• Professional News
  • 08 August 2012

The European Court of Justice finds that tax relief to a state-owned company is not contrary to EU law

The market economy investor principle may also apply when a State converts a tax receivable to a capital contribution.

In this case, France had waived approx. EUR 900m in taxes from State-owned energy company EDF. France stated that this was a commercially rational investment, see the market economy investor principle. This was rejected by the Commission, which stated that the principle could not be applied in connection with the exercise of the State’s powers as a tax authority.

Both the Court and the European Court of Justice set aside this assessment and pointed out that a State may in principle convert a tax receivable to an investment and thereby meet the market economy investor principle. It is, however, required that the State at the time of the decision acted rationally and in pursuance of an investment strategy. The judgment indicates that it will in many cases be the Member States that have to prove that the transaction is commercially rational.

(Case no. C-124/10P the Commission vs. France and Electricité de France)

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