The Battle of Bilbao in the 21st century: no taxation for Spanish Port Authorities

One of the issues we have addressed several times in our Shipping & Transport Bulletin is the taxation of Port Authorities in European ports. The topic is particularly delicate for Italy since – as we will explain below – a procedure initiated by the European Commission [1] is in progress precisely in order to verify the compatibility with the European legislation of the taxation system applied to Italian Port System Authorities.

In this article we wish to examine a similar situation involving the Spanish Port Authorities.

Indeed, the information about the appeal lodged by the Autoridad Portuaria de Bilbao (hereinafter “AP Bilbao”) against the decision of the European Commission of 8 January 2019 [2], concerning the taxation of ports in Spain, as well as against the decisions of the European Commission of 7 March 2019 [3] and 15 November 2019 [4] (”Contested Decisions”) [5] has been recently published in the Official Journal of the European Union.

The Contested Decisions state that the tax benefits received by Spanish ports, including the port of Bilbao, are incompatible with the European free market and competition rules.

The European Commission, by the Contested Decisions, had challenged the fact that (i) in Spain port authorities were exempt from corporate income tax in respect of their main sources of income, i.e. port taxes and/or revenue from state concessions; while (ii) in the Basque Country, port authorities were even completely exempt from corporate income tax.

According to the European Commission, said benefits represent State aid to all intents and purposes.

In November 2019, following the above-mentioned European Commission Decision of 8 January 2019, Spain agreed to amend its corporate income tax legislation to bring it in line with EU State aid rules. In particular, the Spanish authorities committed to subject Spanish ports, including those located in the Basque Country, to the ordinary corporate income tax rules starting from 2020. The Commission welcomed this commitment and formally accepted it by the above-mentioned Decision of 15 November 2019.

The AP Bilbao, however, not agreeing with the Contested Decisions and not wanting to lose the preferential regime it has been enjoying up to now, has appealed against the Contested Decisions before the Court of the European Union.

The AP Bilbao based its action on five pleas in law:

  1. The tax exemption measures which are the subject of the Contested Decisions do not constitute an economic advantage, while the abolition of said exemption imposes an economic burden on AP Bilbao. Indeed, the latter would be anyway obliged to finance investments in the general interest from its own resources.
  2. A full analysis of the available data was allegedly not carried out during the investigation conducted by the European Commission.
  3. The tax exemption does not distort or threaten to distort competition and in no way affects trade between Member States. Indeed, the exemption measures which are the subject of the Contested Decisions do not improve the competitive position of port authorities and, therefore, cannot affect trade between Member States. For this reason, said relief does not constitute State aid within the meaning of Article 107 TFEU.
  4. Moreover, the tax exemption is not selective, since it does not constitute an exception to the reference system, which is the reason why such measure does not constitute State aid within the meaning of Article 107 TFEU.
  5. Finally, even if the exemption is to be regarded as State aid, it is still compatible with the internal market. Indeed, pursuant to Article 107(3)(c) TFEU, aid to facilitate the development of certain economic activities or of certain economic areas may be considered compatible with the internal market provided that it does not adversely affect trading conditions to an extent contrary to the common interest. There is no doubt, according to the AP Bilbao, that the tax exemption in question would allow the development of port activity in Spain. In fact, without this preferential regime, the AP Bilbao would not be able to carry out the port investments it is currently developing.

We will be monitoring developments in this matter, as this issue is of particular interest also to the Italian Port System Authorities [6].

As said, in fact, the European Commission has found a breach of Article 107 TFEU in the tax exemption granted to the bodies responsible for the management of ports in Italy, since also this exemption allegedly constitutes State aid.

Indeed, according to the European Commission “the differential treatment between port authorities (which are not subject to corporate income tax) and the other companies operating in Italy (which are subject to it) constitutes a selective advantage in favour of the former, which cannot be justified by the nature and logic of the Italian tax system applicable to companies. Such preferential tax treatment also threatens to distort competition and affect trade within the Union” [7].

Italy has always defended itself by stating that the Italian Port System Authorities would not qualify as enterprises, being non-economic public bodies. Such approach – as already pointed out in our previous interventions on the topic [8] – collides with the prevailing view at EU level. We highlight in fact that the European Court of Justice has repeatedly clarified that “the concept of an undertaking covers any entity engaged in an economic activity, regardless of its legal status and the way in which it is financed, and that any activity consisting in offering goods and services on a given market is an economic activity” [9].

The European Commission, furthermore, has repeated several times that “the commercial exploitation of port infrastructures and the construction of similar infrastructures for the purposes of commercial exploitation is an economic activity” and – more precisely – it has been held that the Port System Authorities exercise economic activity because they “grant concessions or authorisations (use of an asset against payment of a fee) to (generally) private companies  for the commercial use of the asset (basic port infrastructure) and the supply of services (e.g. loading, unloading, pilotage, towing) to shipping companies” [10].

With regard to Italy, the procedure initiated by the European Commission [11] is currently underway. The European Commission published in the Official Journal of the European Union [12], on 10 January 2020, the letter informing Italy of the opening of the formal investigation procedure pursuant to Article 108(2) TFEU and “giving notice to submit comments pursuant to Article 108(2) of the Treaty on the Functioning of the European Union“.

Given the absolute importance of the abovementioned procedure and the impact that it may have on our industry, we will continue to follow these events with the utmost attention in order to provide you with updates and comments.


This article is for information purposes only and is not, and cannot be intended as, a professional opinion on the topics dealt with. For further information please contact your counsel.


[1] SA.38399
[2] See decision of the European Commission of 8 January 2019 [C (2018) 8676 final].
[3] See decisions of the European Commission of 7 March 2019 [C (2019) 1765 final].
[4] See decisions of the European Commission of 15 November 2019 [C (2019) 8068 final].
[6] The lawsuit has been registered by the Court of the European Union T-126/20.
[7] Compare page 11 of the Communication from the European Commission – DG Competition to the Permanent Representation of Italy of 30.4.2018.
[8] For a comment on this matter see “Shipping & Transport Bulletin June-July 2018“.
[9] See Court of Justice, Case C-35/96 Commission/Italy, paragraph 36.
[10] Ex multis see European Commission Decision “State aid SA.38399 (2018/E) – Ports Taxation in Italy”. For a comment on the case seeShipping & Transport Bulletin June-July 2018“.
[11] See decision of the European Commission “ State aid SA.38399 (2018/E) – Ports Taxation in Italy”. For a comment on the case seeShipping & Transport Bulletin June-July 2018“.

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