EU Ban On State Economic Subsidies Invalidates Some Applications of Tax Exemption Treaty with Vatican

Article 107(1) of the Treaty on the Functioning of the European Union prohibits EU states from granting aid that "distorts or threatens to distort competition [between Member States] by favouring certain undertakings or the production of certain goods..."  In Congregación de Escuelas Pías Provincia Betania v. Ayuntamiento de Getafe, (CJEU, June 27, 2017), the Court of Justice of the European Union held that this provision may invalidate some applications of a treaty between Spain and the Vatican exempting from taxes the property in Spain of Catholic dioceses, parishes and religious orders.  At issue is a municipal tax that would apply to the renovation and extension of a building at a school operated by a Catholic order. According to the Court, the ban on favoring certain "undertakings" applies only to "economic activity."  To the extent that the building is used for educational activities subsidized by the Spanish government, the religious order is not engaged "economic activity" and the EU Treaty does not bar a tax exemption.  However

it would seem ... the Congregación’s educational activities that are not financed by the Spanish State, corresponding to early-years teaching, extracurricular activities and post-compulsory education, meet all the criteria ... of the present judgment for classification as ‘economic activities’....

Law & Religion UK has more on the decision.