Spain: Tax exemptions may constitute unlawful state aid - KPMG Global
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Spain: Tax exemptions for Church may constitute unlawful state aid

Spain: Tax exemptions may constitute unlawful state aid

The Court of Justice for the European Union (CJEU) today issued a judgment concluding that tax exemptions for the Catholic Church in Spain may constitute unlawful state aid if and to the extent to which they are granted for economic activities.


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An agreement between Spain and the Vatican, prior to Spain’s accession to the European Communities, provides for various tax exemptions for the Catholic Church.

In the case before the CJEU, a religious congregation of the Spanish Catholic Church was the body responsible for a church school near Madrid. The congregation applied for a refund of approximately €24,000 for municipal taxes paid on the construction, installation, and work in respect of a building used by the school as a hall. The hall was used for both state-regulated primary and secondary education, and for non-compulsory educational activities that were not subsidized from public funds and for which fees were charged. The Spanish tax authority refused the refund claim.

A court in Madrid referred the case to the CJEU as to whether the tax exemption applied to a school building must be regarded as state aid prohibited by EU law. The case also raised a fundamental question whether the exemption from certain taxes granted by an EU Member State to a religious community, including for activities which do not have a strictly religious purpose, may constitute unlawful state aid. 

As noted in a release [PDF 166 KB] from the CJEU, today’s judgment states that the tax exemption may constitute unlawful state aid if and to the extent to which the activities carried on in the premises in question are economic activities, which is a matter for the Spanish court to determine.

The case is: Congregación de Escuelas Pías Provincia Betania v. Ayuntamiento de Getafe (C-74/16, 27 June 2017).

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