The European Court of Justice clarified the difference between tax exemption and state aid

On April 29, 2025, the CJEU issued a decision in case C-453/23, which addressed the conditions under which tax exemptions can be considered permissible under EU state aid rules.

Subject of the dispute

A Polish company owned a railway siding on its property and wanted to make it accessible to a railway carrier. It believed that this would entitle it to a property tax exemption under Polish law. Despite meeting all the conditions set by Polish law, the exemption was denied, with the reasoning that under EU law, such an exemption would constitute illegal state aid because it was not pre-notified to the European Commission.

The company appealed this decision. The case reached the Polish Supreme Administrative Court, which requested a ruling from the CJEU on whether it constituted a selective advantage that needed to be notified.

CJEU Decision

The Court stated that a tax exemption can be considered state aid only if:

• it is financed by the state,
• it affects trade,
• it provides a selective advantage,
• and it distorts fair economic competition.

In this case, the court found that the exemption is part of Poland's regular tax system and is not unfair (selective) because it applies equally to all owners of railway infrastructure.

This decision demonstrates that a tax exemption does not constitute state aid if it is based on general and neutral criteria within the national tax system.