Global Tax Alert | 23 July 2013

EU Commission concludes that Spanish tax lease scheme constitutes in part illegal state aid

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Aid granted since April 2007 should be refunded

Executive summary

On 17 July 2013, Joaquín Almunia, Vice-President of the EU Commission in charge of competition announced the conclusion of the investigation regarding the nature of the Spanish tax lease scheme and the finding that said scheme partially constitutes an illegal state aid. The consequence of this decision is that the aid granted since April 2007 should be refunded to the Spanish treasury.

The EU Commission's formal decision will likely not be published until September. The EU Commission has already anticipated, however, that the Spanish government will be in charge of determining how, when and in which amount the illegal state aid should be refunded.

Detailed discussion

The Spanish tax lease scheme

The Spanish tax lease scheme, which became effective as of 2003 and was in force until 2011, was not a special regime in itself but rather the result of the combination of the tax regime applicable to financial leases, the tax transparency regime applicable to Economic Interest Groupings (EIGs) and the benefits of the special tonnage tax regime.

Through the combination of the above regimes, an investor would participate in the acquisition or construction of ships with the purpose of obtaining a significant tax return which included the generation of deductible tax losses. In particular, the investor would invest in an EIG (a tax transparent vehicle for Spanish tax purposes) which would be interposed between the constructor of the ship and the charterer. The EIG would enter into a financial lease agreement in respect of the ship with a Spanish leasing company, which would have previously acquired the ship from the constructor, and would, in turn, enter into an operating lease agreement with the charterer. These agreements were entered into during the construction stage of the ship and would allow the EIG to depreciate the ship at an accelerated rate even before the ship was delivered.

Sometime after the construction stage was completed, the EIG was entitled to elect to be taxed under the special tonnage tax regime, which would allow it to be taxed in accordance with a special scale resulting in a reduced effective tax rate on the sale of the ship.

The main implications of the EU Commission's decision

The EU Commission considered that the Spanish tax lease scheme should partially be deemed an illegal state aid since April 2007 as its implementation was not duly notified in accordance with EU regulations.

The investigation of the EU Commission concluded that the Spanish tax lease scheme allows the investors to enjoy the tonnage tax regime which should only benefit companies engaged in the shipping business. Consequently, the investors, not the constructors or the charterers, should refund to the Spanish state the aids they have unduly benefited from.

The competence for determining the terms and conditions under which the refund of the aid should be carried out by the investors corresponds to the Spanish government.

The EU Commission explicitly announced that, regardless that the agreements entered into between the parties of the Spanish tax lease scheme may provide otherwise, the investors are not allowed to pass on the cost of the refunds to the constructors or the charterers.

The new Spanish tax lease scheme

In 2011, the Spanish government notified the EU Commission of the implementation of a new Spanish tax lease scheme. The EU Commission confirmed that such new scheme is compliant with EU policies.

Pursuant to this new Spanish tax lease scheme, in the context of a structure similar to the previous tax lease scheme, the EIG would benefit from an accelerated depreciation of the ship but the benefits of the tonnage tax regime should not apply.


Following this decision from the EU Commission, financial entities and investors which have been a party to Spanish tax lease schemes should analyze their alternatives, including the filing of an appeal against this decision and the execution of the guarantees provided in the corresponding agreements.

Furthermore, the decisions of the Spanish tax authorities on how, when and in what amount the aids should be refunded will be key in the analysis of potential alternatives.

For additional information with respect to this Alert, please contact the following:

Ernst & Young Abogados, Madrid
  • Adolfo Zunzunegui Ruano
    +34 91 572 7889
  • Maximino Linares Gil
    +34 91 572 7123
Ernst & Young Abogados, Barcelona
  • Elizabeth Malagelada Prats
    +34 93 366 3894
Ernst & Young LLP, Spain Tax Desk, New York
  • Inigo Alonso Salcedo
    +1 212 773 8692

EYG no. CM3672