The European Court of Justice has held that two Basque tax relief measures-a reduction in the basis of assessment for corporation tax for newly established firms and a tax credit amounting to 45% of certain investments-are State aid incompatible with the common market.

In 1993, in relation to corporation tax, three territories in Spain (Territorios Históricos of Álava, Vizcaya and Guipúzcoa) introduced new tax measures, involving in particular a tax exemption for some newly established firms.

Over the years from 1994 to 1999 the provinces of Álava, Vizcaya and Guipúzcoa adopted measures providing that certain investments were to receive a 45% tax credit in relation to corporation tax. Also in 1996, the three territories approved a reduction in the basis of assessment to corporation tax for newly established firms where certain conditions were satisfied by those firms.

Neither the measures for 45% tax credits on investments nor the measures for reduction in the basis of assessment to corporation tax were notified to the Commission when adopted.

In 1999 the Commission initiated a formal investigation procedure in relation to the 45% tax credits and reductions in the tax base applied in the three territories. In July 2001, the Commission found that the measures constituted State aid incompatible with the common market. The Commission ordered Spain to recover the aid from the beneficiaries. The three territories brought appeals before the European Court of Justice.

By its judgment delivered on 9 June 2011, the Court upheld the Commission's decision.

The press release, which sets out further details on this case, was published on the EU website at http://curia.europa.eu/jcms/upload/docs/application/pdf/2011-07/cp110078en.pdf

The full text of the judgment is published on the CURIA website at http://curia.europa.eu/jurisp/cgi-bin/form.pl?lang=EN&Submit=rechercher&numaff=C-471/09.