Barcelona and Real Madrid to pay back millions in illegal state aid

Barcelona and Real Madrid will be forced to repay millions of euros of illegal state aid received from national and local authorities in Spain.

In a verdict published today, the European Commission ruled the two clubs, along with five other La Liga teams, received tax breaks, cheap loans and property deals that amounted to unlawful subsidies.

"Professional football is a commercial activity with significant money involved and public money must comply with fair competition rules," said competition commissioner Margrethe Vestager. "The subsidies we investigated in these cases did not."

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Real Madrid was also singled out over a series of "sweetheart land deals" with city authorities, completed in the late 1990s and worth €18.4m (£15.4m), the Financial Times reports.

The club transferred part of its old training ground to the city, which was redeveloped "into the Cuatro Torres business hub, dominated by the four tallest skyscrapers in the city". In return, it was handed other plots of land that were subsequently revalued to its advantage.

Real Madrid was also in the spotlight over tax breaks, along with Barcelona, Athletic Bilbao and Osasuna.

The FT says the four were the only clubs allowed to remain member-owned after a law change in 1990 that forced all other teams to become limited companies. According to the EC, this meant they benefitted from a rate of tax that was five per cent lower than their peers.

Amounts of money in this case are relatively small, at up to €5m (£4.2m) for each club. Tax rates were equalised by a law that came into force in January.

Finally, a series of loans offered at uncommercial rates by city authorities in Valencia to three clubs in the region, Valencia, Hercules and Elche, were ruled illegal. The trio will have to pay back €20.4m (£17.1m), €6.1m (£5.1m) and €3.7m (£3.1m) respectively.

"Investigators are seeking to end an era of club football in which lucrative commercial enterprises attracted the world’s top talent while riding on the coat-tails of taxpayers," the FT says.

The EC has also closed a similar investigation in the Netherlands into similar links between local authorities and clubs including PSV Eindhoven and MVV Maastricht.

State aid rules are designed to prevent government bodies offering support to individual commercial entities that could give them an advantage over rivals in their home market or across the European free market.

Laws have been used to clamp down on sweetheart tax deals for the likes of Starbucks, Fiat and Budweiser-owner AB InBev in the Netherlands, Luxembourg and Belgium.