On 21 June 2012, the ECJ handed down its judgment on an appeal against a General Court ruling which dismissed an action by banks BNP Paribas and BNL against the European Commission’s decision that an Italian aid scheme in favour of restructured banks was incompatible with the EU. In 1990, the Italian government took measures to facilitate the reorganisation of previously state-owned banks, in particular, it introduced a derogating tax scheme which facilitated transferring fixed assets and other banking assets held by public entities to existing or newly established private credit institutions. The Commission found that this scheme did not constitute State aid as it was justified by the inherent logic of the tax system. This scheme was then adapted and revised, including releasing hidden gains resulting from privatisations of banks in the 1990s, and authorising the payment of substitute tax in three instalments without interest. These tax advantages were not notified the Commission for approval and it opened an in-depth investigation into the scheme in 2007, concluding in March 2008 that the scheme was incompatible with the internal market. It found that these advantages gave certain credit institutions a selective advantage which had a negative impact on competition, and which could not be justified by the nature of the Italian tax system. Therefore, the scheme was illegally implemented by Italy and had to be recovered from the recipient banks. In 2010, the General Court dismissed BNP Paribas and BNL’s (two recipients of the aid) appeals to annul the Commission’s decision. BNP Paribas and BNL then appealed the ECJ. The ECJ found that the General Court had erred in law by merely observing the Commission’s decision and not carrying out a comprehensive review of whether the tax realignment scheme constituted State aid. Therefore, the ECJ set aside the General Court’s judgment but considered itself appropriate to give a final judgment. The ECJ found that Italy’s 2004 Finance Law meant that the scheme now only confers a tax advantage to banking entities and other companies could no longer benefit from it. As a result, the ECJ concluded that the tax scheme did not constitute State aid and could not be justified by the inherent logic of the Italian tax system, and therefore dismissed the appeals. Read more.
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Italian banking tax aid case: European Court of Justice judgment on Italian banking tax aid scheme
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Senior Patent Counsel
Royal DSM NV