Property tax exemption for the Catholic Church for commercial activities

Property tax exemption for the Catholic Church for commercial activities

The agreement between the Spanish State and the Holy See on economic affairs establishes a total and permanent tax exemption for the Catholic Church, which is particularly significant where property tax is concerned.

This exemption not only concerns places of worship but is also interpreted as covering real estate belonging to a Catholic entity where commercial activities are carried out.

Under Articles 107 and 108 of the TFEU, and with reference to cases C-74/2016 and C-622/2016, granting these exemptions would constitute a form of state aid that would breach EU legislation.

On 08 October 2020, Spanish Members of the European Parliament (MEPs) Sira Rego and Manu Pineda of the Group of the European United Left – Nordic Green Left filed a written parliamentary question to the European Commission. MEPs asked the Commission “does it believe that tax exemptions for Catholic entities that are trading goods and services in Spain distort competition and breach EU legislation on taxation matters and state aid, particularly in relation to property tax?”

The MEPs further enquired from the Commission “what measures will it take to put a stop to this state aid in accordance with the case-law of the Court of Justice of the European Union?” and “will it request that this tax exemption and the legislative alignment on tax exemption for the Catholic Church be repealed?”

On 09 December, Executive Vice-President Vestager responded on behalf of the European Commission. She reported that “as mentioned in the answer to Written Question E-005531/2020, there is currently no ongoing investigation by the Commission concerning the use of public funds in Spain to finance the Catholic Church” and “for a measure to be categorised as ‘State aid’ for the purposes of Article 107(1) of the Treaty on the Functioning of the European Union (TFEU), all the conditions set out in that provision must be fulfilled”.

She explained that “first, there must be an intervention by the State and through State resources”, “second, it must confer a selective advantage to undertakings” and “third, the measure must be liable to affect trade between Member States. Fourth, it must distort or threaten to distort competition”.

Finally, Executive Vice-President Vestager asserted that “as recalled by the Court in its judgment rendered in Case C-74/16, the prohibition in Article 107(1) TFEU can only apply to a measure, such as a real estate tax exemption, if (i) at least some of the activities carried on by the entity concerned constitute ‘economic activities’ and (ii) the real estate is used, at least in part, for such economic activities”.


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