The European Commission (EC) decided this Friday to take the United Kingdom before the Court of Justice of the European Union (CJEU) for not fully recovering illegal state aid of up to 100 million euros, granted as tax exemptions for passive interest and copyright (“royalties”) in Gibraltar.
Brussels specified in a statement that the aid was granted before the country left the community club. In December 2018, the EC confirmed the illegality of the corporate tax exemption regime for passive interest and royalties applied between 2011 and 2013 in El Peñón, as well as five tax resolutions granted in that same period.
The Commission’s decision declared these measures illegal and incompatible with the Community rules on State aid. Hence, the United Kingdom had to recover them after granting them to the beneficiaries to eliminate the distortion of competition generated by these tax exemptions.
Gibraltar’s assistance as a rebate in corporate tax for interest obligations and royalty gave unfair advantages to some multinational companies and had to be retrieved by the authorities of Britain and Gibraltar, declared the Vice-President of the EC in charge of Competition, Margrethe Vestager.
He stressed that “more than two years after” the Community Executive declared the aid illegal, they have not been fully recovered, and “not enough progress has been made in restoring competition.” “That is why we have decided to send the United Kingdom to the Court of Justice for not implementing that decision, ” noted Danish policy.
The deadline is April 23, 2019
Gibraltar’s deadline to recover all illegal aid was April 23, 2019, four months after Brussels notified its decision.
According to the agreement on leaving the community club, the EC has the option of sending the CJEU to the United Kingdom for not implementing decisions of the Community Executive taken before the end of the transition, which concluded on December 31 and during which it continued applying EU law on British territory, even if it was no longer a Member State.
The Commission stated that it has remained in “regular” contact with the Peñón authorities, which “have already recovered part of the beneficiaries’ illegal aid.” However, he pointed out that Gibraltar has identified four beneficiaries subject to the return order, but only in two cases has recovery been completed, and “less than 20% of the total illegal aid has been reimbursed.”
He indicated that aid from Mead Johnson Nutrition and partially from Fossil still need to be reimbursed. Mead Johnson Nutrition appealed against the Commission’s decision to the General Court of the EU. Still, this step does not mean the suspension of the aid’s recovery. That company and Fossil have also launched legal proceedings before the British courts.
In Fossil’s case, a Gibraltarian court has sent the case to the CJEU. Meanwhile, UK authorities and courts have delayed or suspended recovery orders.