Spanish football clubs have to pay back millions in illegal state aid

The European Commission has concluded that public support measures granted by Spain to seven professional football clubs gave those clubs an unfair advantage over other clubs in breach of EU State aid rules.

Spain has to recover the illegal aid from the seven clubs, namely FC Barcelona, Real Madrid, Valencia, Athletic Bilbao, Atlético Osasuna, Elche and Hercules.

The first investigation concerned tax privileges in favour of Real Madrid, FC Barcelona, Athletic Bilbao and Atlético Osasuna.

In Spain, professional football clubs are considered as limited liability companies for tax purposes. However, these four clubs were treated as non-profit organisations, which pay a 5% lower tax rate on profit than limited liability companies.

The four clubs benefitted from this lower tax rate during over 20 years, without an objective justification.

Spain has in the meantime adjusted its legislation on corporate taxation to end this discriminatory treatment.

Thee clubs now have to return the unpaid taxes, which will be no more than €5 million per club but the precise amounts that need to be paid back are to be determined by the Spanish authorities in the recovery process.

In a second investigation, the Commission saud a land transfer between Real Madrid and the City of Madrid was overvalued by €18.4 million, giving Real an unjustified advantage over other clubs. It will have to pay back €18.4 million.

The EC also investigated guarantees given by the State-owned Valencia Institute of Finance (IVF) for loans granted to Valencia football clubs Valencia, Hercules and Elche. At the time, those clubs were in financial difficulties. The public guarantee allowed the clubs to obtain the loans on more favourable terms.

This gave them an economic advantage over other clubs, who have to raise money without state backing, and the state financing was not linked to any restructuring plan to make the clubs viabl.

The amounts paid will be €20.4 million for Valencia, €6.1 million for Hercules and €3.7 million for Elche.