Contents
Judgment of the General Court (First Chamber, Extended Composition)25 June 2025note(State aid — Tax treatment of operators of public casinos in Germany — Levy on the profits — Deductibility of the amounts paid in respect of that levy from the tax base for corporation and trade tax — Decision not to raise any objections — No serious difficulties — Concept of ‘State aid’ — Selective nature)In Case T‑510/20 RENV,Fachverband Spielhallen eV, established in Berlin (Germany),LM, represented by A. Bartosch and R. Schmidt, lawyers,vEuropean Commission, represented by B. Stromsky and C. Kovács, acting as Agents,Federal Republic of Germany, represented by J. Möller and R. Kanitz, acting as Agents,THE GENERAL COURT (First Chamber, Extended Composition),composed of S. Papasavvas, President, R. Mastroianni, M. Brkan, I. Gâlea (Rapporteur) and S.L. Kalėda, Judges,Registrar: S. Jund, Administrator,having regard to the judgment of 21 September 2023, Fachverband Spielhallen and LM v Commission (C‑831/21 P, EU:C:2023:686),having regard to the written part of the procedure,further to the hearing on 12 November 2024,gives the following
Judgment
1By their action under Article 263 TFEU, the applicants, Fachverband Spielhallen eV and LM, seek the annulment of Commission Decision C(2019) 8819 final of 9 December 2019 on State aid SA.44944 (2019/C) (ex 2019/FC) – Tax treatment of public casinos operators in Germany and SA.53552 (2019/C) (ex 2019/FC) – Alleged guarantee for public casinos operators in Germany (Wirtschaftlichkeitsgarantie) (‘the contested decision’), in so far as it rejects their complaint directed against the fact that the sums paid to the Land Nordrhein-Westfalen (Land of North Rhine-Westphalia, Germany) by operators of public casinos by way of a levy on the profits were deductible from the tax bases for trade tax and income or corporation tax.
Background to the dispute
2On 22 March 2016, the applicants, Fachverband Spielhallen, a trade association of 88 operators of gambling machines, and LM, an operator of gambling machines, lodged three complaints with the European Commission concerning the tax treatment of operators of public casinos in Germany.
3In North Rhine-Westphalia, the gambling activities offered in casinos were governed by the Spielbankgesetz NRW (Law on casinos in the Land of North Rhine-Westphalia; ‘the Law on Casinos’) of 13 November 2012, until it was replaced by the Spielbankgesetz NRW (Law on casinos in the Land of North Rhine-Westphalia) of 29 May 2020. Westdeutsche Spielbanken GmbH & Co. KG (‘WestSpiel’) was at the time the sole public casino licensee in the Land of North Rhine-Westphalia.
4In accordance with the Law on Casinos, the income generated by casinos was subject to two different tax systems. On the one hand, gambling-related income was subject to a specific tax system consisting of a tax on casinos. On the other hand, non-gambling related income, such as restaurant and catering income, was subject to a normal tax system consisting of trade tax and income or corporation tax.
5Paragraph 14 of the Law on Casinos provided that 75% of the annual profits declared by operators of public casinos – whether gambling-related or not – was to be paid to the Land of North Rhine-Westphalia. However, in the event that the remaining quarter of those profits exceeded 7% of the sum of share capital, reserves and mutual funds, all of the profits were to be paid to the Land of North Rhine-Westphalia (‘the levy on the profits’).
6The part of the levy on the profits deriving from non-gambling related income was nevertheless deductible from the tax bases for trade tax and income or corporation tax as ‘costs associated with commercial transactions’.
7In their complaint concerning the deductibility of the levy on the profits in North Rhine-Westphalia, the applicants claimed, inter alia, that that deductibility of the levy on the profits from the tax bases for the abovementioned taxes (‘the measure at issue’) constituted State aid within the meaning of Article 107(1) TFEU.
8After corresponding with the applicants, the Commission, in the contested decision, found that the measure at issue did not confer any selective advantage, with the result that it did not fall within the scope of Article 107(1) TFEU. Consequently, it decided not to initiate the formal investigation procedure provided for in Article 108(2) TFEU with regard to the measure at issue.
9By order of 22 October 2021, Fachverband Spielhallen and LM v Commission (T‑510/20, not published, EU:T:2021:745), the General Court found that the action brought by the applicants against the contested decision was, in its entirety, manifestly lacking any foundation in law.
10By judgment of 21 September 2023, Fachverband Spielhallen and LM v Commission (C‑831/21 P, EU:C:2023:686), the Court of Justice set aside the order of 22 October 2021, Fachverband Spielhallen and LM v Commission (T‑510/20, not published, EU:T:2021:745). The Court of Justice held that the General Court had erred in law by failing to examine the line of argument put forward by the applicants disputing the identification by the Commission, in the contested decision, of the reference system or the normal tax system.
11The Court of Justice, reserving the costs, referred the case back to the General Court for it to examine it as to the substance.
Forms of order sought
12The applicants claim that the Court should:– annul the contested decision, in so far as it concerns the measure at issue;– order the Commission to pay the costs.
13The Commission, supported by the Federal Republic of Germany, contends that the Court should:– dismiss the action;– order the applicants to pay the costs.
Law
14In support of their action, the applicants rely on a single plea in law alleging infringement of their procedural rights on account of the Commission’s refusal to initiate the formal investigation procedure provided for in Article 108(2) TFEU despite it being unable, at the end of the preliminary examination stage, to overcome all the serious difficulties raised by the assessment of the measure at issue.
15The applicants’ single plea in law consists, in essence, of five parts. By the first part, the applicants claim that the Commission erred in assuming that they considered the levy on the profits to be a tax, when the applicants had always stated that it was a distribution or transfer of profits, which is not deductible under the normal tax system. By the second part, they claim that the Commission classified the levy on the profits as a ‘specific tax’ by considering – incorrectly – that the way national law classifies a measure is not decisive. By the third part, they dispute the criteria used by the Commission to classify the levy on the profits as a tax. By the fourth part, they put forward a series of arguments to claim that, even if the levy on the profits were a tax, it would not be deductible from the tax bases for trade tax and income or corporation tax. By the fifth part, they put forward arguments to dispute the finding made in footnote 77 to the contested decision, according to which the levy on the profits is comparable to special payments imposed on undertakings, for example for anticompetitive conduct, which are deductible from the tax bases for trade tax and income or corporation tax.
Preliminary observations
16It must be recalled, as a preliminary point, that, in the context of the procedure for reviewing State aid, a distinction must be drawn between, on the one hand, the preliminary stage of the procedure for reviewing aid under Article 108(3) TFEU, which is intended merely to allow the Commission to form a prima facie opinion on the measure at issue, and, on the other hand, the formal investigation procedure under Article 108(2) TFEU.
17The lawfulness of a decision not to raise objections, such as the contested decision, based on Article 4(2) of Council Regulation (EU) 2015/1589 of 13 July 2015 laying down detailed rules for the application of Article 108 [TFEU] (OJ 2015 L 248, p. 9), depends on the question whether the assessment of the information and evidence which the Commission had at its disposal during the preliminary examination stage of the measure at issue should objectively have raised doubts as to the classification of the measure at issue as aid within the meaning of Article 107(1) TFEU, given that such doubts must lead to the initiation of a formal investigation procedure in which the interested parties referred to in Article 1(h) of that regulation may participate (see, by analogy, judgment of 2 September 2021, Commission v Tempus Energy and Tempus Energy Technology, C‑57/19 P, EU:C:2021:663, paragraph 38).
18Where, at the end of the preliminary examination stage, the Commission adopts a decision by which it finds that a State measure does not have the nature of State aid, it also refuses by implication to initiate the formal investigation procedure provided for in Article 108(2) TFEU and Article 6(1) of Regulation 2015/1589 (see, to that effect, judgment of 18 November 2010, NDSHT v Commission, C‑322/09 P, EU:C:2010:701, paragraph 51 and the case-law cited).
19Furthermore, when an applicant seeks the annulment of a decision not to raise objections, that applicant essentially contests the fact that the Commission adopted the decision in relation to the measure at issue without initiating the formal investigation procedure, thereby infringing the applicant’s procedural rights. In order to have its action for annulment upheld, the applicant may invoke any plea capable of showing that the assessment of the information and evidence which the Commission had at its disposal during the preliminary examination stage of the measure notified should have raised doubts as to the classification of that measure for the purposes of Article 107(1) TFEU (see, to that effect, judgment of 2 September 2021, Commission v Tempus Energy and Tempus Energy Technology, C‑57/19 P, EU:C:2021:663, paragraph 39 and the case-law cited).
20Accordingly, it is for the EU Courts, when they have before them an application for annulment of such a decision, to determine whether the assessment of the information and evidence which the Commission had at its disposal during the preliminary investigation stage of the national measure at issue should objectively have raised doubts as to the classification of that measure as aid, given that such doubts must lead to the initiation of a formal investigation procedure (see, to that effect, judgment of 6 October 2021, Scandlines Danmark and Scandlines Deutschland v Commission, C‑174/19 P and C‑175/19 P, EU:C:2021:801, paragraph 67 and the case-law cited).
21In that regard, it should be noted that the existence of doubts such as to warrant the initiation of the formal investigation procedure referred to in Article 108(2) TFEU is reflected in the objective existence of serious difficulties encountered by the Commission when examining the aid character of the measure at issue or its compatibility with the internal market. The concept of ‘serious difficulties’ is an objective one. It follows that judicial review by the Court of the existence of serious difficulties will go beyond simple consideration of whether or not there has been a manifest error of assessment (see, to that effect, judgment of 19 September 2018, HH Ferries and Others v Commission, T‑68/15, EU:T:2018:563, paragraph 61 and the case-law cited).
22Furthermore, evidence of the existence of doubts such as to justify initiating the formal investigation procedure referred to in Article 108(3) TFEU, which requires investigation of both the circumstances in which the decision not to raise objections was adopted and its content, must be adduced by the applicant seeking the annulment of that decision on the basis of a body of consistent evidence (judgments of 2 September 2021, Commission v Tempus Energy and Tempus Energy Technology, C‑57/19 P, EU:C:2021:663, paragraph 40, and of 19 September 2018, HH Ferries and Others v Commission, T‑68/15, EU:T:2018:563, paragraph 63).
23It is in the light of that case-law that the five parts of the single plea in law raised by the applicants must be examined.
24The Court considers it necessary to examine, at the outset and together, the second to fifth parts of the single plea in law, given that, by those parts, the applicants submit, in essence, that the Commission encountered serious difficulties in examining the selectivity of the measure at issue during the preliminary examination stage. Next, the first part of the single plea will be examined.
The second to fifth parts of the single plea in law
25The applicants submit, in essence, that the classification of the levy on the profits as a specific tax under German law is incorrect. Consequently, the Commission, first, erred in determining the applicable reference system, and second, failed to ascertain whether the measure at issue derogates from that reference system.
26The Commission, supported by the Federal Republic of Germany, disputes the applicants’ line of argument.
27According to the settled case-law of the Court, classification of a national measure as ‘State aid’, within the meaning of Article 107(1) TFEU, requires all the following conditions to be fulfilled. First, there must be an intervention by the State or through State resources. Second, the intervention must be liable to affect trade between the Member States. Third, it must confer a selective advantage on the beneficiary. Fourth, it must distort or threaten to distort competition (see judgments of 16 July 2015, BVVG, C‑39/14, EU:C:2015:470, paragraph 24 and the case-law cited, and of 8 November 2022, Fiat Chrysler Finance Europe v Commission, C‑885/19 P and C‑898/19 P, EU:C:2022:859, paragraph 66 and the case-law cited).
28So far as concerns the condition relating to the selectivity of the advantage, which is a constituent factor in the concept of ‘State aid’ within the meaning of Article 107(1) TFEU, it follows from equally settled case-law of the Court of Justice that the assessment of that condition requires a determination as to whether, under a particular legal regime, the national measure at issue is such as to favour ‘certain undertakings or the production of certain goods’ over other undertakings which, in the light of the objective pursued by that regime, are in a comparable factual and legal situation and which accordingly suffer different treatment that can, in essence, be classified as discriminatory (see judgment of 8 November 2022, Fiat Chrysler Finance Europe v Commission, C‑885/19 P and C‑898/19 P, EU:C:2022:859, paragraph 67 and the case-law cited; see also, to that effect, judgments of 15 November 2011, Commission and Spain v Government of Gibraltar and United Kingdom, C‑106/09 P and C‑107/09 P, EU:C:2011:732, paragraphs 75 and 101, and of 14 January 2015, Eventech, C‑518/13, EU:C:2015:9, paragraphs 53 to 55).
29In that context, in order to classify a national tax measure as ‘selective’, the Commission must carry out a three-step examination. The Commission must begin by identifying the reference system, that is, the ‘normal’ tax system applicable in the Member State concerned, and, as a second step, demonstrate that the tax measure at issue is a derogation from that reference system, in so far as it differentiates between operators who, in the light of the objective pursued by that system, are in a comparable factual and legal situation. The concept of ‘State aid’ does not, however, cover measures that differentiate between undertakings which, in the light of the objective pursued by the legal regime concerned, are in a comparable factual and legal situation, and are, therefore, a priori selective, where the Member State concerned is able, as a third step, to demonstrate that that differentiation is justified, in the sense that it flows from the nature or general structure of the system of which those measures form part (see judgment of 8 November 2022, Fiat Chrysler Finance Europe v Commission, C‑885/19 P and C‑898/19 P, EU:C:2022:859, paragraph 68 and the case-law cited).
30For the purposes of assessing the selective nature of a tax measure, it is, therefore, necessary that the common tax regime or the reference system applicable in the Member State concerned be correctly identified in the Commission decision and examined by the court hearing a dispute concerning that identification. Since the determination of the reference system constitutes the starting point for the comparative examination to be carried out in the context of the assessment of selectivity, an error made in that determination necessarily vitiates the whole of the analysis of the condition relating to selectivity (see judgment of 8 November 2022, Fiat Chrysler Finance Europe v Commission, C‑885/19 P and C‑898/19 P, EU:C:2022:859, paragraph 71 and the case-law cited).
31In the first place, it must be stated that the determination of the reference framework, which must be carried out following an exchange of arguments with the Member State concerned, must follow from an objective examination of the content, the structure and the specific effects of the applicable rules under the national law of that State (see judgment of 8 November 2022, Fiat Chrysler Finance Europe v Commission, C‑885/19 P and C‑898/19 P, EU:C:2022:859, paragraph 72 and the case-law cited).
32In that regard, the selectivity of a tax measure cannot be assessed on the basis of a reference framework consisting of some provisions of the national law of the Member State concerned that have been artificially taken from a broader legislative framework (judgment of 28 June 2018, Andres (insolvency of Heitkamp BauHolding) v Commission, C‑203/16 P, EU:C:2018:505, paragraph 103).
33Moreover, where the tax measure in question is inseparable from the general tax system of the Member State concerned, reference must be made to that system. On the other hand, where it appears that such a measure is clearly severable from that general system, it cannot be ruled out that the reference framework to be taken into account may be more limited than that general system, or even that it may equate to the measure itself, where the latter appears as a rule having its own legal logic and it is not possible to identify a consistent body of rules external to that measure (judgment of 6 October 2021, World Duty Free Group and Spain v Commission, C‑51/19 P and C‑64/19 P, EU:C:2021:793, paragraph 63).
34In the second place, outside the spheres in which EU tax law has been harmonised, it is the Member State concerned which determines, by exercising its own competence in the matter of direct taxation and with due regard for its fiscal autonomy, the characteristics constituting the tax, which define, in principle, the reference system or the ‘normal’ tax regime, from which it is necessary to analyse the condition relating to selectivity. This includes, in particular, the determination of the basis of assessment, the taxable event and any exemptions that may apply (see judgment of 14 December 2023, Commission v Amazon.com and Others, C‑457/21 P, EU:C:2023:985, paragraph 39 and the case-law cited).
35In the third place, according to the case-law, when determining the reference framework for the purpose of applying Article 107(1) TFEU to tax measures, the Commission is in principle required to accept the interpretation of the relevant provisions of national law given by the Member State concerned in the exchange of arguments, provided that that interpretation is compatible with the wording of those provisions (judgments of 5 December 2023, Luxembourg and Others v Commission, C‑451/21 P and C‑454/21 P, EU:C:2023:948, paragraph 120, and of 19 September 2024, United Kingdom and Others v Commission (Taxation of profits of CFCs), C‑555/22 P, C‑556/22 P and C‑564/22 P, EU:C:2024:763, paragraph 97).
36The Commission may depart from that interpretation only if it is able to establish, on the basis of reliable and consistent evidence that has been the subject of that exchange of arguments, that another interpretation prevails in the case-law or the administrative practice of that Member State (judgments of 5 December 2023, Luxembourg and Others v Commission, C‑451/21 P and C‑454/21 P, EU:C:2023:948, paragraph 121, and of 19 September 2024, United Kingdom and Others v Commission (Taxation of profits of CFCs), C‑555/22 P, C‑556/22 P and C‑564/22 P, EU:C:2024:763, paragraph 98).
37In accordance with Article 4(3) TEU, that Member State is bound by a duty of sincere cooperation throughout the procedure for the examination of a measure by reference to the provisions of EU law on State aid. That duty implies, in particular, that that Member State must in good faith provide the Commission with all relevant information requested by it concerning the interpretation of the provisions of national law that are relevant for the purpose of determining the reference framework, as derived from national case-law or administrative practice (judgments of 5 December 2023, Luxembourg and Others v Commission, C‑451/21 P and C‑454/21 P, EU:C:2023:948, paragraph 122, and of 19 September 2024, United Kingdom and Others v Commission (Taxation of profits of CFCs), C‑555/22 P, C‑556/22 P and C‑564/22 P, EU:C:2024:763, paragraph 99).
38It is in the light of the principles recalled above that it is necessary to examine whether the applicants have demonstrated that the Commission infringed their procedural rights by refusing to initiate the formal investigation procedure provided for in Article 108(2) TFEU, even though, in their submission, it encountered serious difficulties when examining the selectivity of the measure at issue.
The reference system
39It is necessary to examine whether, as the applicants essentially submit, the Commission encountered serious difficulties in determining the applicable reference system.
40It must be noted that the reference system was identified in recitals 78 and 80 of the contested decision. The reference system consists of the relevant taxes applicable to all undertakings, namely trade tax and income or corporation tax. In a reply to a question put by the General Court in the context of a measure of organisation of procedure, the Commission confirmed that those taxes constituted the relevant reference system for assessing whether the measure at issue amounted to a derogation.
41According to the Commission and the Federal Republic of Germany, it is apparent from recital 78 of the contested decision that the tax bases for those taxes are determined by taking into account the principle of taxation of net income (‘net income principle’), in the sense that, according to the general rules on the taxation of income, ‘costs associated with commercial transactions’ are deductible from those tax bases.
42As regards the net income principle, it is apparent from the case-law of the Bundesverfassungsgericht (Federal Constitutional Court, Germany), referred to in footnote 77 to the contested decision, that, in accordance with the general principle of equality enshrined in Article 3(1) of the Grundgesetz für die Bundesrepublik Deutschland (Basic Law of the Federal Republic of Germany), in tax matters, the taxation of income must be determined by taking into account the economic capacity of the taxpayer. It follows from that that, under income tax legislation, only the increase in the assets of the undertaking is subject to tax, which means that, in principle, all costs associated with commercial transactions are deductible as operating expenses.
43In that regard, in response to a question put by the General Court in the context of a measure of organisation of procedure, the Federal Republic of Germany confirmed that the normal tax system in that Member State is governed by the constitutional principle of the ability to pay tax, which, as an expression of the general principle of equality, means that everyone must contribute to the financing of public services in line with their individual economic capacity. According to the Federal Republic of Germany, the principle of the ability to pay tax forms the basis of the objective net income principle, according to which operating expenses that are unavoidable for the activity carried out by taxpayers must be deductible from the tax bases.
44It must be noted, as the Federal Republic of Germany stated in response to another question put by the General Court in the context of a measure of organisation of procedure, that that net income principle was reflected in the provisions referred to in footnote 41 to the contested decision, namely Paragraph 4(1), (3) and (4) of the Einkommensteuergesetz (Law on income tax; ‘the EStG’), Paragraph 8(1) of the Körperschaftsteuergesetz (Law on corporation tax; ‘the KStG’) and Paragraph 7(1) of the Gewerbesteuergesetz (Law on trade tax; ‘the GewStG’).
45Furthermore, the Federal Republic of Germany stated that the net income principle, which governs German tax law, is also an expression of another principle, namely that of the legality of taxation, which is binding on the tax authorities and requires them to calculate and collect taxes uniformly, in accordance with the law.
46In the present case, in accordance with the requirements arising from the case-law cited in paragraph 31 above, the Commission determined the reference framework following an objective examination of the content, the structure and the specific effects of the applicable rules resulting from an interpretation of the relevant provisions of tax law provided by the Federal Republic of Germany in the exchange of arguments.
47It is common ground between the parties that the distribution of profits, in so far as it constitutes a form of allocation of profits, cannot constitute a cost associated with commercial transactions capable of reducing the taxable income of a company, for the purpose of determining the tax base for corporation tax (Paragraph 8(3) of the KStG) and for trade tax (Paragraph 7 of the GewStG).
48Furthermore, in accordance with the provisions of German tax law, there are exceptions to the rule on the deductibility of costs associated with commercial transactions. There are taxes whose non-deductibility is expressly provided for in Paragraph 4(5b) and Paragraph 12(3) of the EStG and in Paragraph 10(2) of the KStG.
49Moreover, in recital 156 of the contested decision, the Commission stated that Paragraph 4(5b) of the EStG precluded the deduction only of trade tax and not of all taxes on profits. According to the Commission, the basic rule is that costs associated with commercial transactions are deductible and it is only where there is an explicit derogation from the net income principle that an undertaking’s expenses are not deductible for the purpose of determining the tax base. Thus, the Commission found that no provision precluded a specific tax on profits from being deductible.
50In that regard, it must be noted that the applicants have not demonstrated that the Commission should have determined the reference system as consisting of the non-deductibility of the levy on the profits as a derogation from the net income principle. First, as is apparent from recitals 153 to 158 of the contested decision, the Commission did not overlook the existence of exceptions or limitations to the rule on the deductibility of costs associated with commercial transactions. Second, it is apparent from the case-law cited in paragraph 32 above that the selectivity of a tax measure cannot be assessed on the basis of a reference framework consisting of some provisions of the national law of the Member State concerned that have been artificially taken from a broader legislative framework. Consequently, where the tax measure in question is inseparable from the general tax system of the Member State concerned, reference must be made to that system (judgment of 19 September 2024, United Kingdom v Commission (Taxation of profits of CFCs), C‑555/22 P, C‑556/22 P and C‑564/22 P, EU:C:2024:763, paragraph 95). That is the case here, given that the Commission defined the reference system as consisting, in particular, of the net income principle, and not merely of the exceptions to that principle.
51In accordance with the case-law cited in paragraphs 35 to 37 above, in order to determine the reference system, the Commission did not depart from the interpretation of the relevant provisions of tax law provided by the Federal Republic of Germany in the exchange of arguments. Furthermore, it should be pointed out that the applicants have not demonstrated that the Commission erred in adopting the interpretation provided by that Member State. In that regard, the applicants have not raised any other argument or adduced any evidence capable of calling into question the merits of the Commission’s determination of that reference system. Although the applicants rely, in their pleadings, on certain judgments of the German courts, in particular of the Bundesverfassungsgericht (Federal Constitutional Court), the Bundesverwaltungsgericht (Federal Administrative Court, Germany), and the Bundesfinanzhof (Federal Fiscal Court, Germany), it must be noted that the arguments based on national case-law do not relate to the interpretation of the relevant provisions which constitute the reference system in the present case.
52It should also be noted that, in their pleadings, the applicants do not dispute that the net income principle implements the principle of the ability to pay tax, which means that, according to the case-law of the Bundesfinanzhof (Federal Fiscal Court), in order to determine a taxpayer’s ability to pay tax, the expenses incurred by the taxpayer in order to generate the taxable income must be deducted from that income.
53As regards the determination of the relevant reference system for examining whether the measure at issue amounts to a derogation, the applicants submit that that reference system should have included value added tax (VAT). It should be noted that that line of argument relating to the failure to take account of VAT in determining the reference tax system is irrelevant, given that, in the contested decision, the complaints relating to VAT are dealt with only as regards a measure other than the measure at issue.
54It follows from the foregoing considerations that the Commission was entitled to accept the interpretation provided by the Federal Republic of Germany as regards the identification of the reference system and to identify the measure at issue as being the deductibility from the tax bases for income or corporation tax and trade tax, for the operators of public casinos, of sums paid to the Land of North-Rhine Westphalia by way of the levy on the profits provided for in Paragraph 14 of the Law on Casinos as regards non-gambling related income.
55Accordingly, it should be stated that the applicants have not demonstrated that the Commission encountered serious difficulties in determining the relevant reference system for examining whether the measure at issue amounts to a derogation.
The existence of a derogation from the reference system
56The applicants submit, in essence, that Westspiel, by benefiting from the levy on the profits being deductible from the tax bases for income or corporation tax and trade tax, is given an advantage as compared to undertakings which distribute profits or, in the alternative, as compared to undertakings which are subject to non-deductible taxes under the relevant provisions of German law.
57First, the applicants submit that the error made by the Commission is due in particular to the fact that it classified the levy on the profits as a ‘specific tax’, which enabled it to find that the amounts paid in respect of that levy were deductible from the tax bases for income or corporation tax and trade tax in accordance with the general rules on taxation under the normal tax system provided for by the applicable German tax law, which allow for costs associated with commercial transactions to be deducted.
58Second, the applicants submit that the levy on the profits must be regarded as a ‘transfer’ or ‘distribution’ of profits or, in the alternative, as a ‘tax on income (in the broad sense)’, and not as a ‘tax’ or a ‘specific tax’, with the result that, in accordance with the applicable German tax law, that levy on the profits should not have been deducted from the tax bases for the trade tax and income or corporation tax.
59It should be noted that the applicants’ arguments seek to dispute the classification of the levy on the profits as a specific tax that may be deducted and to allege, primarily, that that levy is comparable to a distribution of profits and, in the alternative, that, even if it were to be classified as tax, it would be comparable to the taxes whose non-deductibility is expressly provided for by Paragraph 4(5b) and Paragraph 12(3) of the EStG and by Paragraph 10(2) of the KStG.
60In the present case, the General Court considers it appropriate to examine, as a first step and as a preliminary point, whether the Commission encountered serious difficulties as regards the classification of the levy on the profits as a specific tax that may be deducted.
61It is apparent from recital 151 of the contested decision that the measure at issue is based on the interpretation of German tax law according to which the levy on the profits is deducted from the tax bases for income or corporation tax and trade tax as a cost associated with commercial transactions, in accordance with the net income principle.
62In addition, in recitals 153 to 156 of the contested decision, the Commission stated that the levy on the profits could be regarded as deductible, as a specific tax on profits, because of its economic effects, its mandatory nature and the absence of consideration. As pointed out in paragraph 49 above, the Commission stated that Paragraph 4(5b) of the EStG precluded the deduction only of trade tax, and not of all taxes on profits, and that no provision precluded the deductibility of a specific tax on profits.
63Furthermore, in recital 158 of and footnote 86 to the contested decision, the Commission stated that the levy on the profits was not a distribution of profits nor was it comparable to such a distribution, on the ground that, first, the levy on the profits was paid to the Land of North Rhine-Westphalia, which was not a shareholder in the public casinos, second, it was set unilaterally by the authorities in a law, third, it was levied automatically and was mandatory, fourth, its amount was to be used for charitable purposes and, fifth, unlike distributions of profits, which are not necessarily linked to the profits made in a given financial year, the levy on the profits was directly linked to the current financial year. Lastly, in recital 158 of the contested decision, the Commission also observed that the legal form of the public casino operators would not permit the distribution of profits.
64It should be held that the question of whether the levy on the profits constitutes, as the Commission maintains, a specific tax and, consequently, whether it is deductible as a cost associated with commercial transactions, or whether it constitutes, as the applicants submit, a transfer or distribution of profits, falls within the interpretation of the relevant provisions which constitute the reference framework. The same applies to the argument raised by the applicants in the alternative that, even if the levy on the profits were a tax, it would be a tax on income in the broad sense, comparable to the taxes whose non-deductibility is expressly provided for by Paragraph 4(5b) and Paragraph 12(3) of the EStG and by Paragraph 10(2) of the KStG.
65As is apparent from the case-law cited in paragraphs 35 and 36 above, when determining the reference framework for the purpose of applying Article 107(1) TFEU to tax measures, the Commission is in principle required to accept the interpretation of the relevant provisions of national law given by the Member State concerned in the exchange of arguments, provided that that interpretation is compatible with the wording of those provisions. The Commission may depart from that interpretation only if it is able to establish, on the basis of reliable and consistent evidence that has been the subject of that exchange of arguments, that another interpretation prevails in the case-law or the administrative practice of that Member State. The same applies where the applicant fails to demonstrate that the interpretation of the provisions of national law that are relevant for examining whether a derogation exists from the reference system in the context of the tax measure at issue is incorrect.
66In the present case, it should be pointed out that it is apparent from the documents before the Court that the Commission adopted the interpretation of the relevant provisions of national law given by the Federal Republic of Germany in the exchange of arguments.
67In that regard, it should be noted that, in order to find that the levy on the profits was deductible as a specific tax in accordance with the net income principle, the Commission relied, in recital 154 of and footnote 86 to the contested decision, on criteria which, in essence, mirror those relating to the definition of the concept of ‘tax’ under German law, under Paragraph 3(1) of the Abgabenordnung (Tax Code), and those referred to in recital 47 of that decision. The Commission also examined the arguments put forward by the applicants concerning the classification of the measure at issue under German law.
68In that respect, the applicants have not established that the interpretation adopted by the Commission is incompatible with the wording of the relevant provisions of German law. Nor have they put forward any argument concerning the existence of a contrary administrative practice on the part of the German authorities.
69Furthermore, as is apparent from paragraph 51 above, although the applicants rely, in their pleadings, on certain judgments of the German courts, in particular of the Bundesverfassungsgericht (Federal Constitutional Court), the Bundesverwaltungsgericht (Federal Administrative Court), and the Bundesfinanzhof (Federal Fiscal Court), it must be stated that the arguments based on national case-law do not relate to the interpretation or application of the relevant provisions which constitute the reference system in the present case.
70The applicants’ arguments that the comparison made in footnote 77 to the contested decision between the levy on the profits and the special payments imposed on undertakings as a result of anticompetitive conduct is incorrect and vitiates that decision by a contradiction must also be rejected. As the Commission stated in its pleadings, it made that comparison in order to present, by way of example, the levy on the profits as a deductible operating expense, while operating expenses have a broader scope and go beyond taxes. Nevertheless, the Commission clearly stated, in the contested decision, that it considered that the levy on the profits constituted a specific tax.
71Thus, in accordance with the case-law cited in paragraphs 35 to 37 above, the Commission accepted, in the present case, the interpretation of the relevant provisions of national law given by the Federal Republic of Germany in the exchange of arguments for the purpose of applying those provisions to the tax measure at issue. Accordingly, in the light of the foregoing considerations, there is no need to call that interpretation into question.
72It follows that the applicants have not demonstrated that the Commission encountered serious difficulties as regards the classification of the levy on the profits as a specific tax.
73Consequently, it must be ascertained whether the measure at issue constitutes a derogation from the reference system, inasmuch as it differentiates between operators who, in the light of the objective assigned to the German tax system, are in a comparable factual and legal situation, that is to say, in particular, between operators subject to the levy on the profits and those subject to taxes whose non-deductibility is expressly provided for by Paragraph 4(5b) and Paragraph 12(3) of the EStG and by Paragraph 10(2) of the KStG.
74It should be recalled that, according to the case-law, in the context of the examination of the selectivity of a tax measure, after having identified and examined, first, the common or ‘normal’ tax regime applicable in the Member State concerned, namely the reference system, it is necessary, second, to assess and determine whether any advantage granted by the tax measure at issue may be selective by demonstrating that the measure derogates from that common regime inasmuch as it differentiates between economic operators who, in the light of the objective assigned to the tax system of the Member State concerned, are in a comparable factual and legal situation (see judgment of 8 September 2011, Paint Graphos and Others, C‑78/08 to C‑80/08, EU:C:2011:550, paragraph 49 and the case-law cited).
75As a preliminary point, it should be noted that the present case is limited to casinos’ non-gambling related income. In that regard, according to footnote 76 to the contested decision, although the levy on the profits is calculated on all sources of income of public casinos, including those from gambling, only the part of the payment which is related to non-gambling income is deductible from the tax bases for trade tax and income or corporation tax.
76In the present case, as regards the objective pursued by the trade tax and income or corporation tax, in response to a question put by the General Court in the context of a measure of organisation of procedure, the Commission confirmed that, as is apparent from recital 105 of the contested decision, that objective consists of generating income by levying a tax on undertakings in line with their profits. In that regard, in response to a question put by the Court in the context of a measure of organisation of procedure, the Federal Republic of Germany stated that the normal tax system has to take account of the principle of the ability to pay tax.
77In addition, as regards public casinos’ non-gambling related income, in response to a question put by the General Court at the hearing, the Commission stated that, as is apparent in essence from recital 78 of the contested decision, the public casinos are in a legal and factual situation comparable to that of other undertakings required to pay trade tax and income or corporation tax, it being understood that, in accordance with the net income principle laid down in Paragraph 4(4) of the EStG, Paragraph 8(1) of the KStG and in Paragraph 7(1) of the GewStG, (see paragraph 44 above), all undertakings may deduct from the taxable bases costs associated with commercial transactions.
78Thus, in recital 152 of the contested decision, the Commission found that the sums paid to the Land of North Rhine-Westphalia by the public casinos by way of the levy on the profits constituted costs associated with commercial transactions, which were therefore deductible for the purpose of determining the tax bases for trade tax and income or corporation tax. In support of that finding, in footnote 77 to the contested decision, the Commission took the view that the levy on the profits could be compared to special payments imposed on undertakings as a result of anticompetitive conduct, since such payments are calculated by taking into account all profits generated as a result of the anticompetitive conduct. The Commission added that such payments were regarded by the Bundesverfassungsgericht (Federal Constitutional Court) as deductible expenses in order to avoid double taxation.
79Accordingly, in recital 152 of the contested decision, the Commission found that the deductibility of the levy on the profits amounted to an application, by the Federal Republic of Germany, of the general rules on taxation under the normal tax system constituting the reference framework. As noted in paragraph 42 above, it is apparent from footnote 77 to the contested decision that the taxation of income must be determined by taking into account the economic capacity of the taxpayer.
80It must be noted that, in the contested decision, in the alternative and in response to the arguments raised by the applicants during the preliminary examination stage, the Commission found that the levy on the profits, first, was not comparable to the non-deductible taxes provided for in Paragraph 10(2) of the KStG and, second, that that levy did not constitute a distribution or transfer of profits.
81In that regard, in response to a measure of organisation of procedure, the Commission stated that, although there are exceptions or limitations to the rule of deductibility of costs associated with commercial transactions, they do not apply to the measure at issue, since the levy on the profits does not constitute a distribution of profits; nor is it covered by any of the cases of non-deductibility from the taxable bases for income or corporation tax expressly provided for in Paragraph 4(5b) and Paragraph 12(3) of the EStG and in Paragraph 10(2) of the KStG, respectively.
82In the first place, as regards the applicants’ arguments that the levy on the profits is comparable to the non-deductible taxes provided for in Paragraph 10(2) of the KStG, it should be stated that, in recital 154 of the contested decision, the Commission classified the levy on the profits as a ‘special tax on the income of public casinos’, which, for the reasons set out in recital 156 of the contested decision, cannot be regarded as being comparable to a ‘general tax’ on income or profits that is not deductible under that provision.
83In any event, in response to a question put by the General Court in the context of a measure of organisation of procedure, the Commission stated that the levy on the profits is based on the ‘annual surplus’, whereas corporation tax is calculated, pursuant to Paragraph 7(1) and (2) and to Paragraph 8(1) of the KStG, on the basis of ‘taxable income’ (‘zu versteuernde Einkommen’), determined on the basis of ‘income’ (‘Einkommen’) within the meaning of the EStG. In that regard, the applicants’ argument that the annual surplus is identical to income within the meaning of Paragraph 2(4) of the EStG cannot succeed. According to the applicants, Paragraph 2(2)(1) and Paragraph 2(4) of the EStG equate income from commercial activity (‘Einkünfte aus Gewerbetrieb’) with profit and, under Paragraph 5(1) of the EStG, to which Paragraph 2(2)(1) of the EStG refers, profit is in principle calculated on the basis of the rules of the Handelsgesetzbuch (Commercial Code), and may therefore, in turn, be treated in the same way as the annual surplus. As the Commission has correctly pointed out, the explanation given by the applicants is incomplete, given that Paragraph 2(2)(1) of the EStG refers also to other provisions of the same law, which make a series of amendments to the determination of profit in relation to the annual surplus. In particular, the Commission stated that some of the operating expenses referred to in Paragraph 4(5) of the EStG are expenses which reduce the annual surplus pursuant to commercial law but which are not deductible for the purpose of determining profit.
84In addition, in response to a question put by the General Court in the context of a measure of organisation of procedure and at the hearing, the Federal Republic of Germany stated that the levy on the profits constituted a ‘special tax’ on gaming establishments falling within the scope of Article 106(2)(5) of the Basic Law of the Federal Republic of Germany, so that it could not be a ‘general tax’ on income or profits falling within the scope of Article 106(3) of that law. It should be pointed out that the applicants have not demonstrated that the levy on the profits constitutes a ‘general tax’ on income or profits, comparable to the non-deductible taxes referred to in Paragraph 10(2) of the KStG. Accordingly, the Commission was correct to find that that provision was not comparable to the levy on the profits.
85In the second place, the applicants’ arguments directed against the finding that the levy on the profits is not a distribution of profits and is not comparable to such a distribution must also be rejected.
86It should be noted, as stated in paragraphs 63 and 67 above, that it is apparent from recital 158 of and footnote 86 to the contested decision that the levy on the profits involves a payment of money to the Land of North Rhine-Westphalia, that it is set unilaterally by a public authority in a law, and that it is levied automatically and is mandatory. In addition, despite the terminological vagueness when referring to the alleged charitable purposes of that levy, the Commission stated, in recital 47 of the contested decision, that the levy contributes to the general budget of that Land in the public interest. Moreover, as the Commission submitted at the hearing, the levy is not consideration for a particular service. It follows that, contrary to what the applicants claim, that levy constitutes a ‘tax’ within the meaning of Paragraph 3(1) of the Tax Code, which cannot be regarded as being comparable to a distribution of profits.
87That conclusion cannot be called into question by the applicants’ arguments based on the possible reinvestment of the amounts levied. Even if the funds collected by way of the levy on the profits had been reinvested in Westspiel, it must be stated that that is a factual circumstance which is not such as to call into question the legal classification of that tax levy, since the funds in question are allocated to the budget of the Land of North Rhine-Westphalia.
88Furthermore, the fact that the Land of North Rhine-Westphalia is an indirect sole shareholder of Westspiel through NRW.Bank and, accordingly, benefits from the levy on the profits in a non-administrative capacity, is not such as to call into question the conclusion that that levy does not constitute a distribution or transfer of profits. As the Federal Republic of Germany has claimed, the levy on the profits cannot be treated in the same way as a transfer of profits within the meaning of Paragraph 291(1) of the Aktiengesetz (Law on public limited companies), given that it is not the result of a contractual relationship voluntarily entered into by the public casinos, but of a special tax imposed unilaterally by the Land of North Rhine-Westphalia in the exercise of its powers as a public authority. In addition, as the Commission has submitted, from a systematic point of view, Paragraph 14(1) of the Law on Casinos, which lays down the levy on the profits, is placed between Paragraphs 12, 13 and 15 of that law, which also concern taxes.
89Therefore, the Commission was entitled to find, in recital 152 of the contested decision, that the deductibility of the levy on the profits amounted to an application, by the Federal Republic of Germany, of the general rules on taxation under the normal tax system constituting the reference system.
90It follows from the foregoing considerations that the Commission was correct to conclude, in recital 152 of the contested decision in particular, that the deductibility of the levy on the profits did not derogate from the general rules on taxation under the normal tax system constituting the reference framework, with the result that the measure at issue did not involve the grant of a selective advantage as provided for in Article 107(1) TFEU.
91Accordingly, the applicants are not justified in claiming that the Commission encountered serious difficulties in the examination of the selectivity of the measure at issue.
92That conclusion cannot be called into question by the applicants’ other arguments.
93In the first place, as regards the classification of the measure at issue under German law, it should be noted, as stated in paragraph 67 above, that the Commission found, in recital 154 of and footnote 86 to the contested decision, that the levy on the profits may be regarded as a specific tax in accordance with certain criteria which partially but decisively mirror those laid down as regards the definition of taxes under German law, as set out in Paragraph 3(1) of the Tax Code, as well as the elements which characterise the taxes imposed by the Länder, set out in recital 47 of the contested decision. The applicants therefore incorrectly complain that the Commission failed to take account of the German law.
94In the second place, as regards the applicants’ other arguments alleging that the measure at issue was adopted in breach of the constitutional rules relating to the exercise of competence in tax matters, it must be noted that the concept of ‘State aid’ is an objective concept which must be examined in the light of the effects caused by the aid measure at issue, and not in the light of other factors such as the lawfulness of the measure by which the aid is granted (see, to that effect, judgments of 22 December 2008, British Aggregates v Commission, C‑487/06 P, EU:C:2008:757, paragraph 85 and the case-law cited, and of 7 October 2010, DHL Aviation and DHL Hub Leipzig v Commission, T‑452/08, not published, EU:T:2010:427, paragraph 40).
95Similarly, it should be noted that the alleged breach of constitutional law has no bearing on the definition of the reference framework or on the existence of a derogation for the purpose of assessing the selective nature of the measure at issue as provided for in Article 107 TFEU. Accordingly, those arguments must be rejected as being ineffective.
96In the third place, as regards the evidence submitted by the applicants in order to dispute the classification of the levy on the profits as a tax within the meaning of Paragraph 3(1) of the Tax Code, it should be borne in mind that the evidence must be submitted in the first exchange of pleadings, pursuant to Article 85(1) of the Rules of Procedure of the General Court. Since the evidence in question was submitted at a later stage in the proceedings and the delay in submitting it was not justified in accordance with paragraph 2 of that article, it is inadmissible. In any event, as the Commission claims, the contested decision was adopted before WestSpiel’s accounting data for the 2019 financial year were published. The legality of a decision concerning State aid must be assessed solely in the light of the information available to the Commission when the decision was adopted (see judgment of 14 May 2019, Marinvest and Porting v Commission, T‑728/17, not published, EU:T:2019:325, paragraph 92 and the case-law cited).
97In the fourth place, as regards the applicants’ claims concerning the alleged contradiction in the contested decision in respect of the multiple classifications of the levy on the profits under national law, it must be noted that, while it may be accepted that contradictory reasoning constitutes an indication of the existence of serious difficulties during the preliminary examination of a measure under Article 108(3) TFEU (see, to that effect, judgment of 14 April 2021, Verband Deutscher Alten- und Behindertenhilfe and CarePool Hannover v Commission, T‑69/18, EU:T:2021:189, paragraph 107), the fact remains that that is not the case here, since the Commission stated that that levy amounted to a deductible operating expense and a tax not covered by the exceptions or limitations to the net income principle.
98In the light of all of the foregoing, it should be noted that none of the applicants’ arguments have demonstrated that the Commission encountered serious difficulties during the preliminary examination in accordance with the case-law cited in paragraph 19 above.
99Accordingly, the second to fifth parts of the single plea in law must be rejected.
The first part of the single plea in law, alleging distortion of the applicants’ arguments
100By the first part, the applicants claim that the Commission erred in assuming that they considered the levy on the profits to be a tax, when they had always indicated that it was a distribution of profits, which is not deductible under the normal tax system. Accordingly, they claim that deducting that levy on the profits from the tax bases for income or corporation tax and trade tax represents a measure derogating from the normal tax system, which does not allow such a deduction, and a selective advantage in favour of WestSpiel.
101The Commission, supported by the Federal Republic of Germany, disputes those arguments.
102In the present case, it should be noted that the Commission stated, in recital 154 of the contested decision, that the applicants implicitly considered that the levy on the profits is a tax comparable to income taxes, personal taxes and trade tax. Nevertheless, it also stated, in footnote 79 to the contested decision, that the applicants had considered that the levy on the profits was not a tax, with the result that the applicants’ argument, alleging that the deduction of taxes from the tax bases for income or corporation tax is prohibited, was unfounded.
103It follows that the Commission did not distort the applicants’ arguments, in so far as it is apparent from the contested decision, and as was confirmed at the hearing, that the Commission examined, first, the assumption that the levy on the profits is a tax comparable to income taxes, personal taxes and trade tax, and second, the assumption that that levy is not a tax, even if it did so only in the alternative. In that regard, it must be pointed out that, as is apparent from paragraph 86 above, the Commission, in recital 158 of and footnote 86 to the contested decision, took into account the applicants’ arguments that the levy on the profits is a distribution of profits or is comparable to such a distribution.
104The first part of the single plea in law must therefore be rejected and, accordingly, the action must be dismissed in its entirety.
Costs
105In accordance with Article 133 of the Rules of Procedure, a decision as to costs is to be given in the judgment which closes the proceedings. Under Article 195 of those rules, it is for the General Court, when it rules after the Court of Justice has set the judgment aside and referred the case back to the General Court, to decide on the costs relating, first, to the proceedings instituted before it and, second, to the proceedings on the appeal before the Court of Justice. Under Article 134(1) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Lastly, under Article 138(1) of the Rules of Procedure, Member States which have intervened in the proceedings are to bear their own costs.
106In the present case, the Court of Justice, in the judgment on appeal, set aside the order of 22 October 2021, Fachverband Spielhallen and LM v Commission (T‑510/20, not published, EU:T:2021:745), and reserved the costs. Consequently, in the present judgment, a ruling must be made on the costs relating to the initial proceedings before the General Court, the appeal proceedings before the Court of Justice, and the present proceedings following referral.
107Since the Commission was unsuccessful in the appeal proceedings before the Court of Justice, it is to be ordered to bear its own costs and to pay those incurred by the applicants in connection with those proceedings.
108Since the applicants have been unsuccessful on the merits in the proceedings referred back to the General Court, on the basis of the arguments which they had put forward in the proceedings before the General Court prior to the appeal, they must be ordered to pay the costs of both of those sets of proceedings.
109The Federal Republic of Germany is to bear its own costs.
Operative part
On those grounds,THE GENERAL COURT (First Chamber, Extended Composition)hereby:
1.Dismisses the action;
2.Orders the European Commission to bear its own costs and to pay those incurred by Fachverband Spielhallen eV and by LM in connection with the appeal proceedings before the Court of Justice in Case C‑831/21 P;
3.Orders Fachverband Spielhallen and LM to bear, in addition to their own costs, those incurred by the Commission relating to the proceedings referred back to the General Court in Case T‑510/20 RENV and to the initial proceedings before the General Court in Case T‑510/20;
4.Orders the Federal Republic of Germany to bear its own costs.
Delivered in open court in Luxembourg on 25 June 2025.
Source: EUR-Lex, © European Union, 1998-2026. Reuse authorised under Decision 2011/833/EU.