Equality under State aid rules and VAT

Abstract

It is often overlooked that within the EU, tax concessions and advantageous tax procedures can constitute prohibited State aid not only in the field of direct taxation, but also within the framework of the harmonised system of EU VAT. The potential for conflict has indeed increased in recent years, because the European Court of Justice (CJEU) has successively expanded the concept of selective State aid laid down in Art. 107 (1) of the Treaty on the Functioning of the EU (TFEU). This article offers a critical analysis of how the CJEU has transformed the State aid prohibition into a broad non-discrimination standard, and it explores how this affects national legislation on preferential VAT regimes. In particular, the article highlights the increased relevance of correctly identifying the guiding principles of the VAT system, and how different perceptions of those idées directrices of the European VAT influence the outcome of the equal treatment analysis inherent to Art. 107 (1) TFEU. This is exemplified, in particular, with respect to VAT grouping regimes. Finally, the interaction with other equality standards is also discussed.