Introduction to European Tax Law on Direct Taxation

Alexandra Miladinovic

I. S. 104Background to the EU Prohibition of State Aid

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The competition policy of the EU was developed to ensure fair competition, proper functioning of markets and a competitive economy within the internal market. State aid control is part of the EU rules on competition. The main pillar of these rules is Art. 107(1) of the Treaty on the Functioning of the European Union (hereinafter TFEU), which provides: “Save as otherwise provided in the Treaties, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market.” In short, it prohibits the provision of advantages, in any form, by national public authorities to undertakings on a selective basis.

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In general, prohibited State aid exists if four cumulative conditions are fulfilled: First, the measure confers an advantage on its recipients that relieves them of charges that are normally borne by undertakings. Second, the advantage is granted by the state or through State resources. Thir...