005064JBJ.

Case T-442/03 SIC v Commission [2008] ECR II-1161, LawLex200900000064JBJ: the Commission cannot limit itself to finding that an exemption reserved to certain public undertakings is justified by the nature and general scheme of the system on the ground that it is based on a law specifically applying to public undertakings without seeking whether the recourse to the legislative instrument was not chosen with the aim of enabling them to escape those charges; Case T-119/07 and T-207/04 Italian Republic, Eurallumina SpA, Judgment of 17 September 2019, LawLex202000002004JBJ: the Member State which merely claims that the exemptions from the excise duty on mineral oils used as fuel for the production of alumina do not constitute State aid, but rather fall within the nature and logic of its national tax system, has not demonstrated the existence of a comprehensive fiscal scheme to systematically exclude the taxation of dual-use energy products or some of them, such as energy products used in metallurgical processes. 

Case T-210/02 British Aggregates v Commission [2006] ECR II-2789, LawLex200700001487JBJ

Case T-210/02 British Aggregates v Commission, cited above.

Commission Decision No 2001/371/EC of 21 December 2000, Exemption from mineral levies, LawLex200500004724JBJ: when a tax exemption based on compliance with pollution quotas is granted, the difference between horticultural undertakings and traditional farmers cannot be justified by the ecological purpose of the charge system at issue where various mineral input norms are applied; Case C-143/99 Adria-Wien Pipeline and Wietersdorfer & Peggauer Zementwerke [2001] ECR I-8365, LawLex200500004865JBJ: the justification for a national measure which reserves a rebate of certain energy taxes to undertakings whose activity consists primarily in the manufacture of goods, constitutes a State aid insofar as the advantage, although based on an objective criterion, is not to be found in the nature or general scheme of the taxation system concerned; Case C-159/01 Netherlands v Commission [2004] ECR I-4461, LawLex200500004494JBJ: when a tax exemption is granted, the difference between horticultural undertakings and traditional farmers cannot be justified by the ecological purpose of the charge system at issue in the absence of scientific proof that cultivation in glasshouses or on substrate carried out only by horticultural undertakings is less polluting; Commission Decision No 2005/468/EC of 30 June 2004, Sioen Fibres SA, LawLex200600001238JBJ: an exemption from an energy tax only for undertakings of the manufacturing sector is not justified by the internal logic of the tax insofar as energy consumption by all sectors is equally damaging to the environment; Case T-210/02 British Aggregates v Commission [2006] ECR II-2789, LawLex200700001487JBJ: introducing a sectoral environmental levy does not constitute a specific advantage within the meaning of Article 107(1) TFEU insofar as environmental levies are by their nature specific measures adopted by the Member States which, as part of their environmental policy, are free to choose the products which will benefit from the exemption even if that choice is based on a desire to maintain the international competitiveness of certain sectors.

Case C-128/03 AEM [2005] ECR I-2861, LawLex200500009576JBJ: different treatment of undertakings in relation to charges resulting from the nature and general scheme of the collection system, does not constitute a State aid per se.

Case T-475/04 Bouygues and Bouygues Télécom v Commission [2007] ECR II-2097, LawLex200800000237JBJ: the reduction in the fee granted to two UMTS licensees, in order to ensure equal treatment in relation to a third licensee having applied later, is not sufficient to identify a selective advantage given the nature and general scheme of the system in question which allows the Member States to freely fix the price of the licenses and due to the risk of withdrawal of the first two operators failing any equal treatment approved by the Court of Justice, Case C-431/07 P Bouygues and Bouygues Télécom v Commission [2009], LawLex200900002068JBJ.

Case C-88/03 Portugal v Commission [2006] ECR I-7115, LawLex200700001455JBJ: a measure which creates an exception to the application of the general tax system may be justified by the nature and overall structure of the tax system if the Member State concerned can show that that measure results directly from the basic or guiding principles of its tax system. In that connection, a distinction must be made between, on the one hand, the objectives attributed to a particular tax scheme which are extrinsic to it and, on the other, the mechanisms inherent in the tax system itself which are necessary for the achievement of such objectives, and which ensure that for the purpose of redistribution the criterion of ability to pay is observed. For a difference in fiscal treatment for betting on horse-races depending on the application tax laws see Case T-471/93 Tiercé Ladbroke v Commission [1995] ECR II-2537, LawLex200500005064JBJ. See also Case C-72/91 Sloman Neptun v Bodo Ziesemer [1993] ECR I-887, LawLex200500004927JBJ. 

Commission Decision No 96/369/EC of 13 March 1996, Fiscal aid given to German Airlines, LawLex200500005364JBJ: a special depreciation, derogating from accelerated or straight-line depreciation, constitutes a State aid and not a general tax measure where, inter alia, it seems to be in no way indispensable to the smooth functioning of the tax system of a State; No 2002/581/EC of 11 December 2001, Measures for banks, LawLex200600000523JBJ: an aid scheme in the form of reduction in tax granted in the banking sector cannot be justified by the nature or general scheme of the system insofar as it has the effect of improving the competitiveness of certain merging banks, and only in relation to certain operations; Case C-409/00 Spain v Commission [2003] ECR I-1487, LawLex200500004601JBJ: an aid scheme in favor of natural persons and SMEs, to the exclusion of large undertakings, constitutes a selective measure within the meaning of Article 107(1) TFEU where the differentiation does not arise from the nature and structure of the system of charges in the general interest; Case C-222/04 Cassa di Risparmio di Firenze and others [2006] ECR I-289, LawLex200800000247JBJ: the tax aid which derogates from the ordinary tax regime which is not based on the measure's logic or the technique of taxation, but results from the national legislature's objective of financially favoring organizations regarded as socially deserving, is not justified by the nature or scheme of the tax system of which it forms part and is therefore selective; Case T-211/05 Italy v Commission, LawLex200900003053JBJ: an aid scheme in the form of tax relief granted upon admission to listing cannot be classified as a measure intended to encourage undertakings to obtain a listing, where it is not directly related to the costs incurred as a result of the listing or to other disadvantages arising from that listing but to the recipients' total income.

Case C-6/12 P Oy, Judgment of 18 July 2013, LawLex201300001166JBJ.

European Competition Law

392. Justification by the nature and general scheme of the system of charges

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392. Justification by the nature and general scheme of the system of charges

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