2025/317

25.2.2025

COMMISSION DECISION (EU) 2025/317

of 20 June 2024

on the measures State Aid SA.44944 (2019/C ex 2016/FC) and SA.53552 (2019/C ex 2019/FC) - Tax treatment of public casinos operators – and alleged guarantee for public casinos operators (Wirtschaftlichkeitsgarantie) – Germany

(notified under document C(2024) 4183)

(Only the German text is authentic)

(Text with EEA relevance)

THE EUROPEAN COMMISSION,

Having regard to the Treaty on the Functioning of the European Union, and in particular Article 108(2), first subparagraph, thereof,

Having regard to the Agreement on the European Economic Area, and in particular Article 62(1), point (a), thereof,

Having called on interested parties to submit their comments pursuant to the provisions cited above and having regard to their comments,

Whereas:

1. PROCEDURE

(1) On 22 March 2016 and 4 February 2019, the Commission received four complaints filed by a trade association of gambling machines operators (Fachverband Spielhallen e.V.) and an operator of gambling machines (‘the complainants’). The complainants claimed that operators of the public casinos (

Spielbankunternehmer

, ‘public casinos operators’) in Germany receive State aid through various measures which allegedly distort the market for gambling services:

— Measure 1:

the reduction of the amount of the casino tax paid by public casinos operators by the amount of the value added tax (‘VAT’) (‘VAT offsetting mechanism’) introduced by all 16 German

Länder

after 2006;

— Measure 2:

the provisions of laws on public casinos of seven

Länder

reducing (‘measure 2.a’) or allowing the authorities of the

Länder

to reduce the casino tax rate in the first years of operation of a public casino, as well as the actual implementation (if any) of this possibility (‘measure 2.b’);

— Measure 3:

the deduction from the tax base of the trade tax and the corporate or income tax of the ‘profit skimming’ (

Gewinnabschöpfung

) paid by the public casinos operators in North Rhine-Westphalia (‘NRW’) with respect to their non-gambling activities;

— Measure 4:

the alleged guarantee to public casino operators in all 16

Länder

to make a reasonable commercial profit (‘measure 4.a’) and the explicit provisions of laws on public casinos in nine

Länder

reducing (‘measure 4.b’) or allowing the authorities of the

Länder

to reduce the casino tax in specific cases, as well as the actual implementation (if any) of this possibility (‘measure 4.c’);

— Measure 5:

the overall special tax system generally applicable to public casinos operators with regard to their gambling related activities, which would induce a lower tax burden compared to the rules applicable to operators of commercial gambling halls.

(2) By letter dated 9 December 2019 (‘the opening decision’), the Commission considered that measure 3 and measure 4.a did not constitute State aid (1), but informed Germany that it had decided to initiate the procedure laid down in Article 108(2) of the Treaty on the Functioning of the European Union (TFEU) in respect of the following measures:

— the special tax rules generally applicable to public casinos operators in each of the 16 German

Länder

(‘measure 5’), composed of several tax exemptions and special taxes, including all the general and automatic features of these special taxes (including in particular measure 1, measure 2.a and measure 4.b);

— the ad hoc decisions of the public authorities to reduce the special taxes applicable to the public casinos operators in case of openings of new public casinos (‘measure 2.b’) and under other circumstances (‘measure 4.c’).

(3) The opening decision was published in the

Official Journal of the European Union

(2). The Commission invited interested parties to submit their comments on the measures.

(4) On 28 February 2020, the German federal authorities and a number of

Länder

submitted comments.

(5) The Commission also received comments from public casinos operators and an association of such operators:

— Spielbank Bad Homburg Wicker & Co. KG (25 March 2020),

— European Casino Association (3 July 2020),

— Spielbank Hamburg Jahr + Achterfeld GmbH & Co. KG, Spielbank Wiesbaden GmbH & Co. KG and Spielbanken Niedersachsen GmbH (3 July 2020),

— François-Blanc-Spielbank GmbH (Bad Homburg v.d. Höhe) (4 July 2020),

— Spielbank Bad Neuenahr GmbH & Co. KG (3 August 2020),

(6) On 5 August 2020, the complainants submitted comments.

(7) On 14 August 2020, the Commission forwarded the comments by interested parties (public casinos operators, association of such operators and the complainants) to Germany, which was given the opportunity to react. Germany provided comments by letter dated 17 September 2020.

(8) The Commission services requested additional information from the German authorities by letters of 11 March 2020, 19 June 2020 (complemented by letter of 25 June 2020), 19 September 2020, 23 September 2021, 14 January 2022, 13 July 2022, 14 December 2022, 22 November 2023 and 21 March 2024. Germany (the federal authorities and, as the case may be, the

Länder

) replied on 7 May 2020, 10 July 2020, 19 January 2021 (complemented by letters of 25 March 2021, 20 September 2021 and 15 January 2024), 22 October 2021 (complemented by letters of 19 November 2021 and 21 January 2022), 4 March 2022, 1 September 2022, 14 February 2023, 11 December 2023 and 4 April 2024.

(9) The complainants submitted further information on 25 November 2021, 29 August 2022 and 23 November 2022.

2. DESCRIPTION OF THE MEASURES AND BACKGROUND OF THE CASE

2.1. Organisation and regulation of gambling in Germany

(10) For the purpose of this Decision, the German legal system can be regarded as distinguishing between two types of games of chance.

(11) On the one hand, certain gambling machines can be freely operated by specialised gambling halls (

Spielhallen

gewerbliche Spielhallen

, ‘gambling halls’ or ‘commercial gambling halls’) or by restaurants, provided that the rules of the Regulation on gaming devices and other games with the possibility of winning (

Spielverordnung

) (3) are complied with. According to the gambling halls regulations of the

Länder

(

Spielhallengesetze

) and to the German commercial ordinance (

Gewerbeordnung

), a licence is necessary to operate commercial gambling halls.

(12) On the other hand, casino games (blackjack, roulette, poker, etc., also called ‘table games’, in German also

großes Spiel

Tischspiel

) and certain gambling machines are considered to be too risky and offering such games is in principle prohibited. By way of derogation from that rule, the German

Länder

are competent to allow certain entities (the public casinos operators) to offer such games, through concessions granted at

Länder

level, on the basis of the conditions laid down by the laws of the

Länder

on public casinos (

Spielbankgesetze)

(13) There are differences between the games offered by public casinos and the games offered by commercial gambling halls. Casino games are in principle prohibited, are characterised by high personnel costs and can only be offered in public casinos. Gambling machines operated by public casinos and by commercial gambling halls are subject to different regulations: only the machines operated by commercial gambling halls are subject to a variety of restrictions and, in particular, have to comply with technical regulations preventing the possibility of unreasonably high losses in short periods of time. On the other hand, access to public casinos is restricted (entrance controls, limited number of public casinos per

Land

) while commercial gambling halls offer their services to a broader clientele.

2.2. Tax treatment of public casinos operators

(14) Public casinos operators are subject to the normal tax system as regards the income they generate from their non-gambling related activities (for example when they operate restaurants) (4).

(15) As regards their gambling income (income from casino games and gambling machines) and gambling-related income (e.g. entrance fees, tips, sale of gambling magazines, rental of ties and jackets), public casinos operators are subject to special taxes only applicable to them (see Section 2.2.1) and exempted from a number of otherwise applicable taxes (see Section 2.2.2), the exemptions being intrinsically linked to the special taxes (see Section 2.2.3).

2.2.1. The special taxes applying to public casinos operators for their gambling income

(16) For their gambling income (in the broad sense, that is to say encompassing the gambling income

stricto sensu

as well as the gambling-related income (5)), public casinos operators are subject to a special tax or special taxes laid down, in each

Land

, in a law of the

Land

(

Spielbankgesetz

(17) Those special taxes mostly use as a tax base the gross gambling income

stricto sensu

(‘GGI’, that is to say the bets placed by the players minus the winnings distributed to the players,

Bruttospielertrag

), which is the main source of gambling-related income for public casinos operators.

(18) The special taxes always include a so-called ‘casino tax’ (

Spielbankabgabe

) calculated on the basis of the GGI. In most

Länder

, the tax rate is progressive depending on the GGI.

(19) In addition to the casino tax, several laws of the

Länder

lay down an additional tax on the GGI, under different names (

weitere Leistung(en), Zusatzabgabe, zusätzliche Leistungen

(20) In all

Länder

, the laws on public casinos lay down a reduction of the amount of casino tax by the amount of (net) VAT to be paid by the public casinos operators (VAT offsetting mechanism, measure 1).

(21) Some of the special taxes on the GGI are also sometimes automatically reduced by the laws of the

Länder

on public casinos after new public casinos are opened (measure 2.a) or in circumstances other than the opening of new public casinos (measure 4.b).

(22) In certain

Länder

, the special taxes on the GGI (or some of them) can be temporarily reduced, for the past or the future, by ad hoc decisions of the public authorities concerning one or several public casinos operators (measure 2.b for newly opened public casinos and measure 4.c in other circumstances).

(23) In addition to the special taxes on the GGI, several laws of the

Länder

lay down an additional tax on the tips received by staff of the public casinos (

Troncabgabe

(24) In addition to the taxes on the gambling turnover, several laws of the

Länder

(6) lay down an additional tax on the residual annual profit (

Jahresergebnis

Gewinn

, in essence calculated on the basis of turnover minus costs) of the public casinos operators, calculated using various methods and under various names (

Gewinnabschöpfung, weitere Abgabe, Gewinnabgabe, Abführung des Überschusses

(25) The laws of the

Länder

sometimes provide that the money collected under the special taxes has to be used by the

Länder

to finance specific public expenses in the general interest.

(26) As from 1 January 2024 (7), in the

Land

Hamburg, the public casino operator is also liable to pay an equalization tax (

Ausgleichsabgabe

) in order to ensure that the operator pays at least the same amount of tax as it would pay if it were subject to the normal tax rules (as if there were no special taxes and no tax exemptions; this normal tax burden includes in particular corporate and/or income tax, trade tax and entertainment tax). The equalization tax is equal to the difference (if it is a positive amount) between the tax amount that would be due under the normal tax rules and the tax amount to be paid by the operator under the special tax rules. The operator must submit an annual declaration for the equalization tax to the tax office no later than six months after the end of the financial year (8) and the payment of the equalization tax should be made according to the general rules of the German tax ordinance. The German authorities have committed to calculate the entertainment tax on the basis of the provisions of the entertainment tax law of Hamburg applicable to gambling machines (

Spielgeräte mit Geldgewinnmöglichkeit

), which amounts to 5 % of the amount of the bets (9) placed in the public casino. Personal income tax and other income taxes (

Ertragsteuer

n) are to be calculated using the highest applicable tax rate.

2.2.2. The normal taxes from which public casinos operators are exempted

(27) In Germany, undertakings (including gambling halls) are normally subject to a series of general taxes, mainly income tax (

Einkommensteuer)

or corporate tax (

Körperschaftsteuer)

and the related solidarity surcharge (

Solidaritätszuschlag

), trade tax (

Gewerbesteuer)

and VAT (10).

(28) The main features of VAT, corporate tax and income tax (tax base and tax rate) are laid down at national level. Corporate tax and income tax are general taxes on profit and VAT is a general tax on turnover. Trade tax is another general tax on profit: the tax base (

Messbetrag

) is defined at national level, together with a minimum rate, but the municipalities are competent to set the rate (

Hebesatz

(29) Apart from those general taxes, undertakings offering gaming services (11) are also usually subject to a specific municipal tax, the entertainment tax (

Vergnügungsteuer

), except in Bavaria. The

Länder

are competent to allow the municipalities to introduce the entertainment tax. The features (in particular the rates and the base) of such taxes are laid down at municipal level within the framework (maximum or minimum rate, tax base) set by the

Land

if it decided to do so. The tax is usually calculated as either a percentage of the amounts spent by the entertained person (12) (bets, entrance fee) or of the GGI generated by the entertaining entity or, as in earlier legislation, a lump-sum per entertaining device (gambling machine) or per surface dedicated to the entertainment activities. The entertainment tax laws of the municipalities usually apply to gambling machines or gambling devices (

Spielgeräte, Spielautomaten, Spielapparate

) and lay down a tax base (usually the GGI or the amount of the bets) and a tax rate (around 20 % if the tax base is the GGI, around 5 % if the tax base is the bets). The entertainment tax laws also sometimes apply to the playing for money (

Ausspielen von Geld, Geldausspielungen

) for which they also lay down a tax base and tax rate.

(30) The normal tax rules for different operators may thus vary depending on a series of conditions (for example, the trade tax and entertainment tax rate depends on the location of the operator, while corporate tax and personal income tax are alternatively applied depending on an entity’s legal form) and can evolve over time.

(31) Public casinos operators are exempted from a number of those otherwise applicable taxes.

(32) According to Article 6(1) of a 1938 law in Germany on public casinos (the ‘1938 law’) (13), which is still in force, public casinos operators are exempted from ‘national taxes levied on income, wealth, turnover and from the lottery tax and the capital duty

’

. Following a 1954 administrative agreement (

Verwaltungsabkommen

dated 30 November 1954) interpreting that provision, Article 6(1) of the 1938 law is regarded as exempting public casinos operators from corporate tax (or, if applicable, income tax (14)) and related surcharges, such as the solidarity surcharge (

Solidaritätszuschlag)

introduced in 1991, and from VAT. The VAT exemption arising from the 1938 law was replaced by another provision in the VAT law of 1967 and was later abolished in April 2006 so that public casinos operators are since then subject to the normal VAT rules (see Section 3.1.4.3 of the opening decision for more details). Although Article 6(1) of the 1938 law would also constitute a basis for an exemption from the lottery tax (

Lotteriesteuer

), that provision is of no effect since public casinos operators do not organise games or events that would be subject to that tax (15). The capital duty (

Gesellschaftsteuer

) and the wealth tax (

Vermögensteuer

), explicitly mentioned in Article 6(1) of the 1938 law, have been abolished in 1992 and 1997 respectively (16) and thus, in practice, those exemptions have had no impact since then.

(33) Moreover, according to Article 6(2) of the 1938 law, ‘the extent to which public casinos operators are to be exempted from taxes of the

Länder

and of the municipalities is to be determined’ by the competent ministers (today, the ministers of the

Länder

). On the basis of that provision, the German authorities adopted further specific provisions specifying the scope of the exemption from taxes of the

Länder

and of the municipalities (17). According to the German authorities, those provisions have the effect of exempting public casinos operators from the trade tax and, where it exists, the entertainment tax (18). The trade tax exemption for public casinos operators is also, since 1995, laid down specifically in Article 3(1) of the trade tax law (

Gewerbesteuergesetz

) (19).

(34) As a consequence of those tax exemptions, municipalities in which a public casino is operated suffer a shortfall in tax revenue because, in principle, municipalities collect the trade tax and the entertainment tax from which public casinos operators are exempted. This shortfall in tax revenue is usually compensated by payments by the

Länder

(which collect the special taxes imposed on public casinos operators) (20).

2.2.3. The objective of the special tax treatment

(35) The objective of the special tax systems of the

Länder

(including the special taxes and the tax exemptions) is twofold.

(36) The casino tax and, more generally, all special taxes paid by the public casinos operators are considered to be a replacement for the other taxes from which the public casinos operators are exempted (

Abgeltung

). In addition, according to a 1933 law (21) in Germany (‘the 1933 law’), the profit of public casinos operators should not benefit private interests but should be ‘skimmed’ or ‘creamed off’ for purposes of public benefit (

Abschöpfung

(37) The special tax system applicable to public casinos operators in each

Land

indeed first aims at replacing the taxes from which the public casinos operators are exempted (

Abgeltung

), that is to say that the normal taxes are deemed to be paid in the form of a special tax (22). From that perspective, public casinos operators are not really exempted from the normal taxes: the tax exemptions applicable to those operators merely mean that their special taxes are deemed to replace the normal taxes; the tax exemptions thus simply aim at preventing double taxation (23) and the amount paid under the special tax rules should in principle be the same as under the normal taxes.

(38) In addition, because the German legislator considered that the public casinos operators (regarded as monopolies (24)) would otherwise make a ‘very high profit’ under the normal tax rules, the special tax rules aim at skimming (creaming off) the profit of these operators which would not have been creamed off under normal tax rules (

Abschöpfung

) (25). As recalled by the German courts, the objective of the tax system applicable to public casinos operators was to ‘cream off’ their revenues. The underlying idea is to tax as much as possible the profits resulting from a socially unwanted but inevitable activity and from a business regarded as shielded from competition, an objective which the normal tax system could not achieve in the view of the German authorities at the time (26). There is however a limit within that second objective. The profit of the public casinos operators should be creamed off as far as possible but the special tax rules should not go beyond the economic viability limit (

Wirtschaftlichkeitsgrenze

) and should thus leave the operators an ‘appropriate’ profit. Public casinos however went bankrupt in the past (27), in particular because of the high tax burden under the special tax rules and the resulting low profitability.

2.2.4. The inseparable link between the special taxes and the exemptions from normal taxes

(39) As consistently explained by the German authorities (quoting the case-law of the Federal Finance Court (28)) and by the complainants, both sets of measures described in Sections 2.2.1 and 2.2.2 (the special taxes and the tax exemptions) are intrinsically linked and make ‘sense’ only if considered as a whole. The general idea of a special tax and of the corresponding tax exemptions was set out in the same law (the 1938 law). As highlighted by the Federal Finance Court, the tax exemptions

alone

are not justified by any ‘economic or socio-political reason’, they merely are the ‘necessary consequence’ of the existence of the special taxes applicable to public casinos operators.

2.3. Grounds for initiating the formal investigation procedure

(40) In the opening decision, the Commission preliminarily considered that measure 5 and the ad hoc decisions of the public authorities to reduce the special taxes applicable to the public casinos operators in certain cases (measure 2.b and measure 4.c) could involve State aid.

(41) Regarding measure 5, the Commission in particular stressed that ‘a mere (abstract) comparison of the legal features of the two systems (namely on the one hand the normal rules generally applicable to all companies and on the other hand the special tax rules generally applicable to public casinos operators) is not straight forward because the tax system of the public casinos operators is, in all

Länder

, fundamentally different from the normal tax rules which it is deemed to replace’ (recital (85) of the opening decision).

(42) The Commission however also considered that, ‘because a specific group of operators is subject to a special tax regime, it is however also not possible to rule out the existence of an advantage, in the absence of a general provision (such as a claw-back or offsetting mechanism (29)) automatically preventing that an advantage arises from the different tax rules. The absence of a mechanism ensuring that the special tax regime applicable to public casinos operators is not more advantageous compared to the normal tax rules means that this regime involves potentially an advantage for these operators. Also, the fact that the rates of the special tax (casino tax and additional taxes) paid by the public casinos operators decreased in the period under review […] constitutes an indication that the schemes at stake could, following that change, provide advantages’ (recital (90) of the opening decision).

(43) The Commission thus concluded that it ‘needs to examine, in the context of the formal investigation, whether public casinos operators enjoyed an advantage because of their subjection to special tax rules as of 8 March 2007’ (recital (101) of the opening decision).

(44) Regarding measure 2.b and measure 4.c, the ad hoc reductions of the special taxes applicable to public casinos operators, the Commission noted that ‘whether these specific measures provided the public casinos operators concerned with a selective advantage cannot, for the reasons mentioned in recital (126) [of the opening decision], be assessed standalone’ and that ‘they need to be examined using the same method as for measure 5 (global comparison), but that comparison should take place in a second step’ (recitals (137) and (138) of the opening decision), before concluding that they could constitute State aid (recital (141) of the opening decision).

(45) As regards all measures referred to in the preceding recitals, the Commission also raised doubts as to the compatibility of such measures (if aid) with the internal market. These measures would indeed ‘qualify as operating aid, as they are not linked to any specific investment or project. Operating aid that merely diminishes the normal costs of an undertaking distorts competition and it is a priori doubtful that such aid could be regarded as compatible with the internal market’ (recital (146) of the opening decision).

3. COMMENTS RECEIVED DURING THE FORMAL INVESTIGATION PROCEDURE

3.1. Comments by the German authorities

3.1.1. Comments by the federal authorities

3.1.1.1. Undertakings

(46) The German federal authorities submit that public casinos operators are not active in a market. Gambling is organised in such a way in Germany that offering table games is in principle forbidden. Only public casinos operators may offer such games, on the basis of a concession. Public casinos operators are entrusted with a public task, namely to offer gambling under State supervision in order to channel the gambling instinct of the population by means of a legal offer. The regional legal setup sometimes lays down that only the

Land

or public law entities can operate public casinos. The German Constitutional court considers that the operation of public casinos is not an economic activity (

wirtschaftlicher Vorgang

3.1.1.2. Advantage

(47) The German federal authorities submit that there are no ‘normal market conditions’ for public casinos operators, which enjoy a monopoly, and hence there is no reference (

Prüfungsmaßstab

) on the basis of which one could identify an advantage. The reference cannot be the normal tax rules because this is a matter of selectivity which is a specific and autonomous criterion. Moreover, because public casinos operators are subject to a special tax system, their taxation cannot be compared to the normal tax rules and thus they cannot receive an advantage.

(48) The German federal authorities submit that, even if the reference is the normal tax rules, the Commission cannot rely on a lack of a claw-back mechanism in the special tax rules (and a mere possibility of an advantage) to conclude that the special tax rules are advantageous. They consider that the judgment of the Court of Justice of the European Union (‘the Court of Justice’) in case C-81/10 P

France Télécom SA v European Commission

(30) is not relevant in this case because France Telecom was subject to the normal tax rules (except for specific aspects).

(49) The German federal authorities also submit that the second objective of the special tax rules applicable to public casinos operators is not to tax the latter the same as (or more than) under the normal tax rules but merely to cream off their profit until the economic viability limit is reached (

Wirtschaftlichkeitsgrenze

). The second objective would allow a lower level of (special) taxation in cases where the profit is low (but it would not force the legislator to safeguard an existing public casino in order to safeguard the public task it carries out). The concept of replacement (

Abgeltung

) is not to be understood in quantitative terms but in qualitative terms. Thus, Germany submits that the Commission would rely on a wrong assumption when it argues in the opening decision that the reduction of the casino tax below the initially chosen level of 80 % would imply that the special system does not achieve its aim anymore.

(50) The German federal authorities explain that all measures covered by the formal investigation are consistent with the objective of the special tax system to cream off profits until the economic viability limit (

Wirtschaftlichkeitsgrenze

). The ad hoc reductions are meant to prevent a taxation going beyond the economic viability limit.

3.1.1.3. Selectivity

(51) Concerning the first step of the selectivity test (identification of the reference system), the German federal authorities argue that there is no single or uniform reference tax system to which public casinos operators and commercial gambling halls operators would be subject. Public casinos operators are an exception (

Ausnahmeerscheinung

); they have their own specific tax system and there is no reference framework (except for VAT which is harmonised at Union level) from which this specific tax system would derogate. According to the case-law of the Union courts, the normal tax rules can only be the reference system for persons to which those rules would in principle apply. Public casinos operators are legally and factually very different from operators of commercial gambling halls, mainly because the former carry out a public task while the latter carry out an economic activity (

wirtschaftliche Tätigkeit

(52) Concerning the second step of the selectivity test (derogation), the German federal authorities submit that the two different tax systems (normal

specific) have different objectives. The normal tax rules aim at generating revenue without obligation as to the use of the revenue. By contrast, the creamed off profits under the special tax rules are meant to benefit charitable purposes.

(53) Concerning the third step of the selectivity test (justification), the German federal authorities state that no justification for a

prima facie

selective measure can be provided in cases such as the one at stake where there is no common reference system. At the same time, there are similarities between the two tax systems, in particular the common principle of prevention of double taxation or excessive taxation. Thus, if there were only one common reference system (and the tax treatment of public casinos operators would be

prima facie

selective), the principle of prevention of excessive taxation should be taken into account.

(54) The German federal authorities consider that the special tax system applicable to the public casinos operators is the relevant reference system and there would therefore be no derogation. The German federal authorities, however, disagree that the objective of that special tax system is to reach at least the tax burden that would result from the normal tax rules, thus a possible advantage granted by the special tax rules would not run contrary to the logic of these special tax rules. In this context, should the Commission assess the coherence/consistency of the design of that separate reference framework in the light of the judgment of the Court of Justice in the case

Commission and Spain v Government of Gibraltar and United Kingdom

(31), the German federal authorities consider that the special tax rules are consistent with their objective and are not selective by design.

(55) The German federal authorities consider that the ad hoc reductions are a part of the special tax rules and pursue the objective of prevention of excessive taxation which is one of the objectives of the special tax rules.

3.1.1.4. Effect on trade and distortion of competition

(56) The German federal authorities argue that there is no effect on trade because the effects of the measures are purely local and do not have more than marginal effects on cross-border investments or cross-border establishment. Because of the geographic location of most of the public casinos, it is also unlikely that clients from other Member States would travel to the German public casinos only to play there. The German federal authorities argue that public casinos located close to the border are a minority of cases and should therefore be disregarded. In addition, only the existence of a public casino as such (and not its level of taxation) is relevant to assess whether there is an effect on trade because taxation is not harmonised at Union level.

(57) The German federal authorities submit that the special tax rules cannot lead to an (even potential) distortion of competition because the operation of public casinos is a monopoly as referred to in paragraph 188 of the Commission Notice on the notion of State aid (32). Undertakings from other Member States cannot enter the German market because the freedom of establishment does not grant a right to obtain the concession required to operate a casino, not because of the special tax rules. In addition, there are significant differences between the games offered by public casinos and the games offered by commercial gambling halls. Casino games can only be offered by public casinos, are in principle prohibited and are characterised by high personnel costs (labour expenditure). Gambling machines operated by public casinos and by commercial gambling halls are subject to different regulations: only the machines operated by commercial gambling halls are subject to a variety of restrictions and, in particular, have to comply with technical regulations preventing the possibility of unreasonably high losses in short periods of time. On the other hand, access to public casinos is restricted (entrance controls, limited number of public casinos per

Land

) while commercial gambling halls offer their services to a broader clientele.

3.1.1.5. Existing or new aid

(58) As regards national taxes, the German federal authorities argue that the exemption from national taxes was already laid down in the 1938 law and should be regarded as an existing measure, irrespective of the regulatory actions (tax measures) adopted by the

Länder

after 1958. The fact that the tax exemption was not used before 1958 in certain

Länder

(because no public casinos were opened in certain

Länder

) is irrelevant.

(59) For the German federal authorities, considering, as the Commission does, the exemption from national taxes not to be existing aid is contradictory to the case-law about regional selectivity, as detailed in paragraph 144 of the Commission Notice on the notion of State aid. Even if the special tax systems laid down at regional level could be regarded as derogations from the normal tax rules (which Germany contests), these derogations would be attributable to the German

Länder

which are autonomous.

(60) The German federal authorities also submit that the exemption from the solidarity surcharge is not a new measure because it was already covered by the 1938 law (as any other, even future, surcharge). Also, the surcharge is calculated on the basis of the amount of corporate or income tax due and as there is a corporate or income tax exemption, it is thus impossible to calculate the amount of the surcharge.

(61) As regards

Länder

(and municipal) taxes, the German federal authorities consider that the exemptions from

Länder

taxes are existing measures irrespective of their adoption date, because the legal basis for those exemptions was laid down in the 1938 law and the general principles of taxation of the public casinos (taxation until the limit of economic viability or

Wirtschaftlichkeitsgrenze

) were also already laid down in the 1938 law. The legislator in 1938 could not list all the different

Länder

taxes. Article 6(2) of the 1938 law also covers future

Länder

taxes. The 1938 law does not impose exemptions from

Länder

and municipal taxes; these were only laid down when required, that is when a public casino was created in the

Land

, which sometimes happened only after 1958; but the exemption always results from the 1938 law.

(62) As regards the ad hoc reductions of the special taxes (measures 2.b and 4.c), the German federal authorities consider that these measures are not selective because they result from the general principles of taxation of public casinos. Because those principles were laid down in the 1938 law and because the ad hoc measures directly stem from those principles, the ad hoc measures are, even if they were introduced after 1958, also not new measures.

(63) As regards the legal reductions of the special taxes and the temporary automatic legal reductions of the special taxes under certain circumstances (measures 2.a and 4.b), the German federal authorities consider that those measures do not provide a selective advantage. They are consistent with the general principles of taxation of public casinos.

3.1.1.6. Compatibility

(64) The German federal authorities submit that the measures at stake (the special tax schemes applicable to public casinos operators) pursue an objective of general interest (they refer to the reasoning made in other sections of their comments), are necessary, appropriate and proportionate.

3.1.2. Comments by the Land Baden-Württemberg

(65) Apart from factual clarifications on the special tax treatment in the

Land

, Baden-Württemberg submits that, even though the tax exemption was only and specifically granted to Spielbank Baden-Baden GmbH & Co. KG, this was the only public casinos operator before 1958 in the

Land

and thus

de facto

all operators were tax exempted at that time.

3.1.3. Comments by the Land Bavaria

(66) Bavaria argues that the documents provided to the Commission show that the trade tax exemption was granted before 1958 by an indefinite number of communes to an indefinite number of public casinos operators and thus would, in theory, cover all operators in that

Land

(67) Bavaria also submits that the trade tax exemption results from Article 6(1) of the 1938 law and would thus date back directly to that law.

3.1.4. Comments by the Land Hamburg

(68) As regards the existence of State aid, Hamburg argues that the catering activities of the public casinos operators should not be taken into account to qualify those operators as undertakings or not. Hamburg also explains that online gambling is prohibited in Germany so that (illegal) online gambling is not in competition with the services provided by public casinos operators. Hamburg recalls that, as the choice of the public casinos operator in the Land was organised through a tender open to any operator in Europe; there was no tax obstacle for foreign operators.

(69) As regards the qualification of the special tax scheme in that

Land

as existing or new, Hamburg submits that the casino tax rate was not reduced because the rate can still reach 90 % of the GGI. Hamburg also explains that, in any event, no proper comparison (between normal tax rules and special tax rules) can be carried out, in particular because the operator would have had behaved differently if it had been subject to another tax system.

3.1.5. Comments by the Land Rheinland-Palatinate

3.1.5.1. Ad hoc reductions (measures 2.b and 4.c)

(70) Rhineland-Palatinate explains that the ad hoc reductions of the casino tax were justified in the light of the principles laid down in the 1933 law and are necessary to safeguard the viability of the public task carried out by the operator.

3.1.5.2. Existing aid

(71) Rhineland-Palatinate submits that the corporate tax and income tax rates were reduced in parallel to the decrease of the casino tax. The evolution in time of the entertainment tax cannot be precisely described. The trade tax increased over time. These contradictory evolutions show that no obvious trend can be found as regards normal taxes. The introduction in the

Land

of a special tax on profit is a timely adaptation of the special tax rules and does not constitute a fundamental change of the special tax rules.

(72) Rhineland-Palatinate submits that, even though the tax exemption was only and specifically granted to the

Spielbank

in Bad Neuenahr, this was the only public casinos operator before 1958 in that city and thus there was no need to lay down a general exemption. Rhineland-Palatinate also considers that the exemption from communal taxes did not expire because it was regularly renewed.

(73) Regarding the

Spielbank

in Bad Dürkheim, the

Land

submits that it never paid any municipal taxes before the entry into force of the TFEU (33) and that this fact shows that there must have been a tax exemption.

3.2. Comments by public casinos operators

3.2.1. Comments by Spielbank Bad Homburg Wicker & Co. KG (‘SBHW’), operator of the Spielbank Bad Homburg until 2012 (25 March 2020)

(74) SBHW submits that the concession contract to operate the public casino entailed various obligations (investment in immovable assets, etc.) which had, together with other regulatory features (smoking ban), a negative impact on the profitability of the business. The ad hoc reductions of the special taxes were necessary to survive and had to be justified to the tax authorities. SBHW paid much more taxes than commercial gambling halls. Public casinos are not in competition with private commercial gambling halls because of legal differences mentioned by the German federal authorities.

3.2.2. Comment by the European Casino Association (‘ECA’) (3 July 2020)

(75) The ECA explains that there are many regulatory differences between public casinos and commercial gambling halls (

Spielhallen

3.2.2.1. Advantage

(76) The ECA submits that a tax advantage would merely constitute compensation from the State for the services of general economic interest provided by the German public casinos. The casinos have been entrusted by the

Länder

with the public task of curbing illegal gambling and providing state-monitored opportunities to satisfy the irrepressible human need to gamble. Public casinos operators are subject to various regulatory restrictions (legal form, need to have a licence, blacklist of addicted players) while commercial gambling halls operator can choose their legal form.

3.2.2.2. Distortion of competition

(77) For the ECA, the relevant product market for the determination of threats of distortion of competition is the market for the operation of public casinos. The Commission should first define the relevant product market and cannot simply make unsubstantiated assertions that casino operators compete with amusement arcade operators and with other companies in the broader entertainment market. This contradicts the Commission’s prior decisional practice, according to which there is no uniform market for gambling (Commission Non-opposition decision of 4 June 2004, Comp/M.3373, Point 26 et seq). Table games and slot machines gambling offered by casinos are completely different from commercial slot machines gambling offered in amusement arcades.

3.2.2.3. Effect on trade

(78) According to the ECA, the operation of casinos is legally restricted to the respective

Land

and case-law rejects the possibility of a detrimental effect on trade between Member States in such cases (case T-728/17).

3.2.3. Comments by Spielbank Hamburg Jahr + Achterfeld GmbH & Co. KG, Spielbank Wiesbaden GmbH & Co. KG and Spielbanken Niedersachsen GmbH (‘SHSWSN’), operators of public casinos in Hamburg, Hesse and Niedersachsen (3 July 2020)

(79) SHSWSN generally submits that the Commission did not sufficiently take into account the factual and legal specificities of public casinos and their differences compared to gambling halls. According to German courts (Federal Administrative Court, BVerwG, 13.6.2013, 9 B 50/12, paragraph 6), these differences justify a differentiated tax treatment.

3.2.3.1. Undertaking

(80) Public casinos operators carry out a public task. The activity of public casinos forms part of essential functions of the State. There is an obligation to operate public casinos. This would be confirmed by judgments of the German constitutional court (BVerfG, 18.3.1970, 2 BvO 1/65, paragraph 97 f

BVerfG, 18.3.1970, 2 BvO 1/65, paragraph 99 and following). Because the economic aspects of the operation of public casinos are very limited (by comparison with the public policy objective of prevention of addiction), there is no real market for public casinos and this market is restricted to a few suppliers (and does not include commercial gambling halls, BVerfG, 19.7.2000, 1 BvR 539/96, paragraph 70 and 73). Public casinos must be economically operated but the economic aspect is ancillary and inseparable from the public remit activity (case C-138/11, paragraph 38). The existence of a price is not relevant.

3.2.3.2. Distortion of competition

(81) Because of the different legal framework, the Federal Constitutional Court considered that there are two different markets, one for public casinos (restricted to public casinos) and one for commercial gambling halls (BVerfG, 19.7.2000, 1 BvR 539/96, paragraph 70, 73). From the point of view of the players, the gambling offer of public casinos is different from the gambling offer of commercial gambling halls and both products are not interchangeable. The public casinos have not been able to detect migration from one type of gambling to another. The two tax systems pursue different objectives and cannot be compared.

(82) Any undertaking from an EU Member State can be granted the concession to operate a public casino. This is the case for the Austrian undertaking Casinos Austria International GmbH operating the public casinos in Niedersachsen.

(83) There is also no distortion of competition on the demand side (clients/players). Public casinos are the only suppliers of table games. The gambling machines operated by public casinos are also fundamentally different from the ones operated by commercial gambling halls.

3.2.3.3. Effect on trade

(84) The effect of the measure is restricted to the territory of each of the

Länder

as a consequence of the catchment area of the public casinos at stake. According to the Commission (COMP/M.3373 – Accor/Colony/Desseigne-Barriere/JV vom 4. Juni 2004, paragraph 23), players are ready to travel 30 minutes for gambling machines and 60 minutes for table games. Hamburg is 1h49min away from Denmark and 2h57min away from the next Danish casino. Wiesbaden is 2h01min away from Luxemburg and 2h30min away from the next Luxemburgish casino. Public casinos in Niedersachsen are between 0h11min and 3h17min away from the Netherlands and between 0h31min and 3h21min away from the next Dutch casino. Only a very limited number of players of German public casinos are nationals from other EU Member States, and it must be assumed that these players do not come to Germany to play casino games but for some other reasons.

3.2.3.4. Selectivity

(85) As regards the reference framework, SHSWSN submits that, except for VAT, the reference system chosen by the Commission (the tax law of undertakings,

Unternehmenssteuerrecht

) is wrong because it does not cover in principle public casinos operators. The tax law of public casinos (

Spielbankensteuerrecht

) is not an exception or a derogation from

Unternehmenssteuerrecht

, both are very different and autonomous tax systems and constitute two sets of general measures.

Spielbankensteuerrecht

thus rather constitutes its own reference system.

(86) The concept of regional selectivity is also only applicable in one tax system which covers the alleged beneficiary and its competitors. The area of responsibility of a regional institution (here a

Land

) located within a Member State forms an independent regional reference framework for the selectivity test if it has sufficient autonomy. In the hypothesis of symmetrical devolution of tax powers, the existence of different tax rates is not selective. The two tax systems are imputable to two different legislative competences (federal State and

Länder

): the only reference framework is the regional

Spielbankensteuerrecht.

(87) As regards the second step of the selectivity test (comparability and derogation), if the reference system is the taxation of public casinos, there is no derogation. Differences of taxation of public casinos between different

Länder

is also irrelevant in the light of the regional selectivity reasoning. If one takes the normal taxation of undertakings as reference system, the taxation of public casinos is a derogation but public casinos and gambling halls are not in the same situation.

(88) Because the taxation of public casinos is not part of the reference system used by the Commission (general tax rules), it is impossible to provide a justification in the third step of the selectivity test. If one takes the taxation of public casinos as reference, there are possible justifications: public casinos need to be taxed only to the extent that they keep the ability to always carry out their public task; the prevention of excessive taxation could also be relevant.

3.2.3.5. Advantage

(89) The advantage needs to be calculated using the general taxes applicable in the relevant

Länder

and cities where public casinos are located. Such an abstract calculation is detrimental to the public casinos because they could not adapt to the normal tax rules. In any event, since 2007, there was no advantage for the public casinos in Hamburg, Wiesbaden and Niedersachsen. This shows that the gambling halls are advantaged.

3.2.3.6. Existing aid

(90) The tax exemptions, the (very limited) reductions of the casino tax and the VAT offsetting mechanism (and, more generally, some necessary flexibility in the setting of the tax rate in order to ensure that public casinos can carry out their public tasks) derive from the 1933 and 1938 laws. The objective and the political aim of the special tax rules have not changed. There were no significant modifications after 1958 or those changes would only be the concretization of possibilities existing before 1958. The existence of a public casino before 1958 is not relevant for the exemption from corporate tax and income tax. A reduction of the casino tax rate alone cannot be used to conclude that there has been a significant change in the system because the taxation (and the profit) of public casinos also depends on other features which cannot be calculated. The evolution of normal tax rules cannot transform unchanged special tax rules into new aid.

3.2.3.7. Compatibility

(91) The aid would be compatible following the same reasoning as the one in Commission Decision 2012/140/EU (‘the Decision of 20 September 2011’) (34) because the aid would aim at ensuring player protection.

3.2.3.8. Recovery

(92) Recovery should in this case be prohibited because it is contrary to the protection of legitimate expectations of the beneficiaries which always paid their taxes and because the special tax rules exist since 1938 and ordering recovery would endanger the public task carried out by public casinos.

3.2.4. Comments by François-Blanc-Spielbank GmbH (‘FBS’), operator of the public casino in Bad Homburg (Hessen) as from 2012 (4 July 2020)

(93) FBS argues that there is no competition between public casinos and commercial gambling halls and that the two tax systems are independent. A study by KPMG shows that the tax burden of FBS under the special tax rules is much higher than under the normal tax rules.

(94) FBS considers that the ad hoc reductions are also intrinsically linked with the generally applicable special tax rules laid down in the regional law of public casinos in Hesse. The possibility to reduce the special taxes is a correction mechanism required by the German Constitution in order to prevent excessive taxation (that can arise because the tax base of the special taxes is the GGI, not the profit, so that the principle of taxation on net income (

Nettoprinzip

) is not complied with under the special tax rules).

3.2.5. Comments by Spielbank Bad Neuenahr GmbH & Co. KG (‘SBN’), operator of public casinos

(35)

in Rhineland-Palatinate (31 July 2020)

3.2.5.1. Undertakings

(95) According to SBN, public casinos operators are not undertakings. The exclusion of competition via a legal monopoly does not as such exclude the existence of a market and thus the qualification as undertakings (case T-309/12, paragraph 68). However public casinos operators carry out public tasks: in the interest of the State, the casinos are entrusted with the public task of curbing illegal gambling and providing state-monitored opportunities for gambling. There is a public interest in allowing gambling to take place under state supervision. The fact that the operators provide their gambling services against remuneration (

gegen Entgelt

) does not make them undertakings because their profit is creamed off by their special tax rules. The German Federal Constitutional Court also acknowledged that public casinos operators do not carry out economic activities (BVerfGE 28, 119).

3.2.5.2. Advantage

(96) According to SBN, measure 5 (the special tax rules applicable to public casinos operators) does not provide an advantage. Even if one uses the (incorrect) method of the Commission (comparing the special tax rules and the normal tax rules), public casinos operators in Rhineland-Palatinate were subject to a much higher tax burden under their special tax rules in the period 2007 to 2017, so that the special tax rules rather constitute a disadvantage for the public casinos operators or an advantage to the commercial gambling halls (if one follows the views of the Commission that casinos and commercial gambling halls are comparable from a competition point of view).

(97) SBN submits that the measure at stake should be assessed using a full analysis of all relevant, positive and negative parameters of the measures and its context, including the situation of the beneficiary (case T-525/08, paragraph 57 and 60). But the Commission did not take into account the fact that the special tax rules are inextricably linked with the idea that risky gambling is only allowed by the State if carried out in a responsible environment.

(98) For SBN (referring to the heading 3.1.4 of the opening decision), the Commission unduly merged the two criteria of advantage and selectivity.

(99) SBN submits that comparing the special tax rules and the normal tax rules is not the correct method to establish the existence of an advantage in this case because the two tax systems are very different, as the Commission itself acknowledged in its abstract comparison. A concrete comparison is also not the correct method because there are no normal market conditions for public casinos operators (case C-15/14, paragraph 77-79). The reference to assess the existence of an advantage should be found in national tax legislation and should take into account the objective of the tax system. While the normal tax rules pursue a revenue-raising objective, the special tax system applicable to public casinos primarily pursues regulatory purposes. The skimming (

Abschöpfung

) objective does not mean that the special tax rules will always lead to a disadvantage. It means that, if profit is low, the tax burden can be lower than under the normal tax rules, in order to allow the operator to carry out its public task. But, of course, public casinos are not to be preserved at any cost.

(100) SBN considers that the lack of claw back mechanism is not relevant because the objective of the special tax rules allow – in certain cases – a lower taxation to safeguard the public tasks carried out by the public casinos. The reduction of the casino tax rate in Rhineland-Palatinate was justified by the negative evolution of the public casinos operators’ turnover, their increasing costs, and by the need to take into account their ability to pay as is the case under the normal tax rules. It was meant to safeguard the public tasks carried out by these operators.

3.2.5.3. Selectivity

(101) SBN considers that the special tax system is its own reference framework as it is very different from the normal tax rules and pursues a regulatory objective. The German legislator had no intention to advantage public casinos operators when it designed the normal tax rules. The Court of Justice also considers that the reference system is the rules that as such would be applicable to the undertakings at stake. The national corporate tax rules are not always the reference (case C-88/03, paragraph 59).

(102) SBN argues that since the special tax system is the correct reference system, the special tax rules are not selective. Public casinos operators are in a specific situation in the light of the regulatory objective pursued by the special tax rules.

(103) SBN also considers that the aim of the special tax rules is not automatically to lead to a higher tax burden, as these rules can lead to under-taxation in certain cases (low profit, establishment phase). Any selectivity of the measures at stake would be justified by the tax law principle prohibiting excessive taxation.

(104) SBN submits that also measures 2.b and 4.c are not selective because they are covered by the objective of the special tax rules to tax public casinos operators only until the economic viability limits (

Wirtschaftlichkeitsgrenze)

. The ad hoc decisions to reduce the special taxes are targeted measures for reasons of equity and to prevent hardships and which are meant to keep the casinos viable. A private operator would also have granted such a measure to keep the casinos alive because it would not have wanted to act against the regulatory purpose of offering regulated access to risky games in public casinos.

3.2.5.4. Distortion of competition and effect on trade

(105) SBN submits that public casinos operators have a monopoly. Operators of regular gambling machines such as commercial gambling halls may be in competition with public casinos operators to the extent they all offer games of chance but this is not sufficient for State aid purposes. The interchangeability of the products by reason of the products’ characteristics, their prices and their intended use is decisive. But the two products at stake are different.

(106) SBN also argues that the public casinos operators’ activities are purely local activities. In the period 2007 to 2017, the proportion of foreign players was within a range of 3,22 % and 6,34 % for the casino in Bad Neuenahr and within a range of 1,63 % und 3,32 % for the casino in Bad Dürkheim. Players interested in table games would travel from a distance of 50 to 100 km while clients interested in casinos’ gambling machines would travel from a distance of 30 to 50 km.

3.2.5.5. Compatibility

(107) SBN considers that the measures at stake, if aid, would be compatible under Article 107(3), point (b), TFEU. They pursue an objective of general interest, namely to limit the risks of gambling. They are necessary, proportionate and appropriate because they do not cause distortions of competition.

3.2.5.6. Existing aid

(108) The measures at stake are, according to SBN, existing measures because they are based on Article 6 of the 1938 law. Subsequent changes did not change the core of that provision and were inherent to the system.

3.3. Comments by the complainants (5 August 2020)

3.3.1. Regarding measure 5

(109) The complainants contest the method and the outcome of the concrete comparison mentioned by the Commission in recital (95) and following of the opening decision.

(110) The complainants further argue that the gambling machines operated by public casinos, which are more dangerous from the perspective of player protection (according to the

Bundeszentrale für gesundheitliche Aufklärung

(36)), should

a fortiori

be subject to the entertainment tax, given that the gambling machines operated by gambling halls are subject to this tax while being less dangerous.

(111) The complainants also argue, in the context of measure 3, that the profit-skimming (

Gewinnabschöpfung

) laid down by the regional law on public casinos in North Rhine-Westphalia is not a tax and should not be taken into account in the tax burden under the special tax rules. They submit that only the German law is relevant to qualify a measure as a tax and that the profit-skimming does not actually pursue the aims of the special tax system applicable to public casinos (i.e.

Abgeltung

and

Abschöpfung

3.3.2. Regarding measure 1 (VAT offsetting mechanism)

(112) The complainants consider that the Commission did not clarify certain aspects of the VAT offsetting mechanism. For the complainants, the Commission failed to examine their argument that the obligation to pay VAT had no economic consequence for the public casinos. It is also still unclear whether public casinos use the right to deduct input VAT even though this is not necessary since, even if they did not use that right, they would save the amount of input tax through a reduction of the casino tax. Some revenues of the public casinos (such as entrance fees) are not taxed at all, which the Commission should investigate.

3.4. Comments by the German federal authorities on the comments submitted by third parties (17 September 2020)

(113) The German federal authorities consider that the fight against gambling addiction is pursued through the regulatory framework of the public casinos, not through the taxation. Thus an additional taxation of public casinos under entertainment tax is not necessary. They contest the view of the complainants that the profit-skimming in North Rhine-Westphalia is not a tax. The profit-skimming is a tax following the relevant provision of the tax ordinance (

Abgabenordnung

, see Article 3(1) of that ordinance).

(114) The German authorities consider that the comments made by the ECA mainly support their own position but stress again that the normal tax rules do not constitute the reference for the taxation of public casinos.

(115) They also mostly agree with the comments submitted by the public casinos operators.

4. ASSESSMENT OF THE MEASURES

4.1. The measures

(116) According to the case-law of the Court of Justice, several interventions of the State must be regarded as a ‘single intervention’ in particular when ‘having regard to their chronology, their purpose and the circumstances of the undertaking at the time of those interventions’, they are so closely linked to each other that they are ‘inseparable’ from one another (37). The Commission has a duty to consider complex measures in their entirety in order to determine whether they confer on the recipient undertaking an economic advantage which it would not have obtained under normal market conditions (38). When a public intervention entails different (positive and negative) consequences for an undertaking, the Commission must take into account the cumulative effect of these consequences to assess the existence of an advantage (39).

(117) In that regard, as explained in Section 2.2.3, both the special taxes applicable to the public casinos operators and the exemptions from normal taxes are of the same nature (tax measures, see recital (158)). They are, in each

Land

, the two non-severable parts or components of one complex measure (one per

Land

) and are therefore assessed together. The special tax rules applicable to the public casinos operators are defined in each

Land

and include also the reductions of the casino tax and of other special taxes.

(118) This Decision concerns the 16 special tax schemes applicable to public casinos operators in the 16

Länder

(40) (‘the measures’), encompassing in each

Land

(a) the overall special tax treatment generally applicable to public casinos operators operating in that

Land

including a positive aspect (the special taxes imposed on public casinos operators) and a negative aspect (the exemptions from normally applicable taxes) (measure 5). This special tax treatment also includes the generally applicable reductions of the special taxes imposed on the public casinos operators, which are automatic and laid down in laws of the

Länder

, namely the reduction of the casino tax to offset the VAT (measure 1) and, if any, the reduction of the casino tax in the case of new public casinos' openings (measure 2.a) and/or in other circumstances (measure 4.b); and

(b) the ad hoc decisions of the public authorities to reduce the special taxes applicable to certain public casinos operators, if any (measure 2.b and measure 4.c). These reductions are intrinsically linked with the special tax treatment applicable to the public casinos operators and must therefore be assessed as part of the 16 schemes. Formally, the legal basis to provide such reductions is indeed laid down in the same law of the

Länder

as the one laying down the other features of the special tax treatment. More substantially, these ad hoc reductions cannot be assessed on their own because they merely reduce the tax burden arising from the special tax rules, without it being possible to determine whether these ad hoc reductions as such provide an advantage compared to the normal tax rules (see recital (137) of the opening decision). Furthermore, in order to adapt the tax burden of the public casinos operators, it is a mere formal choice of the public authorities of the

Länder

to choose between a direct change to the scheme, i.e. of the tax features laid down in the law on public casinos, or a reduction of the tax burden through the adoption of ad hoc measures. Germany also underlined that the ad hoc measures followed the same overall objective as the special tax treatment.

(119) As regards the VAT offsetting mechanisms, the opening decision noted that public casinos operators have been subject to VAT since 2006 (recital (123) of the opening decision), while before 2006 they were formally exempted from VAT but the casino tax they paid was meant to replace all normal taxes, including VAT (footnote 66 of the opening decision). It was also noted that the VAT offsetting mechanisms could not be assessed in isolation from VAT obligations of the public casinos operators, leading to the finding that the 2006 reform encompassing both items was neutral (recitals (124) and (125) of the opening decision). As a consequence, the 2006 reform may only have maintained an existing advantage related to the special tax rules to which public casinos operators are subject, an issue included in the assessment of measure 5 on which the Commission opened the formal investigation procedure. Finally, the opening decision noted that focussing on the VAT offsetting mechanism in isolation from the related VAT obligation of public casinos did not allow a finding of an advantage as those mechanisms merely reduced the level of special taxes, without any reference to the relevant benchmark which are the normal tax rules (recital (126) of the opening decision).

4.2. Existence of State aid

(120) According to Article 107(1)TFEU, ‘any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market.’

(121) The qualification of a measure as aid within the meaning of Article 107(1) TFEU requires the following cumulative conditions to be met: (i) the measure must be imputable to the State and financed through State resources; (ii) it must confer an advantage to an undertaking; (iii) that advantage must be selective; and (iv) the measure must distort or threaten to distort competition and affect trade between Member States.

4.2.1. State resources and imputability to the State

(122) To constitute State aid, a measure must both be imputable to the State and financed through State resources.

(123) The measures are tax measures, imputable to a public authority (central State/

Länder

/municipalities, see Section 2.2). They also involve public resources, to the extent the public authorities that collect these taxes forego revenues, which they would otherwise collect from an undertaking in normal circumstances (41).

4.2.2. Undertakings

(124) The German public casinos offer services (especially gambling services and gambling related services (42)) against remuneration (entrance fees, a fraction of the bets served in the form of winnings, prices), which is not contested by Germany or the public casinos operators (43). They offer those services on a market (see Section 4.2.3 about distortion of competition). They are thus undertakings carrying out economic activities for State aid purposes.

(125) The fact that national law or national courts would not have regarded public casinos’ gambling activities as economic activities is not relevant, to the extent this qualification was not carried out in the light of Article 107(1) TFEU (44). Judgments of German courts issued in other contexts made different findings; for instance, the German Federal Constitutional Court also found that the operation of a public casino is without doubt ‘profit-oriented’ and that public casino operators are undertakers/undertakings (

Unternehmer

) (45); in another judgment, the same tribunal qualified the operation of public casinos as a mere ‘occupation/profession’ (46). In the same vein, public casinos operators would be subject to trade tax (if they were not exempted), while this tax only applies to ‘business enterprises’ and entities carrying out an ‘economic business’ (47). In addition, gambling operators are in principle taxable persons for VAT purposes according to Council Directive 2006/112/EC (48). Furthermore, in a number of

Länder

, public casinos operators are regular private-law undertakings owned by private owners.

(126) The Commission already considered that gambling activities (and in particular the activities of casinos) are economic activities pursuant to Article 107(1) TFEU (49).

(127) The alleged fact that public casinos operators are not active ‘on a market’ (because gambling is prohibited in Germany and because only public casinos operators are allowed to offer the games they provide) will be examined (and rebutted) in Section 4.2.3 about distortion of competition. It is also sufficient to note that the alleged exclusion of competition via a legal monopoly does not as such exclude the existence of a market and thus the qualification as undertaking (50).

(128) Germany and certain public casinos operators broadly (51) argue that public casinos operators are entrusted with the public task of offering gambling under State supervision in order to channel the gambling instinct of the population by means of a legal offer. Public casinos operators would perform essential function of the State and carrying out their activities would be mandatory. The Court of Justice however only regarded a few activities as being non-economic in nature and essential functions of the State (police, air navigation safety or the organisation, financing and enforcement of prison sentences); providing gambling services is not part of them. In addition, at least in a number of

Länder

, public casinos operators are private-law undertakings and are not necessarily owned by the public authorities (52), which shows that the activities at stake are not essential functions of the State (or of the public authorities in general). Moreover, in certain

Länder

, public casinos operators went bankrupt (see recital (144) of the opening decision) and there were no public casinos in certain

Länder

for several years (Thuringia, Mecklenburg-Vorpommern). This shows that providing gambling services is not an obligation of the public authorities and that the legal offer (meant to channel the gambling instinct of the population) described by Germany was inexistent in those cases. Gambling services of public casinos operators being sometimes not provided or not to be provided at any cost, it cannot be argued that those activities are ‘essential functions of the State’ (53). It may be true that the

public authorities’ (Länder)

activity to

regulate

gambling in public casinos in each

Land

is an essential function of the public authorities (54). However, this activity of the

Länder

is different from the activity of providing gambling services by public casinos operators as such. The mere fact that an economic activity is regulated by the public authorities does not prevent it from being qualified as economic activity. This is confirmed by the German courts (55).

4.2.3. Distortion of competition

(129) A measure granted by the State is considered to distort or threaten to distort competition when it is liable to improve the competitive position of the recipient compared to other undertakings with which it competes (56). A distortion of competition is generally found to exist when the State grants a financial advantage to an undertaking in a liberalised sector where there is, or could be, competition (57). Public support is liable to distort competition even if it does not help the recipient undertaking to expand and gain market share. It is enough that the aid allows it to maintain a stronger competitive position than it would have had if the aid had not been provided.

(130) When the Commission assesses aid schemes, it does not need to check that the criterion of distortion of competition is actually met in all individual cases, for all beneficiaries of the scheme.

(131) The measures are liable to distort competition.

(132) Such measures indeed favour certain economic operators over their competitors in a market where at least some competition exists or can exist. The fact that the public casinos operators would benefit from a legal monopoly to provide the games they offer does not alter that finding. The games they offer are at least to a certain extent in competition with the ones offered by other operators, even if they are not exactly the same. In particular, public casinos operators are to some extent in competition with gambling halls (in particular as regards gambling machines) and with other undertakings in the broad market of games of chance and the broader market of entertainment. Even for table games, public casinos operators are to some extent in competition with gambling halls, online operators and casinos from other Member States.

(133) The market at stake is not limited to gambling in German public casinos. Even though, as argued by the German authorities, the games offered in public casinos can only be offered in Germany by public casinos (legal monopoly), and even though the gambling machines operated by the public casinos operators and by the commercial gambling halls are not exactly the same (see recital (13)), public casinos operators are to a certain extent in competition with commercial gambling halls, in particular when they offer gambling machines and provide related services. This is evidenced by consistent and repeated statements by public casinos operators themselves and their business association (58), by judgments of the German courts (59) and by reports of other German public institutions (60).

(134) One public casino operator (SBN) acknowledges in its comments that operators of regular gambling machines such as commercial gambling halls may be in competition with public casinos operators to the extent they all offer games of chance. But it argues, on the basis of the Commission Notice on the definition of relevant market for the purposes of Community competition law (61), that such a ‘competition relationship’ is not sufficient for State aid purposes: the interchangeability of the products by reason of the products’ characteristics, their prices and their intended use would be decisive. The Commission Notice however explicitly acknowledges that ‘elements of the approach outlined here might serve as a basis for the assessment of State aid cases’ only ‘when consideration of market power and therefore of the relevant market are raised’, which is not the case here. On the contrary, it is in general not relevant (and it is not necessary) to define a ‘market’ in terms of product substitutability in State aid cases (62).

(135) The alleged fact that gambling halls and public casinos would operate on different markets according to the Commission’s own decisional practice is irrelevant and wrong. The Commission Decision mentioned by ECA is a merger decision, not a State aid decision. In addition, even if that decision left open the question whether gambling machines and table games were in the same market (for mergers purposes), it explicitly stated that the Commission already acknowledged that there was one market for gambling machines (63) and it is not contested that both gambling halls and public casinos operate gambling machines (these represent around 75 % and up to 100 % of the public casinos’ total gambling turnover).

(136) Some public casinos operators (and the German association of public casinos itself) even consider that public casinos are in competition with operators providing other game of chances than gambling machines (such as sports betting) and even with operators providing leisure activities in general (64).

(137) Public casinos operators are also at least to a certain extent in competition with online gambling operators offering casino games or other games of chance (65). Even though certain public casinos operators argued that online gambling was illegal in Germany, the legal basis they refer to provides for certain exceptions (66) and online gambling became legal in 2021 (67).

(138) In addition, even if one considers that casino games are only in competition with casino games (which the Commission contests), there is to a certain extent competition between German public casinos themselves (68) and between German public casinos and foreign casinos (69).

(139) As the services provided by public casinos operators are in competition with other services, paragraph 188 of the Commission Notice on the notion of State aid (legal monopoly) is not applicable.

(140) In the light of the above, the measures are liable to distort or threaten to distort competition.

4.2.4. Effect on intra-Union trade

(141) According to well-established case-law of the Court of Justice, it is not necessary to demonstrate that an aid has an actual effect on trade between Member States, but only that it is liable to affect such trade (70). In particular, the Court of Justice has ruled that where State aid ‘strengthens the position of an undertaking as compared with other undertakings competing in intra-[Union] trade, the latter must be regarded as affected by the aid’ (71).

(142) Furthermore, public support can have an effect on trade between Member States even if the recipient is not directly involved in cross-border trade. A subsidy may for example make it more difficult for operators in other Member States to enter the market (72). Even a subsidy provided to an undertaking that provides only local or regional services may have an effect on trade where undertakings from other Member States could provide such services (also using the freedom of establishment) and the possibility is not purely hypothetical (73).

(143) The measures are liable to affect intra-Union trade.

(144) When the Commission assesses aid schemes, it does not need to check that the criterion of effect on trade is actually met in all individual cases, for all beneficiaries of the scheme and whatever the amounts of aid at stake. In that regard, it is sufficient to note that (i) public casinos and gambling halls are at least to some extent in competition, (ii) nothing prevents public casinos and commercial gambling halls from being operated close to each other (in the same city for example) and this is often factually the case, and (iii) nothing prevents such gambling halls from being operated or owned by foreign undertakings. Thus, a selective advantage to public casinos is liable to affect intra-Union trade by making it more difficult for companies from other Member States to enter the market and operate gambling halls in Germany.

(145) As a matter of fact, many gambling halls in Germany are operated by foreign undertakings (74). Furthermore, it is not contested that, in fact, at least one of the public casinos operated by each public casinos operator is located close to one or several commercial gambling halls which are or could be operated by undertakings from other Member States.

(146) An advantage for public casinos operators is also such as to help them to attract foreign customers, especially in border regions. Attracting foreign customers (not only in border regions but more generally in all cities with a public casinos, for instance spa cities of international reputation) was historically one of the aims of the 1933 law allowing the operation of public casinos (75). Still today, public casinos are mostly located in places attracting foreign customers (76) such as major cities, touristic cities, airports (77) or border regions.

(147) Using their strengthened financial situation, public casinos operators can also more easily enter foreign markets (78) or attract foreign investment (79).

(148) The German federal authorities and some public casinos operators argue that the effects of the measures are purely local and do not have more than marginal effects on cross-border investments or cross-border establishment. They explain in that regard that, because of the geographic location of most of the public casinos, it is unlikely that clients from other Member States would travel to the German public casinos only to play there (public casinos located close to the border are a minority of cases that should be ignored). This line of reasoning is however not relevant when aid schemes are at stake, in particular when such schemes are not legally restricted to cases in which their effects would be purely local and would not have more than marginal effects on cross-border investments or cross-border establishment. In addition, whether or not clients from other Member States would travel to the German public casinos

only

to play there is not the relevant criterion: what matters is whether or not the increased attractiveness of German public casinos is liable to (even marginally) influence foreign customers’ behaviour. Furthermore, one of the main effects on intra-Union trade in this case concerns the limitation to the establishment and operation of gambling halls by foreign operators, while these gambling halls are (as explained in recital (145)) or at least can be operated close to public casinos. In that context pointing to an effect on trade, Germany and the relevant public casinos operators do not explain how the measures could not have an impact on cross-border investments or cross-border establishment.

(149) Germany and the public casinos operators in question rather merely focus on the impact of the measures on consumers or on other casinos. The public casinos operators in Hamburg, Wiesbaden (in Hesse) and Lower Saxony only submitted information about the distance between their casinos and the next border or the next foreign casino (80). In the same vein, the operator of the public casinos in Bad Neuenahr and Bad Dürkheim (in Rhineland-Palatinate) merely submitted that the proportion of foreign players would range from 1 % to 6 % (81).

(150) Given the characteristics of the measures, the aid schemes as such are liable to affect trade between Member States. Moreover in the light of the possible effect on foreign investment/establishment in gambling halls (and in public casinos, when it is legally possible (82)), it is likely that all the individual aids granted under the schemes have more than marginal effects on trade. It is not

a priori

excluded to find individual situations where the aid has no effect on trade (83). However, the identification of such situations belongs to the implementation phase.

(151) Consequently, it is considered that the measures are liable to have an effect on intra-Union trade.

4.2.5. Selective advantage

(152) To assess the existence of an advantage, the financial situation of the undertaking following the measure should be compared with its financial situation if the measure had not been taken (84). According to the case-law of the Court of Justice, the concept of aid embraces not only positive benefits, but also measures which in various forms mitigate the charges which are normally included in the budget of an undertaking (85). As regards fiscal measures, an advantage may be granted through different types of reduction in a company’s tax burden (86). Although a measure that entails an exemption from or a reduction of a tax does not involve a positive transfer of resources from the State, it gives rise to an advantage because it places the undertakings to which it applies in a more favourable financial position than other taxpayers and results in a loss of income to the State (87). In particular, in relation to tax measures, in order to evidence a possible tax advantage, it is necessary to assess whether the tax treatment granted to an entity provides it with an advantage in comparison to the normal tax rules (88).

(153) To be considered State aid, a measure must be selective, in the sense that it must favour only certain undertakings or the production of certain goods. According to established case-law of the Court of Justice, the assessment of the material selectivity of a measure takes place in three steps. First, it is necessary to identify and examine the common or normal regime (‘reference system’, ‘system of reference’ or ‘reference framework’) applicable in the Member State concerned. Second, it is in relation to this common or ‘normal’ tax regime that it is necessary to assess and determine if any advantage granted by the tax measure at issue may be selective. This has to be done by demonstrating that the measure derogates from that common regime inasmuch as it differentiates between economic operators that, in the light of the objective pursued by that regime, are in a comparable factual and legal situation. Third, if such derogation exists, it is necessary to examine whether it results from the nature or general scheme of the taxation system of which it forms part and could hence be justified by the nature or logic of the system. In this context, it is for the Member State to show that the differentiated tax treatment derives directly from the basic or guiding principles of that system.

(154) In tax matters, contrary to what Germany argues (89), the assessment of the advantage is thus linked to the assessment of the selectivity criterion, to the extent the existence of a derogatory tax treatment is also assessed in comparison to the reference framework, that is to say the normal tax rules. As also stressed by the Court of Justice (90), the determination of the reference framework is of particular importance in the case of tax measures since the very existence of an advantage may be established only when compared with ‘normal’ taxation. The Commission will thus first present in Section 4.2.5.1 the normal tax rules (reference framework), against which the measures need to be assessed (both for the advantage criterion and for the selectivity criterion). The Commission will then assess the advantage criterion (Section 4.2.5.2) and the selectivity criterion (Section 4.2.5.2.3).

4.2.5.1. The normal tax rules (reference framework)

(155) As the Court of Justice ruled in the

World Duty Free

case (91), the determination of the reference framework 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 Member State. 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. It is the Member State concerned which defines, by exercising its exclusive competence in the matter of direct taxation, the characteristics constituting the tax. The determination of the reference system or the ‘normal’ tax regime, on the basis of which it is necessary to analyse the condition relating to selectivity, must take account of those characteristics. It must also be borne in mind that, in so far as the determination of the reference framework must be based on an objective examination of the content and structure of the applicable rules under national law, it is not necessary to take account of the objectives pursued by the legislature when adopting the measure under examination.

4.2.5.1.1. Material scope

(156) As described in more detail in Section 2.2.2, the corporate tax and personal income tax – with the solidarity surcharge – and the trade tax are the taxes that apply generally to all undertakings on their income in Germany (92). Those taxes are applicable to public casinos operators when they carry out non-gambling related activities. Those taxes use as tax base and aim at taxing the profit (93). This was not contested by Germany. While the tax rates of corporate tax/personal income tax and of the solidarity surcharge are laid down uniformly at national level, the municipalities can set (within certain limits) the rate of the trade tax. The normal tax rules may thus vary depending on the location of the operator (the trade tax rate depends on the location of the operator) and its legal form (corporate tax and personal income tax are alternatively applied depending on an entity’s legal form (94)).

(157) In addition, undertakings offering entertainment and in particular gambling services are also – except in Bavaria where the entertainment tax was abolished as from 1980 – generally subject to a specific municipal tax on entertainment (entertainment tax). The features of such taxes are laid down at municipal level, sometimes within the framework (maximum or minimum rate, tax base) set by the

Land

which, most of the time, devolves most of its tax competence to the municipalities. The applicable entertainment tax rules thus also depend on the location of the operator.

(158) As described in more detail in Section 2.2.3, public casinos operators are explicitly exempted from those normal taxes which would otherwise apply. The normal taxes are, for public casinos operators, deemed to be paid through the special taxes imposed on them (

Abgeltung

) and described in Section 2.2.1. All the measures described in Section 2.2.1 (casino tax, additional taxes on the GGI, additional tax on the annual profit etc.) are compulsory payments generally applicable to all public casinos operators (in the

Land

concerned), they are laid down unilaterally by the

Länder

in their laws, and the sums collected are transferred to the

Länder

without any counterpart. In view of the German law, they therefore qualify as taxes (95). Those taxes serve to replace the normal taxes from which the public casinos operators are exempted (

Abgeltung

) and to skim/cream off the profit of public casinos operators for purposes of public benefit (

Abschöpfung

). As regards the argument raised by the German federal authorities that the two different tax systems (normal tax rules vs specific tax rules for public casinos) have different objectives because the normal tax rules aim at generating revenue without obligation as to the use of the revenue while the taxes collected under the special tax rules should be used for charitable purposes, the Commission notes that the alleged destination of the special taxes (charitable purpose) does not change the fact that these taxes are meant to replace the normal taxes.

(159) The taxes described in Section 2.2.2 constitute the normal tax rules because they apply generally to all undertakings in Germany (for corporate tax, trade tax and the related surcharges) or generally to the entertainment sector (for the entertainment tax). In the absence of the special tax rules applicable to public casinos operators (in particular the explicit tax exemptions they benefit from), these operators would be subject to these normal taxes. The measures in question are inseparable from the general tax system, given the explicit reference to the normal taxes by way of the exemption from those taxes and the skimming and replacement logic of the measures which can only be understood by comparison or reference to the normal tax rules. This is also evidenced by the 1938 law and the laws of the

Länder

on public casinos which always lay down at the same time these two inextricably linked parts of the complex measure (at least in the form of principles in the 1938 law), namely the special taxes and the exemption from normal taxes. As the measures are inseparable from the general tax system of the Member State concerned, reference must be made to that system to assess advantage and selectivity.

(160) Furthermore, the tax treatment of public casinos operators cannot be considered as a separate system of reference as it is not simply a special purpose levy that would come – following its own specific logic – in addition to the normal taxes. On the contrary, it is meant to replace the normal tax rules. If the measures at stake were simply the additional special taxes applicable to public casinos operators, without the exemptions from normal taxes, these special taxes could on their own be regarded as a separate system of reference following its own logic (special purpose levy). This is, however, not the case as the special taxes are intrinsically linked with the tax exemptions and are supposed to replace the normal taxes.

(161) Germany and several interested parties consider that the tax rules to which public casinos operators are subject (casino tax, etc.) are the reference framework that should be taken into account for the assessment of the advantage and the selectivity of the measures. They additionally and alternatively argue that there is no reference or that there are no normal market conditions so that no selective advantage can be identified. In particular, the German federal authorities broadly argue that the normal taxes do not in principle apply to public casinos operators, which are an ‘exceptional phenomenon’ and very different from gambling halls so that there is no common reference system (and the special tax system for public casinos operators is its own reference framework). They add that, according to the case-law, the normal tax rules can only be the reference system for persons to whom those rules would in principle apply.

(162) The German authorities however do not explain at all why and to what extent the normal taxes would not apply to public casinos operators. It is clear that the normal taxes would apply to public casinos operators if they were not explicitly exempted from these taxes by the measures. It is noteworthy in that regard to observe that public casinos operators are subject (without any difference or adaptation) to the normal tax rules when they provide services other than gambling services. The Commission also notes, as regards the taxation of public casinos operators’ gambling activities, that it was necessary to lay down explicit exemptions from the normal taxes so that public casinos operators do not pay those taxes which would otherwise normally apply to them and even applied to them in the past when there were no tax exemptions (96). The tax exemptions in question have a substantial effect (without them, public casinos operators would pay the normal taxes) and not a mere formal or declaratory nature (a case in which removing these exemptions would not change the situation because, for example, public casinos operators would be exempted from the same taxes following other more general tax rules) (97). German courts also took the view that, in the absence of the special tax rules, public casinos operators would be subject to the normal tax rules, also because the special taxes (casino tax and possibly other special taxes) are explicitly regarded as a replacement for the normal taxes (98).

(163) More generally, it is always possible – as Germany does – to find specificities characterising certain undertakings or certain economic sectors (be it only their particular activities or the non-fiscal regulatory framework applicable to them). Such specificities are not sufficient to consider that these undertakings or sectors would be subject to their own reference system when normal taxes would apply to them following the normal tax rules. The different factual and legal situation of certain undertakings can however be relevant to a certain extent in the second step of the analysis which will be assessed in Section 4.2.5.3.1.

(164) In an attempt to limit the relevance of the explicit tax exemptions for the selectivity reasoning (they create an obvious link to the normal tax rules and represent a derogation from these rules), Germany also argues that those exemptions are not the cause of the different tax treatment but a mere consequence of the special taxes (with the aim to avoid double taxation). This however does not change the fact that, in the absence of these tax exemptions, public casinos operators would be subject to the normal taxes as these operators and activities normally fall within their usual scope of application.

(165) The fact also remains that the special taxes paid by public casinos are meant to replace the normal tax rules (

Abgeltung

), which again points to the fact that these normal tax rules are the relevant reference framework. It is not the mere existence of special taxes (and of the different tax treatment) that justifies the exemption from normal taxes. It is the fact that the special taxes are meant to replace the normal taxes. Only in that case the tax exemptions are the logical consequence of the special taxes, in the light of the need to prevent double taxation (99). In addition, the existence of special taxes is only justified by the fact that the normal tax rules could not achieve a sufficiently high level of skimming of the public casinos’ profit (100). Therefore, the design and the logic of the special tax treatment (replacement and skimming,

Abgeltung

and

Abschöpfung)

can only be understood by reference to the level of taxation under normal tax rules and thus to the normal tax rules.

(166) It is thus true that the tax exemptions are a consequence of the special taxes. But the exemptions are only justified and so to speak ‘neutral’ (that is, merely preventing double taxation) if the special taxes indeed replace the normal taxes and do not lead to a tax burden lower than under the normal tax rules (because, in the latter case, there cannot be ‘double taxation’). As nothing ensures that the special taxes will lead to at least the same tax burden as under the normal tax rules (see recital (177); Germany even alleges that, in the case of low profits, the special tax rules may or even should lead to lower taxation than under the normal tax rules), the tax exemptions cannot be regarded as simply preventing double taxation. Those tax exemptions are not simply a logical consequence of the existence of special taxes. They go beyond a mere prevention of double taxation: they allow non-taxation up to the difference between the tax burden under the normal tax rules and the tax burden under the special taxes. They are thus not neutral for the assessment and should be fully taken into account. To the extent Germany’s argument would aim at justifying the measure by the logic of the tax system (third step of the selectivity reasoning), it is examined in Section 4.2.5.3.2.

(167) In the context of the advantage criterion, SBN also submits that the two tax systems are very different, that there are no normal market conditions for public casinos operators as in the

Kernkraftwerke Lippe-Ems

case (101), and that the reference to assess the existence of an advantage should be found in national tax legislation and take into account the objective of the special tax system. These arguments boil down to contesting that the normal tax rules as described in Section 4.2.5.1 are the reference to be used to assess the existence of an advantage and of the selective character of the measures. It is thus relevant to assess them together with the other arguments related to the reference system used by the Commission. The arguments raised by SBN are however ineffective to the extent that SBN does not contest that, in the absence of the special tax rules for public casinos operators, those operators would be subject to the normally applicable taxes following the general rules of taxation applicable in Germany. SBN also does not explain why the normal tax rules as described in Section 4.2.5.1 are not the reference. In that regard, the fact that the two tax systems would be very different does not mean that normal tax rules as described in Section 4.2.5.1 are not the reference, it simply means that the tax rules applicable to public casinos operators are different, which supports the idea that they constitute a derogation from those normal tax rules. The reference made by SBN to the

Kernkraftwerke Lippe-Ems GmbH

case is not relevant because that case-law did not deal with exemptions from

normally

applicable taxes (and special taxes replacing the latter) but with special

additional

taxes for certain operators (the special taxes were not meant to replace the normal taxes, contrary to the situation in the present case where the operators are exempted from the normal taxes). Furthermore, the regulatory objective of the special taxes (casino tax, etc.) is not relevant (102) for the identification of the reference framework and the normal market conditions (normal taxation).

4.2.5.1.2. Geographical scope of the reference framework, repartition of competence within the German authorities to tax public casinos and other operators

(168) In their comments, certain interested parties (SHSWSN) refer to the case-law of the Court of Justice on symmetrical devolution of tax powers and regional selectivity. They explain that the two tax systems (normal tax rules and special tax rules) are imputable to two different legislative competences (federal State and

Länder

) so that the only possible reference framework is the special tax system.

(169) Contrary to what is claimed by SHSWSN, it is straightforward to identify a reference framework in this case, because the special taxes are meant to replace the normal taxes from which the public casinos operators are explicitly exempted (see Section 2.2.3).

(170) The case-law of the Court of Justice about regional selectivity mentioned by SHSWSN (103) is also not relevant in this case because the German Federal State did not (generally) devolve (symmetrically or not) to infra-State entities the power to set the tax rules applicable to (all) undertakings within the territory of these infra-State entities. For all operators other than public casinos operators, there are no special tax rules laid down by the

Länder

that would replace the normal taxes such as corporate tax, income tax or trade tax. Even public casinos operators are subject to the normal tax rules when they provide services other than gambling services or services that are closely related to gambling services. The

Länder

are not in general the competent authority to define the normal tax rules (in particular for VAT, corporate tax, income tax and trade tax) applicable in their respective territories, even for public casinos operators.

(171) Moreover, at least a part of the special tax measures (the exemption from corporate tax and income tax and trade tax) is laid down by the State in national/federal laws and public casinos operators are (also for their gambling activities) subject to VAT, the same as all other undertakings. Thus, it is not correct to claim that the special tax system of public casinos operators would only be set by the

Länder

. It is also incorrect to claim that the normal tax rules are imputable only to the (federal) State: the

Länder

can decide to levy or not an entertainment tax, and can decide on the exemptions from municipal taxes for public casinos (trade tax and entertainment tax); the cities can set the rates of the trade tax and, within the framework defined at the level of the

Land

, they can set the features (tax base and tax rate) of the entertainment tax. Thus, using their competence, the

Länder

can shape, at least to a certain extent, both the normal and the special tax rules. In the same vein, the State is also involved in the taxation of public casinos: the State is competent as regards corporate tax and income tax (currently it grants an exemption from those taxes pursuant to Article 6(1) of the 1938 law) and VAT (until 2006, the State exempted public casinos from VAT).

(172) Overall, it is thus incorrect to claim that there would be two tax systems (normal tax rules and special tax rules) imputable to two different legislative competences that would each be competent to define a specific reference framework applicable to materially different entities: competences mostly overlap in this case.

(173) This Decision however acknowledges the tax competence of the

Länder

with regard to public casinos operators (each

Land

has specific rules on the casino tax for instance) by assessing individually each scheme (the special tax rules applicable to public casinos operators) at the level of the

Land

and with regard to the normal tax rules applicable in that

Land

. This Decision also acknowledges the tax competence of the cities by taking into account the situation in each municipality as regards the normal tax rules that would apply to public casinos operators (tax rate of the trade tax, tax rate, tax base and other tax features of the entertainment tax).

4.2.5.2. Advantage

(174) To assess whether the measures lead to an advantage, it is necessary to compare (the tax burden arising from) the special tax rules to (the tax burden arising from) the normal tax rules as set out in Section 4.2.5.1.

4.2.5.2.1. Advantage within the meaning of the

Fútbol Club Barcelona

case-law

(175) In order to determine whether a tax scheme provides an advantage, it is usually sufficient to compare

ex ante

the legal features of the measure under assessment with the normal tax rules. In cases involving a measure derogating from the normal tax rules, in particular in the

France Telecom

(104) and

Fútbol Club Barcelona

cases (105), the Court of Justice ruled that the advantage criterion is already met when a scheme grants a mere ‘potential’ advantage which may materialise only in certain circumstances. The Court noted that considering that the measures examined in these cases only involve State aid if an actual advantage materialises in all tax years under the scheme would amount to rewarding non-transparent forms of aid and favouring Member States which violate the standstill clause within the meaning of Article 108(3) TFEU. In particular, the fact that, for each tax year, the actual existence of an advantage (its specific amount) depends on external and random circumstances does not prevent the Commission from concluding that the measure provides an advantage (106).

(176) The case at hand is, as already explained in the opening decision (107), similar to the

France Telecom

and

Fútbol Club Barcelona

cases, to the extent it is impossible to conclude

ex ante

that the special tax rules (combination of the tax exemptions and of the special taxes where the special taxes do not relate directly to the normal tax rules, contrary to a reduced rate for example) will automatically, generally and always lead to an actual advantage (or disadvantage). The amount of tax paid under the normal tax system and under the special taxes depends on random circumstances or choices freely made by the operators, which are not legal features of the tax regime that can be assessed

ex ante

. There is a possibility that the special tax rules may lead to an actual advantage in certain circumstances, which is sufficient to conclude that the measures provide an advantage for State aid purposes.

(177) In particular, because a specific group of operators is subject to a special tax treatment (the special tax schemes of the

Länder

applicable only to public casinos operators which replace the normally applicable tax rules), and because there is no general provision (such as a claw-back or offsetting mechanism (108)) automatically preventing that the special tax treatment is more advantageous compared to the normal tax rules, this regime provides an advantage to this group of operators.

(178) Germany argues that the

France Telecom

case-law is not relevant because the beneficiary in that case was subject to the normal tax rules except for specific aspects. The Commission considers that that case-law is relevant as public casinos are also subject to the normal tax rules when they carry out any activity other than gambling activities. They are also subject to normal tax rules (such as VAT) for their gambling activities, except for the aspects examined in this Decision. In any event, in

France Telecom

, the Court did not make its assessment dependent on the fact that the beneficiary was, except for the measure at stake, subject to the normal tax rules.

(179) Several public casinos operators (SHSWSN, FBS, SBN) submit that they did not benefit from an advantage under their special tax rules because they would have borne a lower tax burden under the normal tax rules. However, as follows from the case law (109), the question of the

materialisation

of the advantage, i.e. whether the measures have actually conferred an advantage on its beneficiaries taken individually, is only relevant at the recovery stage.

(180) In the

Land

Hamburg and in line with the reasoning mentioned in recitals (176) and (177), the recent legislative change (introduction of an equalization tax (see recital (26)) however ensures that, as from 1 January 2024, there is no advantage for the public casino operator. The Commission notes in that regard that the calculation of the amount of tax that would be due under the normal tax rules relies on the regular application of those normal tax rules, on the basis of commonly accepted and even sometimes conservative assumptions (110).

4.2.5.2.2. Alleged compensation for a service of general economic interest

(181) The ECA submits that (i) a possible tax advantage would merely constitute compensation by the State for the provision of services of general economic interest (SGEI) by the German public casinos, and (ii) the public casinos operators have been entrusted by the

Länder

with the public task of curbing illegal gambling and providing state-monitored opportunities to satisfy the irrepressible human need to gamble. The measures however do not meet several of the cumulative criteria laid down in the

Altmark

case-law (111) for the SGEI compensation not to confer an advantage.

(182) Firstly, Germany did not argue and there is no indication that public casinos operators have been entrusted with clearly defined public service obligations (within the meaning of the

Altmark

case law). Neither did Germany argue that public casinos operators provide services which, if they were considering their own commercial interest, they would not assume or would not assume to the same extent or under the same conditions. The Commission also notes in that regard that there are (or were at some point in the past) no public casinos operators (and thus no services at all) in certain

Länder

(183) Secondly, the parameters on the basis of which the compensation is calculated are not established in advance and

a fortiori

not in an objective and transparent manner.

(184) Thirdly, in the absence of an

ex ante

definition of the compensation and in view of the design of the measures (absence of any link to the costs of the alleged public service obligations), it cannot be ensured that the compensation will not exceed what is necessary to cover all or part of the costs incurred in the discharge of public service obligations.

(185) Fourthly, there is no requirement (112) to select the operators at stake through a public procurement procedure which would allow for selection of the tenderer capable of providing those services at the least cost to the community. In addition, the level of compensation was also not determined on the basis of an analysis of the costs which a typical undertaking would have incurred.

(186) In conclusion, the measures do not fulfil the conditions of the

Altmark

case law under which an SGEI compensation does not confer an advantage. On the contrary, the measures are liable to provide an advantage (potential advantage by comparison to the normal tax rules), in particular given the absence of any claw-back mechanism.

4.2.5.2.3. Alleged market conformity of the measures

(187) To the extent SBN argues that a private operator would also have granted tax advantages to keep the casinos alive in the view of the regulatory purpose to propose regulated access to risky games, this can be regarded as a reference to a possible market conformity of the advantage provided to public casinos operators. The objective brought forward by SBN – and which would have allegedly guided the action of a hypothetical private operator – is however precisely the kind of policy objective that only the State could pursue and that cannot be taken into account in the market economy operator test. Here the State acts as a public authority. The tax measures examined are obviously not comparable with decisions of investment of a private operator. The measures are thus not market conform.

4.2.5.3. Selectivity

(188) To be considered State aid, a measure must be selective, in the sense that it must favour only ‘certain undertakings’ or the production of ‘certain goods’. While at first sight the special tax rules in question are obviously and explicitly only benefitting public casinos operators and thus ‘certain undertakings’, the selectivity of a tax scheme should in principle be assessed in three steps (113): the first step (determination of the system of reference) was examined in Section 4.2.5.1; the second and third steps will be examined in the following recitals.

4.2.5.3.1. Derogation from the reference system

(189) Taking the normal tax rules as the reference system, it must be assessed, in a second step, if the measures derogate from the ‘normal’ tax rules inasmuch as they differentiate between economic operators that, in the light of the objective pursued by the normal tax regime, are in a comparable factual and legal situation. As described in more detail in Section 2.2.1, public casinos operators are exempted from certain taxes to which other undertakings are normally subject, namely corporate tax or income tax, trade tax and – to the extent that these other undertakings provide entertainment services – entertainment tax (where it exists). They are subject to a special tax regime (114) involving different taxes (with different names, bases and rates) laid down by each

Land

. This special system is meant to replace the normal taxes from which public casinos operators are exempted (corporate tax/income tax and the related surcharges, trade tax and entertainment tax). It is thus in the light of the objective of those normal (otherwise applicable) taxes that the selectivity assessment should be carried out, this objective being in principle linked with (or reflected by) the triggering event of the tax or the tax base (115). Conversely, the objective of the

special

taxes is not relevant at this stage of the selectivity reasoning (116): this is why the fact that the special taxes paid by public casinos operators would be intended to benefit charitable purposes or would have a regulatory objective has no bearing on the second step of the selectivity reasoning.

(190) In the light of the objective of corporate tax and income tax (and the related surcharges) and trade tax, namely to tax profit (recital (156)), all undertakings (including undertakings providing gambling services) are in a comparable situation, to the extent they make profit. In the light of that objective, the fact that public casinos operators would operate on the basis of legal monopolies is not relevant,

inter alia

because such monopolies were deemed by the German legislator to be very profitable (see recital (38)), so that taxing them is consistent with the objective of the general taxes on profit at stake. Similarly, the fact that public casinos operators would be subject to other special taxes (that may however lead to a possible advantage overall) or to specific regulatory rules regarding the prevention of addictive behaviours or the fact that the games offered in public casinos are different from the ones offered by the gambling halls is not relevant in the light of the objective of the general taxes on profit. Therefore, a possible advantage for the public casinos operators arising from the measures (including the exemption from corporate tax/income tax, from the related solidarity surcharge and from trade tax) is

prima facie

selective.

(191) Germany argues that the tax base of the solidarity surcharge is the amount of corporate and income tax, so that the public casinos operators would not pay any amount of solidarity surcharge even in the absence of an exemption from that solidarity surcharge. This reasoning is however based on the false premise that there would never be a positive amount of corporate tax or income tax under the normal tax rules. However, this only applies within the framework of the special tax rules where there is a corporate and income tax exemption, but it is not the case under the normal tax rules.

(192) As regards the entertainment tax, in the cities where it exists, the objective of that tax is to tax entertainment activities (in particular gambling machines, other gambling or playing for money). The municipal entertainment tax laws usually tax gambling machines (

Spielautomat

) or gambling devices (

Spielgeräte

Spielapparaten

) which are nowadays the main type of game offered in public casinos. This can be regarded as also covering table games offered in public casinos. Gambling more generally (and thus in particular table games) is sometimes taxed using a generic triggering event, e.g. playing for money (

Ausspielen von Geld, Spielen um Geld

Geldausspielungen

). More specifically, the objective is to tax entertainment on the basis of the money ‘spent’ or ‘played/gambled’ by the persons entertaining themselves (‘

sich ein Vergnügen leistet’

), as consistently highlighted by the case-law of the German courts (117) and in line with the name of the tax. This was not contested by Germany. In the light of this objective, the public casinos operators, to the extent they provide gambling activities (in particular gambling machines and table games), which constitute a type of ‘entertainment’ and ‘gambling’ for which players spend money to entertain themselves, are in a comparable situation compared to the gambling halls and the games they offer (or to other entertainment activities) that are subject to the tax. Accordingly, all those operators are, to the extent they offer entertainment (and in particular gambling) services, in a comparable situation in the light of the objective of the entertainment tax.

(193) To the extent the measures subject public casinos operators to special tax rules without differentiating between their gambling activities (table games and gambling machines) but merely by reference to their quality of public casinos operators, the subcategory of gambling activities carried out by these operators is not directly relevant to assess whether the schemes are selective. In the light of the objective of the entertainment tax, public casinos operators, to the extent they provide gambling activities (for instance gambling machines), are in the same situation as other operators subject to the entertainment tax such as the gambling halls which provide comparable gambling activities (gambling machines). The alleged fact that certain entertainment tax laws as they are drafted would not specifically cover table games is also irrelevant to the extent that the drafting of those laws directly stems from the existence of the special tax rules: table games are not specifically taxed in the entertainment tax laws

because

public casinos are generally exempted from the entertainment tax from the outset while they are the only operators allowed to offer table games. Certain

Länder

clarified that it would be for the cities to determine whether table games would be taxed. By doing so, the cities would need to duly take into account the applicable principles of non-discrimination and equality of treatment. The normal tax rules by reference to which selectivity should be assessed must therefore, in this case, be processed to remove the effects of the measures, in particular the exemption from the entertainment tax. While it is acceptable that table games in public casinos would not be taxed under the entertainment tax in Bavaria (because there is no entertainment tax at all), table games in public casinos would necessarily be taxed in

Länder

where entertainment or at least some gambling is taxed (which is the case in all

Länder

– except Bavaria – to the extent the entertainment tax laws tax gambling machines). In any event, as evidenced by the fact that some public casinos (at a time where they offered mostly or only table games) used to be subject to the entertainment tax before being exempted, not subjecting table games to the entertainment tax would be selective by design and constitute a situation in which the boundaries of the system of reference have been designed in a clearly arbitrary or biased way (118). Taxing gambling machines in gambling halls without taxing table games which are at least as addictive would also constitute a discrimination in the light of the possible secondary objective of the entertainment tax (see recitals (196) to (199)).

(194) The fact (alleged by Germany) that games offered by public casinos are in general prohibited (unless a specific concession is granted to offer these games) while the games offered by gambling halls are normal economic activities simply subject to a licence is not relevant in the light of the objective of the entertainment tax. In addition, public casinos operators have and have had legal concessions to carry out their activities (and Germany does not contest that these games and concessions were legal). The reasoning that illegal games should not be taxed under the entertainment tax is thus not relevant. The argument by Germany that games offered by public casinos would not be in competition with the games offered by gambling halls, which the Commission contests in any event (see Section 4.2.3), is also not relevant in the light of the objective of the entertainment tax which encompasses many very different types of entertainment (119).

(195) Germany also argues that table games offered by public casinos are more work-intensive than the operation of gambling halls. This is however also not relevant in the light of the objective of the tax which is to tax the money ‘spent’ or ‘played/gambled’ by the persons entertaining themselves (120). Besides, public casinos in certain cities or

Länder

do not offer table games and, in general, table games account for only a minor fraction of the public casinos’ turnover.

(196) The German authorities explained that the entertainment tax may also additionally pursue the objective (

außerfiskalisches Lenkungsziel

) of tackling addiction (namely to dis-incentivise gambling, which is seen as a risky or socially objectionable occupation) (121).

(197) Such a secondary and only possible objective cannot be taken into account in the selectivity assessment: some sorts of entertainment subject to the entertainment tax in many cities are not risky or socially objectionable occupations (122) so that this alleged secondary objective is not or at least not always relevant

In addition, this secondary objective simply reflects the fact that imposing any tax burden on an activity will, all other things being equal, make it less attractive (on the demand or on the supply side (123)). This objective thus stems directly from the main objective without being different from that main objective or requiring a different setup of the tax and thus a separate assessment is not required. Furthermore, the German courts explicitly stated that, even if the entertainment tax follows such an additional objective, this should not put into question the primary objective of the tax and its relationship to the money spent by the player in order to be entertained (124).

(198) In any event, in the light of this secondary objective, the games offered by the public casinos operators and thus also those operators themselves are in a comparable situation to the gambling halls (and the games they offer) because all these games are risky and addictive. While both types of games (the ones offered by public casinos and the ones offered by gambling halls) may have different risks and are also – for that very reason – subject to distinct regulatory frameworks (see Section 2.1), neither Germany nor the interested parties argue that these factual and legal differences, taken together, would make the games sufficiently different in the light of the objective of the entertainment tax. On the contrary, Germany argues that the stricter regulatory framework for public casinos operators reflects the higher addiction risk of the games they offer (and conversely the lower regulation of gambling halls reflects the lower risks that these games represent) and that public casinos fight against gambling addiction through their regulatory framework, not through taxation. This means that the factual differences between the games at stake (in terms of addictive potential) are already taken into account (compensated) by legal differences in their respective (non-fiscal) regulatory framework, so that they are ultimately in the same situation in the light of the (secondary) objective of the tax. There is also no indication that the specific regulatory framework applicable to public casinos completely removes the inherent risks of the games offered in public casinos, so that they should not be subject to the entertainment tax. This is also true for the games offered in commercial gambling halls: they are subject to the entertainment tax even though they are also subject to a specific regulatory framework to limit the risk they represent in terms of addiction, public health and players’ protection. For the purpose of the entertainment tax and in the light of the objectives of that tax, both types of games (and both types of operators) can thus be regarded as being in a comparable situation.

(199) More generally, the fact that public casinos operators (and all the games they offer) should be subject to entertainment tax, in the light of its objective, in the same way as gambling halls, is confirmed by the statements made by several

Länder

(in reply to questions of the Commission)

according to which public casinos operators would be subject to the entertainment tax if they were not legally exempted from that tax. The case-law of German courts also shows that the special taxes paid by public casinos operators replaces the normal taxes, including the entertainment tax (125), which would not make sense if public casinos (and their games) would not fall under the scope of that tax in the first place. In the same vein, the entertainment tax laws of the cities often explicitly exempt public casinos from entertainment tax, which also shows that the games offered by public casinos are regarded as falling, in principle, within the scope and under the objective of the entertainment tax. In addition, some public casinos operators used to pay the entertainment tax in the past (after such tax was introduced and before exemptions from entertainment tax were introduced) (126). Furthermore, still today, municipalities receive (as a transfer from the

Länder

) a fraction of the casino tax (levied on the GGI arising from all games offered in public casinos) to account for the loss of revenues arising from the exemption from entertainment tax (and trade tax) (127).

(200) As a conclusion, a possible advantage arising from the measures is

prima facie

selective.

4.2.5.3.2. Justification

(201) It is up to Germany to explain how the

prima facie

selective measures can be justified (and thus not selective) by reasons deriving directly from the intrinsic basic or guiding principles of the reference system or by being the result of inherent mechanisms necessary for the functioning and effectiveness of the system (128).

(202) Apart from arguing that no justification can be provided in cases where there is no common reference system (which Germany claims but the Commission contests), the German authorities merely stated that the constitutional principle of prevention of double and excessive taxation (

Vermeidung einer doppelten und damit übermäßigen Besteuerung

) should be taken into account (129). That objective may be regarded as a guiding principle of the German tax system: it is supported by the case-law of the German constitutional tribunal which refers to the principle of proportionality (130).

(203) However, by merely mentioning the constitutional principle of prevention of double and excessive taxation, Germany did not explain how the (possibly unlimited) advantage provided by the measures could be regarded as justified by that principle, let alone be proportionate (131). In addition, Germany’s reasoning can only aim at justifying a lower tax burden for public casinos operators under the special tax rules

because

taxation under the

normal

tax rules (the only reference for the identification of an advantage for State aid purposes) would allegedly be excessive. Germany however does not explain why and how this would be the case. The idea that taxation under the normal tax rules would be excessive also directly contradicts the assumption originally made by the German legislator that taxation under normal tax rules was insufficient (leading to a too low tax burden) to cream off the unusually high profit of public casinos operators.

(204) Furthermore, to the extent Germany would aim at justifying ad hoc reductions of special taxes for public casinos operators

because

taxation under the

special

tax rules would be excessive (so that ad hoc reductions would be necessary), this is not the subject of this Decision which focuses on the difference of taxation in comparison to the

normal

tax rules: the ad hoc reductions of the special taxes are part of the special tax rules and thus part of the measures to be assessed by comparison with the normal tax rules. Germany also does not adduce evidence showing that the tax burden of public casinos operators (under the special tax rules) was regarded as excessive. In the only case (known to the Commission) where the public casinos operators’ taxation was examined from the point of view of excessive taxation by German courts, the German court ruled that the tax system of public casinos operators in the

Land

in question was not as such the cause of the alleged excessive taxation of the operator at stake, even though the operator was forced to terminate its activities (132).

(205) In any case, the design of the measures (special taxes replacing the normal taxes from which public casinos are exempted), which does not refer to the level of taxation under the normal tax rules or to any possible proxy for excessive taxation (133), does not ensure that such a justification would be achieved in a proportionate manner.

(206) Certain operators such as SBN, and to some extent the German federal authorities, submit that the special tax system applicable to public casinos operators primarily pursues regulatory purposes (allow the public casinos operators to carry out their public task) which would constitute a justification by the logic of the tax system. Such alleged objectives are contradicted by the facts (134), by the design of the special tax rules (135) and by the case-law (136). They are external to the tax systems in question (corporate tax and income tax, trade tax, entertainment tax) and cannot constitute a justification by the guiding (internal) principles of the normal tax rules. They were not consistently applied in practice (137). In addition, the design of the measures, which does not refer to any objective proxy related to safeguarding the economic viability of public casinos operators in the light of their public tasks, does not ensure that such an alleged justification would be achieved in a proportionate and adequate manner.

4.2.5.4. Conclusion

(207) In view of the above, the measures involve a selective advantage to the public casinos operators, except – as from 1 January 2024 – in the

Land

Hamburg.

4.3. New aid or existing aid

(208) According to Article 1, point (b)(i), of Council Regulation (EU) 2015/1589 (138), an aid measure is ‘existing if it

‘existed prior to the entry into force of the TFEU in the respective Member States

’; this concerns

‘aid schemes and individual aid which were put into effect before, and are still applicable after, the entry into force of the TFEU in the respective Member States

’. The TFEU (139) entered into force in Germany on 1 January 1958 (for the Western German

Länder

) and 3 October 1990 (for the East German

Länder

(209) According to Article 1, point (c), of the Regulation (EU) 2015/1589the concept of ‘new aid’ includes ‘alterations to existing aid’. Such alterations must be material, not simply of a formal nature, to qualify as new aid: an alteration cannot be characterised as being of a purely formal or administrative nature if it is ‘

liable to affect the evaluation of the compatibility of the aid measure with the common market

’ (140). In that framework (see Article 4 of Commission Regulation (EC) No 794/2004 (141)) also a change reducing the aid intensity or the scope of the existing aid constitutes an alteration (142). In addition, if the alteration affects the actual substance of the original scheme (substantial alteration), the alteration affects the existing aid nature of the scheme itself. However, where the alteration is ‘clearly severable’ from the initial scheme (143), only the severable element of the scheme that was modified qualifies as new aid.

(210) It is thus necessary to examine whether the measures were put into effect before the entry into force of the TFEU (Section 4.3.1) and if so, whether such ‘existing’ measures were altered after the entry into force of the TFEU (Section 4.3.2). In all cases (i.e. for all

Länder

), this analysis shows that the special tax treatment of public casinos operators (as it existed during the recovery period (144)) did not exist before the entry into force of the TFEU, so that the aid at stake is not existing aid. In particular, Section 4.3.1 shows that, in some

Länder

, no measure was put into effect before the entry into force of the TFEU. Section 4.3.2.1 demonstrates that in some other Länder, the measures that were put into effect before the entry into force of the TFEU were not the basis for the special tax treatment of the operators during the recovery period. Furthermore and as an additional line of reasoning, even if some measures existed and were put into effect before the entry into force of the TFEU, they were materially and substantially modified after the entry into force of the TFEU and before the beginning of the recovery period

as will be demonstrated in Sections 4.3.2.2.2 and 4.3.2.2.3 (reduction of the casino tax rate) and Section 4.3.2.3 (introduction of a new normal tax).

4.3.1. Situation before the entry into force of the TFEU

4.3.1.1. In the East German

Länder

(211) In the East German

Länder

(including East Berlin), public casinos operators were generally (any operator, for any casino, without limit in time) subject to special taxes (a casino tax of 85 %) and exempted from income tax, corporate tax (145), trade tax and entertainment tax on the basis of two laws adopted before 3 October 1990 (146). There was thus in these

Länder

a scheme (a fully fledged scheme, without a need for implementing or complementing measures) in place before the entry into force of the TFEU.

(212) In two East German

Länder

(East Berlin and Saxony), fully fledged special taxes existed and were actually ‘put into effect’ before the entry into force of the TFEU because public casinos had opened and were subject to the existing special tax rules already before the entry into force of the TFEU (147).

(213) In the other East German

Länder

, even though fully fledged special tax schemes existed before the entry into force of the TFEU, they were not actually ‘put into effect’ because no public casinos existed at that time (148). It follows from the actual wording of Article 1, point (b)(i), of Regulation (EU) 2015/1589, in particular the use of the term ‘put into effect’, that existing aid, for the purposes of that provision, does not mean aid or an aid scheme which was created before the entry into force of the TFEU in the respective Member State, but which was implemented in that State only after that date (149).

(214) The schemes existing in these other East German

Länder

(Brandenburg, Mecklenburg-Vorpommern, Saxony-Anhalt and Thuringia) before the entry into force of the TFEU thus cannot be regarded as existing measures and the aid they provide is necessarily new aid. Only the schemes put into effect in East Berlin and Saxony can be regarded as existing before the entry into force of the TFEU.

(215) Unless the schemes in East Berlin and Saxony were altered after the entry into force of the TFEU, those two schemes would be existing aid measures. It is thus necessary to examine whether and to which extent these measures were materially and substantially altered after the entry into force of the TFEU. This will be examined in Section 4.3.2.2.

4.3.1.2. In the West German

Länder

(216) It is true that the

general principles

governing the taxation of public casinos operators (application of a special tax system aiming at skimming their profits) have been laid down well before the entry into force of the TFEU (in the 1933 law and in the 1938 law). However, these laws are too vague (

lex imperfecta

, according to the German courts (150)) and cannot be regarded as laying down a State aid measure. Contrary to what Germany argues, the 1938 law cannot be regarded as exempting public casinos operators from

Länder

taxes and municipal taxes. Article 6(2) of that law was too imprecise to be (and was never) directly applied: it merely laid down a possibility for the competent authorities (

Ermächtigung

(151)) to lay down, in the future, exemptions from

Länder

taxes and municipal taxes, which calls for further ‘implementing measures’ so that the 1933 and 1938 laws cannot be regarded as laying down a State aid measure. The fact that some public casinos operators, after 1938, paid entertainment tax or trade tax (152) confirms that the 1938 law did not exempt them from those taxes. In the same vein, the 1938 law did not introduce a sufficiently precise system of special taxes (the casino tax was mentioned but its main features, especially the tax rate, were not defined and it thus called for implementing measures). Furthermore, arguing (as Germany does) that the 1933 and 1938 laws are sufficiently precise to be regarded today as a (unique) existing scheme contradicts the current situation in which each

Land

defines its own specific tax scheme for public casinos operators (a situation where the tax rules applying to public casinos operators are sometimes very different depending on the

Länder

and where each set of special tax rules rather constitutes a scheme on its own). The insufficiently precise provisions of the 1933 and 1938 laws are thus irrelevant for the qualification as new or existing aid.

(217) Furthermore, as explained in Section 4.1, the schemes of the

Länder

are complex measures comprising two inseparable aspects (special taxes and exemptions from normal taxes). From that perspective, a separate or autonomous assessment of each of the (intrinsically linked) aspects of those measures would not take into account the specific nature of the measures. For that reason, the assessment must focus on the measures to the extent they exist, that is as fully fledged measures, and not on the separate sub-measures which do not logically exist autonomously. Consequently, if some aspects of the schemes (for instance the special taxes) were not laid down before the entry into force of the TFEU, the schemes at stake cannot be existing aid as they did not even exist as measures: the mere fact that some of the tax exemptions such as the corporate tax and income tax exemption may have been laid down before the entry into force of the TFEU cannot be relevant as these earlier measures were missing complementing and implementing measures (153).

(218) This is for example the case in all the

Länder

which first introduced the exemptions from local taxes and the special taxes in the 1970s and which had no public casinos before: there was no (fully fledged) ‘measure’ and, in addition, no special tax treatment could be ‘put into effect’ (as there was no public casino) before the entry into force of the TFEU in West Berlin, Bremen, Hamburg, Lower Saxony, North Rhine-Westphalia and Saarland (see Section 4.3.2.1.1 on the situation in these

Länder

after the entry into force of the TFEU).

(219) In the other West German

Länder

(Baden-Württemberg, Bavaria, Hesse, Rhineland-Palatinate, Schleswig-Holstein), there were some existing (fully fledged) measures put into effect before the entry into force of the TFEU but they did not concern all public casinos operators generally, for any casino, and were limited in time. They concerned only the operators existing at the time, only for a limited period of time and only for the operation of specific casinos (see the detailed assessment in Section 4.3.2.1.2).

(220) In the cases mentioned in recital (218) where there were no (fully fledged) ‘measures’ before the entry into force of the TFEU, there cannot be ‘existing’ measures and the special tax treatment necessarily constitutes new aid (in its entirety). As regards the cases mentioned in recital (219) where fully fledged measures existed but were not generally applicable, it still needs to be examined whether they constitute the basis for the special tax treatment of public casinos during the recovery period (154) (Section 4.3.2.1.2) and (as an additional reasoning) whether these measures underwent alterations after the entry into force of the TFEU (see Section 4.3.2.2).

4.3.2. Situation after the entry into force of the TFEU

(221) The provisions laying down the special tax treatment of public casinos operators underwent a series of changes after the entry into force of the TFEU, both before and after the beginning of the recovery period. In situations described in recitals (218) and (219), measures that lay down the special tax treatment of public casinos during the recovery period did not exist before the entry into force of the TFEU. Some of the changes after the entry into force of the TFEU (introduction of the special tax and of the exemption from municipal taxes) thus lead to the very creation of the measures (which makes them new aid in their entirety). In other situations (and also as an alternative reasoning for the situations described in recitals (218) and (219)), the changes that happened after the entry into force of the TFEU will be assessed as to whether they constitute material and substantial alterations.

4.3.2.1. Introduction of generally applicable exemptions from

Länder

taxes and municipal taxes (trade tax and entertainment tax) and of generally applicable special taxes in the West German

Länder

(222) The

generally

(155)

applicable

exemptions from

Länder

taxes and municipal taxes (which in effect encompasses trade tax and entertainment tax) and the special taxes on public casinos operators (casino tax in particular) constitute the main features of the tax schemes applicable to public casinos operators. In all West German

Länder

, the measures laying down the special tax treatment of public casinos during the recovery period were introduced by laws adopted after the entry into force of the TFEU and before the beginning of the recovery period, as explained in the two sub-sections below. As public casinos are, since the beginning of the recovery period, subject to special tax treatment on the basis of measures adopted after the entry into force of the TFEU, the aid they received is prima facie new aid.

4.3.2.1.1. In

Länder

where there were no public casinos before the entry into force of the TFEU

(223) In six West German

Länder

(West Berlin, Bremen, Hamburg, Lower Saxony, North Rhine-Westphalia and Saarland), there was no special tax on public casinos (casino tax) and no exemption from

Länder

taxes and municipal taxes predating the entry into force of the TFEU (because there were no public casinos in these

Länder

before that date). The generally applicable exemption from

Länder

taxes and municipal taxes and the special taxes were introduced in the laws of the

Länder

after 1958 and before the beginning of the recovery period, as illustrated in Table 1 below.

Table 1

First provision laying down the exemption from

Länder

taxes and municipal taxes and the main features of the casino tax

Berlin (West Berlin in 1973)	Law of 13.4.1973(156)
Bremen	Law of 20.2.1978(157)
Hamburg	Law of 24.5.1976(158)
Lower Saxony	Law of 25.7.1973(159)
North Rhine-Westphalia	Law of 19.3.1974(160)
Saarland	Licence (Spielbankerlaubnis) of 22.10.1976 (for the first public casino). Law of 9.7.2003 (generally applicable)(161)

(224) Before the adoption of these laws of the

Länder

, there were no fully fledged (let alone put into effect) schemes in the six West German

Länder

at stake. There were thus no existing schemes before the entry into force of the TFEU, so that the aid schemes at stake today cannot be regarded as existing aid and the aid they provide is necessarily (in its entirety) new aid (see also Section 4.3.1.2).

(225) As an alternative reasoning, if one considers that the different parts of each special tax scheme should be assessed separately (contrary to the main line of reasoning set out in recitals (216) and (217), which relies on the idea that the schemes do not exist as long as all their complementary features – special taxes and tax exemptions – are not precisely laid down), the adoption after the entry into force of the TFEU of laws of the

Länder

laying down an exemption for public casinos operators from

Länder

taxes and municipal taxes and introducing special taxes would in any event constitute a material and substantial alteration to the ‘existing’ tax regimes of public casinos operators (which would merely consist in the existing corporate tax and income tax exemption). The measure indeed transformed from a pure (non-functional) corporate and income tax exemption to a much more complex measure in which the newly introduced special taxes were meant to replace normal taxes from which the operators were exempted (not only corporate and income tax). Therefore, in the six West German

Länder

concerned, this alteration would in any event transform the potentially existing measures into new aid schemes and the entirety of the advantage arising from the schemes would, as from the alteration (which predates the beginning of the recovery period), constitute new aid.

4.3.2.1.2. In

Länder

where there were public casinos before the entry into force of the TFEU

(226) In the five remaining Western German Länder (Baden-Württemberg, Bavaria, Hesse, Rhineland-Palatinate, Schleswig-Holstein), according to the German authorities, the public casinos operators that have been active during the recovery period are exempted from Länder taxes and municipal taxes and subject to special taxes on the basis of laws of the Länder adopted after the entry into force of the TFEU (and before the beginning of the recovery period), as illustrated in Table 2.

Table 2

First provision laying down, in a general manner, the exemption from

Länder

taxes and municipal taxes and the main features of the special taxes in five Western German

Länder

Baden-Württemberg	Law of 23.2.1995
Bavaria	Law of 26.7.1995
Hesse	Law of 21.12.1988
Rhineland-Palatinate	Law of 19.11.1985
Schleswig-Holstein	Ordinance (Verordnung) of 13.12.1994. Law of 29.12.1995

(227) However, there had already been public casinos and public casinos operators in these five

Länder

before the new provisions listed in Table 2 were adopted and before the entry into force of the TFEU. Those operators were already subject to special tax rules before the entry into force of the TFEU and those tax rules were thus existing measures at that time (1958). If the measures listed in table 2 constituted a mere continuation of the previously existing measures put into effect before the entry into force of the TFEU, they could be regarded as existing measures as the adoption of those measures would be regarded as a mere formal or administrative change, not an alteration. This is, however, not the case. As will be demonstrated below (recitals (228) to (236)), the new laws of the

Länder

introducing the generally applicable exemptions from municipal and

Länder

taxes and laying down the special taxes for public casinos operators (Table 2) were not alterations of purely formal nature; they did not simply replace

equivalent

‘existing’ provisions applicable to the existing operators.

(228) Firstly, these legal provisions replaced provisions laid down in contracts or ministerial decisions. Because taxes are usually a competence of the legislator, as is clear from the laws adopted in the 1970s, the corresponding earlier contracts or ministerial decisions enjoyed only a lower level of legal certainty. This change (increase) of the provisions’ level of legal certainty necessarily affects the substance of the previous measures and thus constitutes a material and non-severable alteration giving rise to new aid (for the entirety of the aid).

(229) Secondly, the measures existing before the entry into force of the TFEU had a different (temporal, personal and material) scope compared to the measures listed in Table 2 and cannot thus be regarded as the cause or origin of the special tax treatment of public casinos operators in these five

Länder

during the recovery period, as explained in recitals (230) to (235). This means that, if the new measures listed in Table 2 had not been adopted, there would be no legal basis for the special tax treatment of the public casinos operators during the recovery period.

(230) In most cases (Bavaria (162), Hesse, Rhineland-Palatinate for the public casino in Bad Dürkheim (163) and Schleswig-Holstein), Germany tried to allege that the exemption from entertainment tax existed before the entry into force of the TFEU, but it admitted that it was unable to retrieve the legal provisions (allegedly) exempting the existing public casinos operators from trade tax and entertainment tax and laying down the special taxes before the entry into force of the TFEU. There is no indication that the special tax rules (tax exemptions and special taxes) allegedly applicable before the entry into force of the TFEU were applicable (i) without time limit (or with an expiry date postdating the beginning of the recovery period), (ii) to any operator (164) (iii) for the operation of any casino and (iv) were laid down by law (legal certainty). There is thus no indication that the measures as they exist today (generally applicable to any operator and any casino without limit in time and laid down by law) are simply a continuation of measures existing before the entry into force of the TFEU. The evidence (actual provisions laying down the special tax treatment before the entry into force of the TFEU) existing in other cases (see recital (231)), rather shows that the special tax treatment of public casinos operators was (before the entry into force of the TFEU) laid down in concession contracts or ministerial decisions, mostly with a limited duration and covering only

intuitu personae

the specific concessionaire for a specific casino. The expiration of such measures after the entry into force of the TFEU and before the beginning of the recovery period is sufficient to conclude that, even in cases where fully fledged measures were put into effect (with their narrow material and time scope) before the entry into force of the TFEU, the provisions applicable for the whole recovery period are new measures (not the continuation of existing measures). There is thus no indication that the measures (generally applicable special taxes and exemptions from municipal and

Länder

taxes) were existing measures. They rather constitute newly created measures or alternatively, at the very least, material alterations to the previously existing measures, because they extended the material, personal and temporal scope of those previous measures and increased the level of legal certainty. As those measures were adopted before the beginning of the recovery period (see Table 2), any aid arising during the recovery period constitutes new aid in its entirety.

(231) In the remaining cases, the Commission assessed the legal basis laying down a special tax treatment at the time of entry into force of the TFEU.

(232) In Baden-Württemberg, the special tax rules (tax exemptions and special taxes) that existed before the entry into force of the TFEU were laid down only individually in ministerial decisions for one identified operator which ceased operating public casinos before the beginning of the recovery period (165). In addition, the special tax treatment for the casino in Konstanz was limited in time and expired in 1960 (166), before the beginning of the recovery period. As a consequence, the tax treatment of the public casinos operator(s) in Baden-Württemberg during the recovery period is a new measure and arises at the earliest from the 1995 law mentioned in Table 2.

(233) As regards the public casino in Bad Neuenahr (Rhineland-Palatinate), the special tax treatment existing before the entry into force of the TFEU for its operator was laid down only for a limited duration which expired long before the beginning of the recovery period (167). That measure thus cannot be the origin of the special tax treatment of the current operator of that public casino which rather arises at the earliest from the 1985 law mentioned in Table 2.

(234) In those cases, it is thus clear that the special tax treatment of public casinos operators during the recovery period originated from provisions adopted after the entry into force of the TFEU which did not constitute a mere continuation of measures put into effect before the entry into force of the TFEU. Even if it is true that Spielbank Baden-Baden GmbH & Co. KG and the operator in Bad Neuenahr were the only public casinos operators before 1958 in Baden-Württemberg and Rhineland-Palatinate respectively and that, as a consequence, (i) all operators were exempted from the normal taxes at that time and (ii) it was not necessary to lay down a generally applicable tax exemption, this does not change the fact that the only provisions existing before 1958 exempted, on the basis of mere ministerial decisions or contracts, only those specific operators (and for a limited time and only for the operation of certain casinos) and were not equivalent to a general exemption that could apply without limitation in time to other operators for any public casino, in particular all the operators active during the recovery period. In addition, even if, as argued by the

Land

Rhineland-Palatinate, the time-limited special tax treatment was regularly prolonged/renewed, each renewal (after the entry into force of the TFEU) constitutes a material alteration (of the time-limited duration) giving rise to a new measure. As a consequence, in those cases as well, any aid granted during the recovery period constitutes new aid in its entirety.

(235) These findings are summarised in Table 3.

Table 3

Special tax treatments existing before the entry into force of the TFEU and their evolution (in five Western German

Länder

where certain public casinos existed before the entry into force of the TFEU)

Baden-Württemberg	Existing measures laid down in 1955 (in a ministerial decision) for one specific operator (Spielbank Baden-Baden GmbH & Co KG) and one casino (in Baden-Baden) without limit in time. Those measures were repealed in 1995. For the other existing casino (in Konstanz), that same operator was subject to a special tax treatment following a 1951 ministerial act which linked the tax treatment to the licence which expired in 1960. The operator of both casinos stopped operations in 2003.
Bavaria	No legal provision before the entry into force of the TFEU (no indication that the existing measure would cover the public casinos operator(s) active during the recovery period and for all the casinos).
Hesse	No legal provision before the entry into force of the TFEU (no indication that the existing measure would cover the public casinos operator(s) active during the recovery period and for all the casinos).
Rhineland-Palatinate	- No legal provision before the entry into force of the TFEU for the (operator of the) public casino in Bad Dürkheim(no indication that the existing measure would cover the public casinos operator(s) active during the recovery period and for all the casinos). - Existing special tax treatment (in a contract) for the (operator of the) public casino in Bad Neuenahr expired in 1962.
Schleswig-Holstein	No legal provision before the entry into force of the TFEU (no indication that the existing measure would cover the public casinos operator(s) active during the recovery period and for all the casinos).

(236) In conclusion, even if the special tax measures applicable to the existing public casinos operators in those five West German

Länder

(Baden-Württemberg, Bavaria, Hesse, Rhineland-Palatinate, Schleswig-Holstein) at the time of entry into force of the TFEU may have been existing measures at that time (1958), there was no continuity of those measures up to the special tax rules laid down in the laws on public casinos of the same

Länder

, which are, since before the recovery period, the basis of the special tax treatment applicable to the operators and public casinos concerned by the recovery period. The special tax rules laid down in the laws of the

Länder

on public casinos (which are the basis of the special tax treatment of public casinos operators during the recovery period) thus cannot be regarded as predating entry into force of the TFEU and are new measures since before the beginning of the recovery period. The aid they have provided during the recovery period is necessarily (and in its entirety) new aid. As an alternative reasoning, even if the new measure (covering the operators active during the recovery period) were regarded as an alteration of a pre-existing measure (by extending its personal, material and temporal scope), the Commission considers that all the aid awarded during the recovery period would precisely arise from that alteration (as the pre-existing measure did not cover the operators active during the recovery period) and would thus also constitute new aid.

4.3.2.2. Changes to the special taxes of public casinos operators after the entry into force of the TFEU

(237) A modification (a reduction but also an increase (168)) of the tax burden under the special tax rules (for instance via a change of the casino tax rate) constitutes an alteration if it is liable to affect the compatibility of the measures. A change of the special tax rules affects the amount of the advantage (169) and the amount of the advantage is a core feature of the compatibility assessment of the measures: it affects in particular the proportionality (see Section 4.4), the incentive effect and the appropriateness of the aid (170).

4.3.2.2.1. General reduction of the amount of casino tax by the VAT offsetting mechanism

(238) The introduction of the VAT offsetting mechanism did not materially modify the ‘existing’ measures, if any (see recital (119) of this Decision and Section 3.3.2.1.1. of the opening decision).

4.3.2.2.2. General reduction (or increase) of the rates and change of the structure of the special taxes

(239) The casino tax and other special taxes paid by public casinos operators constitute one of the main features of the tax schemes applicable to public casinos operators. In all

Länder

, the rates of these taxes were however materially and substantially modified (reduced and, in rare cases, increased) (171) and, in most

Länder

, also the structure of the tax was materially and substantially modified (introduction of progressivity, introduction of an additional tax on profit while the special taxes were previously levied on the GGI), as illustrated in Table 4.

Table 4

Reduction (or increase) of the casino tax rate (including other taxes on the GGI) and change of the overall tax structure

Baden-Württemberg	Law of 20.11.2012 (applicable as from 2010) (45-50 % + tax on profit, instead of 80 %)
Bavaria	Law of 29.4.1999 (50-70 %, instead of 80 %) Law of 24.4.2001 (50-70 % - higher thresholds) Law of 9.5.2006 (50-60 %) Law of 14.4.2009 (35-40 %) Law of 14.4.2011 (30-35 %) Law of 24.5.2019 (25-30 %)
Berlin	Law of 8.2.1999 (80-91 %, instead of 85 % in East Berlin and 80 % in West Berlin) Law of 3.3.2010 (applicable as form 1.1.2010) (40-50 % + tax on profit)
Brandenburg	Law of 22.4.2003 (60-80 %, instead of 85 %) Law of 18.12.2007 (55-75 %) Law of 28.6.2012 (25-45 %)
Bremen	Law of 18.12.2012 (applicable as from 1.1.2013) (40 %, instead of 80 %)
Hamburg	Law of 16.11.1999 (70-90 %, instead of 80 %-90 %) Law of 23.5.2014 (55-80 % + tax on profit up to 10 % of the GGI)
Hesse	Law of 13.12.2017 (75 % + weitere Leistungen, instead of 80 % + weitere Leistungen)
Mecklenburg-Vorpommern	Law of 7.5.1996 (70-85 %, instead of 85 %) Law of 5.7.2004 (50-80 % + tax on profit) Law of 17.12.2009 (applicable as from 1.1.2007) (25-80 % + tax on profit)
Lower Saxony	Law of 25.6.2003 (applicable as from 1.9.2002) (80 %, instead of 70-88 %). Law of 16.12.2004 (applicable as form 1.1.2005) (50-70 %). Law of 27.8.2009 (applicable as from 1.1.2009) (0-75 % + tax on profit)
NRW	Law of 30.10.2007 (applicable as from 1.1.2008) (15-75 % + tax on profit, instead of 80 %) Law of 13.11.2012 (applicable as from 1.1.2012) (45-55 % + tax on profit)
Rhineland-Palatinate	Law of 22.12.2015 (40-90 % + tax on profit, instead of 80 %)
Saarland	Law of 9.7.2003 (62-72 %, instead of 80 %). Law of 5.5.2010 (52-62 %). Law of 4.12.2013 (applicable as from 1.2.2014) (39-49 % + tax on profit).
Saxony	Law of 9.12.1993 (80 %, instead of 85 %) Law of 11.12.2002 (50-70 %) Law of 26.6.2009 (applicable as from 1.1.2007) (40-60 %) Law of 14.6.2012 (35-55 %)
Saxony-Anhalt	Law of 26.6.1991 (80-92 %, instead of 85 %) Law of 30.7.1997 (50-80 %) Law of 30.8.2004 (70 %) Law of 16.12.2009 (25-50 % + tax on profit)
Schleswig-Holstein	Finanzvertrag for the casino in Lübeck-Travemünde 1959 (80 %), 1964 (83 %), 1971 (85 %), 1972 (85.5 %). Finanzvertrag for the casino in Westerland 1949 (80 %), 1966 (71-80 %), 1972 (72-82 %) Law of 8.7.1976 (73-98-88 %) Law of 14.6.1982 (73-88 %) Law of 29.12.1995 (80 %) Law of 8.10.2010 (40-55 % + tax on profit) Law of 25.4.2012 (30-55 %, depending on the games)
Thuringia	Law of 10.5.1994 (80 %, instead of 85 %) Law of 27.11.1997 (45-80 %) Law of 29.3.2011 (25-60 % + tax on profit)

(240) Contrary to what is abstractly argued by the

Land

Hamburg, the fact that, after the changes, the casino tax rate

may

be the same as the pre-existing tax rate (‘up to 90 %’, before and after the changes), is not sufficient to consider that the change at stake is of a pure formal or administrative nature. Nothing ensures that this will be the case as this would depend on factual circumstances (in particular the level of GGI) which are not a feature of the scheme. Switching (as was the case in Hamburg in 1999) from a special tax system where the GGI is taxed at 80 % (with a mere possibility of an additional 10 %) to a special tax system where the GGI is taxed at 70 % (with a mere possibility of an additional 20 %) is an alteration, even if in both cases the maximum possible (hypothetical) rate is the same (90 %). Similarly, switching (as was the case in Hamburg in 2014) from a special tax system where the GGI is taxed at 70 % (with a mere possibility of an additional 20 %) to a special tax system where the GGI is taxed at 55 % rate (with a mere possibility of an additional 25 % and an additional tax on the profit capped at 10 % of the GGI) is an alteration even if in both cases the maximum possible (hypothetical) rate is the same (90 %). In addition, the change of design of the special taxes (the introduction of a tax, the tax base of which is the GGI instead of the profit) in any event constitutes a material alteration.

(241) The changes listed in Table 4 affect the constitutive features of the special taxes (affecting for instance the tax rate and/or the structure of the tax which became progressive). Those changes therefore constitute material alterations of any scheme potentially qualifying as an ‘existing’ scheme based on the recitals in Section 4.3 (172).

(242) The changes also affected the substance of the schemes themselves and the alteration is thus not severable. As highlighted by the German courts (173), the very high (around 80 %) rate of the casino tax existing before such changes was deemed appropriate to cream off the profits of the public casinos operators, in line with the objective of the special tax rules. Therefore, a reduction of that rate, without any link or reference to the normal tax rules, has the potential to change the very nature and objective (and thus the substance) of the special tax schemes by turning a likely disadvantage (very high tax rate leading to a higher tax burden than under the normal rules) into an advantage. A change in the tax burden under the special tax rules – in the absence of any safeguard that the taxation will not be lower than under the normal tax rules – also endangers the ‘replacement’ and ‘skimming’ logic of the special tax treatment and thus the objectives assigned to it. In addition, in cases where the special tax regime of public casinos did not lead in the past to actual advantages in particular because the casino tax rate remained high, the materialisation of an actual advantage (during the recovery period) after a general reduction of the special taxes would necessarily mean that the alteration (the general reduction of the special taxes) affected the ‘replacement’ objective of the special tax treatment and thus its substance.

(243) As the substance of the schemes is affected, the entirety of the advantage arising from the schemes constitutes new aid. Any actual advantage for public casinos operators arising after these changes (174) constitutes new aid, whatever the qualification (as existing or new) of the special tax rules as they existed before the alteration.

(244) It is true that, as argued by the

Land

Rhineland-Palatinate, some of the normal taxes (for example the corporate tax rate) were also reduced over time. However, the Commission considers that this is not sufficient to claim that the two tax systems evolved ‘in parallel’ as claimed by the

Land

: reductions in the special taxes were not motivated by a parallel decrease in the normal taxes; and the evolution of the normal tax rules, especially trade tax and corporate tax, which concern all undertakings, was never motivated by a parallel evolution of the special taxes which only concern public casinos operators. This is also evidenced by the fact that the special tax rules evolved on different paths (and different times) in the different

Länder

while the changes under the normal tax rules (especially the corporate tax reduction mentioned by the

Land

Rhineland-Palatinate) applied uniformly at national level or were defined at municipal level (for changes in the trade tax rate or the entertainment tax). In addition, because there is no automatic mechanism to ensure that the special tax rules lead to the same tax burden as under the normal tax rules, no precise comparison between the two sets of tax rules could be carried out and it was thus from the outset not even possible to modify one set of tax rules to (exactly) follow the evolutions of the other set of tax rules. The

Land

Rhineland-Palatinate itself acknowledges that the temporal evolution of the entertainment tax cannot be precisely described and thus implicitly acknowledges that the two tax systems could not evolve in parallel.

(245) Even if the two tax regimes evolved in parallel, it would in any event be incorrect to consider that those changes in both sets of tax rules would not be material alterations because they would not lead to a difference in the tax burden. Even if they would not lead to an (additional) advantage, parallel reductions in the tax burden under the normal and the special tax rules are to be regarded as material alterations because they actually change the tax burden to be paid by the operators at stake. In addition, a reduction in the tax burden under the special tax rules, if only motivated by a parallel reduction of the normal taxes, would disregard the skimming logic of the special tax rules (which should be achieved whatever the level of the tax burden under the normal tax rules) and thus their own objective and substance.

(246) The material and substantial alterations arising from the modification of the rates of the special taxes and from the changes to the structure of the special taxes give rise to new aid as from the alteration (and for the entirety of the advantage, see recitals (242) and (243)). This applies in East Berlin and Saxony where the special tax schemes were, before that alteration, existing measures put into effect before the entry into force of the TFEU. In the other cases (Brandenburg, Mecklenburg-Vorpommern, Saxony-Anhalt and Thuringia and all West German

Länder

), these substantial alterations serve as an alternative reasoning that there is new aid in any event, that is in addition to the main line of reasoning that the special tax treatment of the public casinos operators active during the recovery period in these

Länder

is based on new measures (see recitals (213) and (214) for the East German

Länder

and Sections 4.3.1.2 and 4.3.2.1 for the West German

Länder

4.3.2.2.3. Temporary ad hoc reduction of the special taxes in certain circumstances

(247) Moreover, the amount of casino tax (or other special taxes) is or was, in certain

Länder

, reduced in certain circumstances (see measures 2.a, 2.b, 4.b and 4.c, as defined in Section 3.1.4.4 and Annexes 1, 2A and 2B of the opening decision). The laws introducing such tax reductions and the corresponding ad hoc decisions reducing the tax burden under the special tax rules were also adopted after the entry into force of the TFEU (175). They also constitute substantial alterations to the measures put into effect before the entry into force of the TFEU (if any) and these substantial alterations give rise to new aid as from the alteration and for the entirety of the advantage for the same reasons as for the general reductions (see recital (242)).

4.3.2.3. Introduction, after the entry into force of the TFEU, of a new (normal) tax from which all public casinos operators in all

Länder

are exempted

(248) According to the German authorities, the exemption from income taxes laid down by Article 6(1) of the 1938 law, as interpreted by the 1954 ‘administrative agreement’ (

Verwaltungsabkommen

), covers surcharges related to corporate tax and income tax. The solidarity surcharge (

Solidaritätszuschlag

), introduced in 1991 (before the beginning of the recovery period), constitutes such a surcharge. Public casinos operators in all

Länder

are thus exempted from the solidarity surcharge based on Article 6(1) of the 1938 law. However, according to the case-law of the Court of Justice (176), since the tax was introduced after the entry into force of the TFEU, the corresponding exemption (in each

Land

) is a ‘new’ measure. The introduction of the new normal tax constitutes a material and substantial alteration to the pre-existing measures.

(249) Such an alteration would transform ‘existing’ schemes (that is schemes predating entry into force of the TFEU which have not been altered since that date), if any, into new aid schemes. By analogy to the reasoning mentioned in recital (242), an increase in the tax burden under the normal tax rules (as resulted from the introduction of the solidarity surcharge in 1991) – without any link to the special tax rules and without a parallel change in the special tax rules – endangers the replacement objective of the special tax rules and thus the intrinsic functioning of the measures and their substance. As a consequence, the entirety of the advantage arising from the schemes as from the alteration (which predates the beginning of the recovery period) constitutes new aid.

4.3.3. Conclusion on the qualification as existing aid or new aid

(250) Any aid arising from the special tax schemes applicable to the public casinos operators in each

Land

, during the recovery period, constitutes new aid for the cumulative reasons mentioned in Sections 4.3.1.1, 4.3.1.2, 4.3.2.1, 4.3.2.2.2 and 4.3.2.2.3. As that aid was not notified to the Commission, it constitutes unlawful aid.

4.4. Compatibility of the aid measures

(251) The measures, to the extent they are aid (‘the aid measures’), qualify as operating aid, as they are not linked to any specific investment or project. Operating aid that merely diminishes the normal costs of an undertaking cannot be regarded as compatible with the internal market (177).

(252) The German federal authorities merely submitted that the measures pursue an objective of general interest (by referring to their arguments about the public mission carried out by public casinos operators), are necessary, appropriate and proportionate. SHSWSN also vaguely argued that the aid would be compatible following the reasoning made by the Commission in the Decision of 20 September 2011 concerning the duties for online gaming in Denmark (178), because the aid would aim at ensuring player protection.

(253) While it is up to the Member State to explain in detail why the measures are compatible with the internal market, the German authorities did not further support their claims and did not explain on which legal basis the measures could be regarded as compatible. SHSWSN also did not provide any precise explanation as to why the measures would be necessary, appropriate and proportionate.

(254) In general, because of the absence of reference to certain costs, the absence of limit to the amount of aid (advantage) and the lack of even basic information about the amount of aid (in the absence of information on the tax burden under the normal tax rules), the aid cannot be found to be proportionate and transparent, which are general requirements for a measure to be regarded as compatible with the internal market. It is thus also not comparable to the situation covered by the Commission Decision of 20 September 2011 which, in particular, found the aid to be proportionate and appropriate in the light of several economic studies showing that the reduced rate of gambling duty applicable to online games was set at the appropriate level (the rate could not have been higher – limiting the advantage – as this would have prevented operators to enter the legal market while this was precisely the objective of the measure). Also, the Commission’s decision-making practice in other cases cannot affect the legality of a decision, which can be assessed only in the light of the objective rules of the TFEU.

(255) The overall argumentation of the German authorities and, in particular, the alleged objective of the measures (to allow the public casinos operators to maintain their operations because they would perform a public task), seem to refer implicitly to Article 107(3), point (c), TFEU (aid to facilitate the development of certain economic activities) and Article 106(2) TFEU.

(256) As already underlined, the measures are operating aid and bear no link to any costs (investment costs or even operating costs). Operating aid cannot, in principle, satisfy the conditions for the application of Article 107(3), point (c), TFEU as such aid, given that it does no more than maintain an existing situation or lower the usual ongoing operating expenditure which an undertaking would have had to bear in any event in the course of its normal business, cannot be regarded as being intended to facilitate the development of an economic activity and is such as to affect trading conditions adversely to an extent contrary to the common interest (179). In addition, Germany did not even argue that the operating aids in question would be equivalent to investment aid and it is indeed not the case for the measures, as the operating aids are not related to any investment of the beneficiaries. Furthermore, the amount of the advantage provided by the schemes is

a priori

not limited and cannot be proportionate and limited to the minimum necessary to prevent undue distortions of competition and effects on trade. The aid thus cannot be compatible under Article 107(3), point (c), TFEU.

(257) As already argued (see Section 4.2.5.2.2), the activities of public casinos cannot be regarded as clearly defined services of general economic interest. Furthermore, there is no mechanism for ensuring that the aid at stake would be limited and no entrustment act specifying the methods of calculating the compensation. Thus, even assuming that public casinos operators would carry out a genuine service of general economic interest (which the Commission disputes), nothing ensures that the compensation granted for the provision of such a service does not exceed what is necessary to cover the net cost of discharging the public service obligations (180). The aid thus cannot be compatible under Article 106(2) TFEU.

(258) One public casinos operator (SBN) considers that Article 107(3), point (b), TFEU would be the compatibility basis for a possible State aid. The compatibility criteria applicable in such cases have been laid down in the Communication from the Commission — Criteria for the analysis of the compatibility with the internal market of State aid to promote the execution of important projects of common European interest (181). The measures do not concern a ‘project’ within the meaning of the criteria laid down in paragraphs 12 and 13 of that Communication. They also do not concern a project of ‘common European interest’ because they do not involve several Member States as required by the criteria laid down in paragraph 16 of the Communication.

(259) The measures’ lack of proportionality (a general compatibility requirement) would thus in any event make the aid incompatible, whatever legal basis is used for the compatibility assessment.

(260) In the light of the foregoing, the aid measures are not compatible with the internal market.

5. IMPLEMENTATION AND RECOVERY

(261) According to the TFEU and the established case-law of the Court of Justice, the Commission is competent to decide that the Member State concerned shall alter or abolish aid that is found to be incompatible with the internal market (182).

(262) As the measures constitute unlawful and incompatible State aid (except the measure in place – as from 1 January 2024 –– in the

Land

Hamburg), the German authorities should put an end to these aid schemes (for example by abolishing the special tax rules or by otherwise ensuring that they do not provide an advantage). The German authorities should inform the Commission services within four months following the date of notification of this Decision of the measures taken. The amended tax rules shall apply at the latest with effect from the tax year following the notification of this Decision (see recital (269)).

(263) The Court of Justice has also consistently held that the obligation on a Member State to abolish aid regarded by the Commission as being incompatible with the internal market is designed to re-establish the previously existing situation (183). In this context, the Court of Justice has established that this objective is attained once the recipient has repaid the amounts granted by way of unlawful aid, thus forfeiting the advantage which it had enjoyed over its competitors on the internal market, and the situation prior to the payment of the aid is restored (184).

(264) In line with the case-law of the Court of Justice, Article 16(1) of Regulation (EU) 2015/1589 states that ‘where negative decisions are taken in cases of unlawful aid, the Commission shall decide that the Member State concerned shall take all necessary measures to recover the aid from the beneficiary’.

(265) Thus, given that the aid measures in question were implemented in breach of Article 108(3), TFEU (they were not notified to the Commission), and are to be considered as unlawful and incompatible aid, they should be recovered in order to re-establish the situation that existed on the internal market prior to their granting. Recovery should cover the time period from the date when the aid was put at the disposal of the beneficiaries, that is the date on which the normal taxes should have been paid, until effective recovery. The amount to be recovered should bear interest from the date on which it was put at the disposal of the beneficiaries until effective recovery. The interest should be calculated on a compound basis in accordance with Chapter V of Regulation (EC) No 794/2004.

(266) According to Article 17(1) of Regulation (EU) 2015/1589, the powers of the Commission to recover aid are subject to a limitation period of ten years. According to Article 17(2) of that Regulation, the limitation period is to begin on the day on which the unlawful aid is awarded to the beneficiary. Any action taken by the Commission or by a Member State, acting at the request of the Commission, with regard to the unlawful aid interrupts the limitation period. Consequently, the decisive factor in determining the starting point of the limitation period referred to in Article 17 is when the aid was in fact awarded. That provision refers to the award of aid to a beneficiary, not the date on which an aid scheme was adopted. In the case of a scheme entailing advantages granted on a periodic basis (which is the case here for the measures), there may be a considerable period between the date on which an act forming the legal basis of the aid is adopted and the date on which the undertakings concerned will actually be granted the aid. In such a case, for the purpose of calculating the limitation period, the aid must be regarded as not having been awarded to the beneficiary until the date on which it was in fact received by the beneficiary (185). Therefore, the limitation period starts to run each year on the date on which the normal taxes were due, although the act forming the legal basis of the aid may have been adopted before that date.

(267) The obligation on Germany to recover the aid will therefore cover the ten years preceding the date on which the Commission first asked Germany for information on the aid measures. As the first information request was sent on 8 March 2017, the recovery starts with the 2007 taxation year. Thus, only aid awarded under the aid schemes after 8 March 2007 can be regarded as new aid that can be recovered.

(268) The amount of the aid to be recovered consists of the positive difference between the amount of tax that the public casinos operators would have paid under the normal tax rules and the amount of tax that they actually paid under the special tax rules, taking into account the effect of all measures (including the ad hoc reductions of the special taxes) and cumulated over the whole recovery period. Given that, under the special tax rules, an operator may have benefitted from advantages and suffered from disadvantages depending on the tax years and specific circumstances, the actual advantage to be recovered should be the positive sum (if any) of these (positive and negative) amounts, including recovery interests. This will ensure recovery of the advantage actually provided by the measures over the recovery period. This methodology is justified in this specific case given the reasoning used in the State aid assessment of the schemes (the existence of a ‘potential advantage’, while its materialisation is examined in the recovery phase). Furthermore, Germany put forward arguments based on national tax law (normal tax rules) justifying such a global approach across tax years instead of a yearly approach in this particular case where the measures can lead to advantages and disadvantages: Germany in particular mentioned the possibility of carrying the losses of one particular tax year to another tax year (carry forward and/or carry back) for taxes on profit (186), as well as depreciations and provisions (

Abschreibungen und Rücklagen

), i.e. mechanisms which allow compensating profits and losses and spreading the tax burden over several years. In the same vein, Germany explained that German tax law enables the offsetting of tax debt across calendar years (187). This approach also appears in line with the consideration that intrinsically linked measures having various effects should be assessed globally, taking into account related disadvantages (188). This implies that recovery should take into account the same perspective, not restricted to individual tax years seen as independent from one another.

(269) In general, Germany must implement recovery effectively and immediately in accordance with Article 16(2) and (3) of Regulation (EU) 2015/1589. As the measures are tax measures involving at least to some extent annual taxes, this assessment can only be done, for a particular tax year, after that tax year has elapsed. Therefore, the assessment for the tax year during which the Decision is adopted (‘the current tax year’) should take place after that tax year has elapsed.

(270) In order to determine the tax burden under the normal tax rules, the German authorities should apply usual corporate tax, income tax (and related additional taxes), trade tax and entertainment tax rules.

(271) In particular, in order to calculate the amount of entertainment tax due by public casinos operators, it should be kept in mind that, most of the time, municipal entertainment tax laws were not specifically designed to apply to public casinos and the games they offer because of the tax exemption applicable to public casinos in the laws of the

Länder

on public casinos. The cities (189) thus never had the occasion in the recent past to make use of their competence to tax public casinos. This means that the authorities competent to lay down the main features of the entertainment tax should place themselves in the situation which would have existed in the absence of the measures examined in the present decision. In the absence of the exemption from entertainment tax (and in the absence of the special taxes), the cities would have had to decide how to tax these entertainment activities (without being able to argue – by definition – that they cannot tax them because of the existing exemptions). In doing so, the cities should in particular comply with the general principles of Union and German law (such as the non-discrimination principle) and the specific principles of taxation under the entertainment tax. The German authorities are thus invited, within four months following notification of this Decision, to submit the appropriate way to calculate the entertainment tax applicable to public casinos in the different cities. In that regard, the following considerations should guide the German authorities.

(272) The entertainment tax should be applied using the most appropriate triggering event in the light of the objective of the tax and, if any, of the specificities of the games offered by public casinos. This means in particular that, given the similarity between the games offered by public casinos and the games offered by gambling halls (190), the cities should tax all those games of chance in a similar manner. Thus, the gambling activities of public casinos operator (gambling machines, and table games, if any) should in principle be taxed using the features (tax base and tax rate) laid down by each municipal entertainment tax law for the taxation of gambling machines in gambling halls, unless the entertainment tax law of the city in question lays down a more specific or appropriate method to calculate the tax for table games (191).

(273) In addition, it could be that certain cities intend or decide to levy the entertainment tax in the form of a tax on the bets placed by the players (

Spieleinsatz/Spieleraufwand

), as a few cities did in respect of gambling machines in gambling halls. In such a case, the cities should duly take into account the specificity of the public casinos in terms of pay-out, as they did when they introduced an entertainment tax on bets for gambling halls (192).

(274) For simplification purposes, when calculating the amount of entertainment tax that would have been due by public casinos operators, the German authorities could decide to apply a rate of 25 % of the GGI, which would in principle constitute the highest possible level of entertainment tax that can be imposed on public casinos operators (193). The German authorities can alternatively decide to carry out more refined calculations using the concrete entertainment tax rates applicable in the relevant municipalities, in order to determine the precise amount of entertainment tax.

(275) In any case, as already underlined (see recital (271)), the calculation method chosen by the cities should be based on credible documentation and comply with the general principles of Union and German law (such as the non-discrimination principle) and the specific principles of taxation under the entertainment tax. The German authorities are invited to provide, within four months following the notification of this Decision, the explanations on the calculation method in an appropriate and streamlined format, specifying the reasoning for the chosen method in order to enable the Commission services to verify it. Within six months following the notification of this Decision, Germany should submit the precise calculations covering the time period until the end of the tax year preceding the notification of this Decision and establish, based on those calculations, the exact amount of aid to be recovered including recovery interest.

(276) In response to the fact (alleged by the

Land

Hamburg) that the operators would have behaved differently under different tax rules (the normal tax rules), so that no comparison can be made, it is appropriate to highlight that, pursuant to the case-law, aid subject to recovery should not take into account hypothetical elements such as the choices, often numerous, which could have been made by the beneficiaries, since the choices actually made with the aid might prove to be irreversible (194).

(277) Some public casinos operators (SHSWSN) argue that recovery should in this case be prohibited because (i) it is contrary to the protection of legitimate expectations of the beneficiaries which always paid their taxes, (ii) the special tax rules exist since 1938 and (iii) ordering recovery would endanger the public task carried out by public casinos operators.

(278) However, in view of the fundamental role played by the notification obligation to render effective the review of State aid by the Commission, which is mandatory, the recipients of aid may not, in principle, entertain a legitimate expectation that the aid is lawful unless it has been granted in compliance with the procedure provided for in Article 108 TFEU and a diligent business operator must normally be in a position to confirm that that procedure has been followed (195). The measures were however not notified to the Commission and therefore not approved by the Commission. In addition, the fact that the special tax rules existed since 1938 aims at arguing that the measure is existing aid, which has been rebutted in Section 4.3. Furthermore, the operators at stake do not explain why ordering recovery of an undue competitive advantage would endanger the public task they allegedly (recital (128)) carry out and why it would constitute a violation of a fundamental principle of Union law.

(279) During the formal investigation procedure, Germany explained that the calculations necessary to carry out recovery are complex and rely on figures dating back to 2007 in some instances; besides, the data would not be easily available (some operators have left the market, while some data disappeared as a consequence of the 2021 floods in Rhineland-Palatinate). The German authorities also argue that, to receive the relevant data, they have to rely on the cooperation of the beneficiaries (public casinos operators) who might be hesitant to provide it in the context of a recovery case. They suggest a time period of 18 months to implement the recovery decision.

(280) It cannot be ruled out that, in implementing the complex calculation methodology described in recitals (268) to (274), Germany may need additional time (compared to the usual practice) to establish the amounts to be recovered. In line with the Commission Notice on the recovery of unlawful and incompatible State aid (196), with respect to the timing for the recovery from individual beneficiaries of the unlawful and incompatible State aid amounts, the German authorities should have four months starting from the date of the end of the current tax year to establish the final aid amounts to be recovered and six months starting from that same date to actually implement the recovery. These deadlines accommodate the fact, mentioned in recital (269), that the assessment for the current tax year can only be done after that tax year has elapsed.

6. CONCLUSION

(281) The Commission finds that Germany has unlawfully implemented the aid measures in question in breach of Article 108(3) of the TFEU. The aid measures are not compatible with the internal market. Consequently, Germany must put an end to those aid measures and recover from the public casinos operators the difference between the amount of tax that they would have paid under the normal tax rules and the amount of tax that they actually paid under the special tax rules.

HAS ADOPTED THIS DECISION:

Article 1

1. The 16 special tax schemes applicable to public casinos operators in the 16 German

Länder

(as described in Section 4.1 of the recitals) constitute State aid schemes unlawfully put into effect by Germany in breach of Article 108(3) of the Treaty on the Functioning of the European Union. The aid granted under those aid schemes is incompatible with the internal market.

2. By way of derogation from paragraph 1, the scheme applicable to public casinos operators as from 1 January 2024 in the

Land

Hamburg (Law of 24 May 1976 allowing a public casino, amended by the law of 21 December 2023) does not constitute State aid.

Article 2

1. Germany shall recover the incompatible aid granted under the aid schemes referred to in Article 1 from the beneficiaries.

2. Individual aid granted under the aid schemes referred to in Article 1 which, at the time it is granted, fulfils the conditions laid down by a Regulation adopted pursuant to Article 1 of Council Regulation (EU) 2015/1588 (197) or pursuant to Article 1 of Council Regulation (EC) No 994/98 (198) or by any other approved aid scheme is compatible with the internal market.

3. The sums to be recovered shall bear interest from the date on which they were put at the disposal of the beneficiaries until their actual recovery.

4. The interest shall be calculated on a compound basis in accordance with Chapter V of Regulation (EC) No 794/2004.

5. Germany shall abolish the incompatible aid schemes within four months following the date of notification of this Decision. The amended tax schemes shall apply at the latest with effect from the tax year following the notification of this Decision.

Article 3

1. Recovery of the aid granted under the aid schemes referred to in Article 1 shall be immediate and effective.

2. Germany shall ensure that recovery is implemented within six months from the date on which the current tax year elapsed.

Article 4

1. Within four months following notification of this Decision, Germany shall submit a detailed description of measures already taken and planned to comply with this Decision and in particular to ensure that the aid measures are abolished. Germany shall in particular submit the following information:

(a) a detailed description of the measures taken to put an end to the aid schemes;

(b) detailed explanations on the calculation methodology chosen to establish the entertainment tax.

2. Within six months following the notification of this Decision, Germany shall submit the following information:

(a) calculations of the amount of aid received under the aid schemes referred to in Article 1 by each of the beneficiaries until the end of the tax year preceding the notification of this Decision;

(b) calculations of the amount (principal and recovery interests) to be recovered until the end of the tax year preceding the notification of this Decision.

3. Within four months starting from the date on which the current tax year elapsed, Germany shall submit the following information:

(a) the total and final amount of aid received by each of the beneficiaries under the schemes (including the current tax year);

(b) the total amount (principal and recovery interests) to be recovered from each beneficiary;

4. Germany shall keep the Commission informed of the progress of the national measures taken to implement this Decision until recovery of the aid granted under the schemes referred to in Article 1 has been completed. It shall immediately submit, on simple request by the Commission, information on the measures already taken and planned to comply with this Decision. It shall also provide detailed information concerning the amounts of aid and recovery interest already recovered from the beneficiaries.

Article 5

This Decision is addressed to the Federal Republic of Germany.

Done at Brussels, 20 June 2024.

For the Commission

Margrethe VESTAGER

Executive Vice-President

(1) The complainants brought an action for a partial annulment of the opening decision to the extent the Commission considered in that decision that measure 3 does not constitute State aid. In case T-510/20,

Fachverband Spielhallen and LM v Commission

, the General Court, by order of 22 October 2021, dismissed the action. The case has been referred back to the General Court by judgment of the Court of Justice of 21 September 2023,

Fachverband Spielhallen and LM v Commission

, C-831/21 P, ECLI:EU:C:2023:686.

(2) Cf.

OJ C 187 of 5 June 2020, p. 80

. Following exchanges with the German authorities, the Commission decided on 27 April 2020 (decision C(2020) 2700 final) to publish in full the opening decision.

(3) Regulation on gaming devices and other games with the possibility of winning (

Verordnung über Spielgeräte und andere Spiele mit Gewinnmöglichkeit). Spielverordnung in der Fassung der Bekanntmachung vom 27. Januar 2006 (BGBl. I S. 280),

as last amended by Article 4 (61) of the act of 18 July 2016 (BGBl. S. 1666).

(4) In certain

Länder

(for instance North Rhine-Westphalia) however, the public casinos operators are or were subject to a special tax on the profits arising from such non-gambling related activities.

(5) The gambling-related turnover of public casinos operators (entrance fees etc.) is subject to VAT, but, because this turnover is not part of the GGI, it is not included in the tax base of the special taxes which use the GGI as tax base (casino tax and possibly additional taxes on the GGI). The casino tax (and possibly additional taxes on the GGI) is however deemed to replace the normal taxes also for these other sources of gambling-related income.

(6) In particular in Baden-Württemberg (since 2012), Berlin (since 2010), Mecklenburg-Vorpommern (since 2004), Lower Saxony (since 2005), North Rhine-Westphalia (since 2007), Rhineland-Palatinate (since 2016), Saarland (since 2013), Saxony-Anhalt (since 2009), Schleswig-Holstein (in 2010-2012) and Thuringia (since 2011).

(7) Law of 21 December 2023 (

Viertes Gesetz zur Änderung des Gesetzes über die Zulassung einer öffentlichen Spielbank vom 21. Dezember 2023

, HmbGVBl. Nr. 47, S. 458) as interpreted by the public authorities of the

Land

(8) This corresponds to the date on which the operator also declares the amount of one of the special taxes (

Sonderausgabe

) (Article 5 (3b) of the law of the

Land

on public casino).

(9) The amount of bets can be established as four times the GGI, as laid down in Article 12(1) of the entertainment tax law of Hamburg. The German authorities explained that this provision would be applicable as a proxy in particular in the event that the amount of bets is impossible or difficult to determine.

(10) The

Gesellschaftsteuer

(capital duty: tax on the sales of company shares) was abolished in 1992 and the

Vermögensteuer

(wealth tax) is not levied anymore since 1997 (and was never levied in the East German

Länder

(11) Certain gaming services (not land-based casino games nor land-based slot machines) are subject to a special tax laid down in the Race Betting and Lottery Act (

Rennwett- und Lotteriegesetz

(12) When other tax bases than amounts spent by the entertained person are used, these other tax bases are regarded as proxy for the amounts spent by the entertained person. The case-law of the German courts requires that there is a sufficiently direct link between the entertainment tax base and the amount played by the player to entertain itself (

Vergnügungsaufwand des einzelnen Spielers

(13)

Verordnung über öffentliche Spielbanken

of 27.7.1938 (

https://www.gesetze-im-internet.de/spielbkv/BJNR009550938.html

), Article 6:

‚1. The casino operator is for the operation of the casino exempt from the taxes of the State which are levied on income, assets and turnover, as well as from lottery tax and capital duty. 2. The extent to which the casino operator is exempt from state and municipal taxes for the operation of the casino is determined by the Minister of Finance in consultation with the Minister of the Interior.’.

Article 6(1) is still regarded as federal law (

Bundesrecht

) by the German authorities, in particular because it concerns corporate tax and income tax which are regulated at federal level.

(14) When an undertaking is transparent for corporate or income tax purposes (for instance because it is a tax transparent entity such as a

Kommanditgesellschaft

or KG), its associates/shareholders (

Gesellschafter

) are, depending on their legal form, subject to either corporate tax or personal income tax. In such a case (i.e. public casinos operators operating as tax transparent KG), the corporate or income tax exemption under the special tax rules applies at the level of the

Gesellschafter

which is assimilated to the public casinos operator for the purpose of the reasoning.

(15) This was clarified by two judgments of the Federal Finance Court on 10.7.1968 (II 94/63, II 95/63 BStBl II S. 829, and II R 139/66).

(16) See footnote 10.

(17) Such tax exemptions were sometimes (at the beginning) laid down in individual acts of the

Länder

(contracts, decision authorizing the entity to operate a public casino, ministerial decisions), but they are now laid down directly in the laws of the

Länder

on public casinos (

Spielbankgesetz

) in all

Länder

and they apply to all public casinos operators (see Annex 3 of the opening decision).

(18) When the laws of the

Länder

do not directly (explicitly) exempt public casinos operators from the entertainment tax and the trade tax, these tax exemption stem from more general provisions of these laws according to which these operators are exempted from (i) taxes which are 'subject to the legislation of the

Länder'

(

'der Gesetzgebung des Landes unterliegen'

) and/or which are 'in direct relationship with the operation of the public casinos' (

'im unmittelbaren Zusammenhang mit dem Betrieb der Spielbank

') and/or (ii) municipal taxes, which in both cases covers the trade tax and the entertainment tax. The exemption from entertainment tax is also sometimes mentioned in the entertainment tax laws of the different cities. Most German

Länder

in their submissions, the federal authorities (see

Gesetzesbegründung zum JStErgG

of 18.12.1995) and the

Verwaltungsabkommen

von 1954 consider that the trade tax is covered by Article 6(2) of the 1938 law. In recent cases, the Federal Finance Court (BFH) implicitly regarded the trade tax as covered by Article 6(1) (

Gerichtsbescheid

of 20.7.2016, IX R 39/16 and

Beschluss

of 30.10.2014, IV R 2/11) but these cases did not specifically concern the distinction between Article 6(1) and Article 6(2) of the 1938 law.

(19) Article 11 of law of 18.12.1995

Jahressteuergesetz

1996, BGBl. I 1995, S. 1959.

(20) Even though there is formally no constitutional right for the municipalities to be compensated or exactly compensated for the loss of tax revenues, it is acknowledged that the exemption from trade tax and entertainment tax leads to a loss of tax revenues for the municipalities (see judgment of the Federal Finance Court of 21.1.1954 (BFH, V D 1/53 S); judgment of the Niedersächsischer Staatsgerichtshof of 11 June 2007 (StGH 1/05); Thüringer Landtag - 5. Wahlperiode, Drucksache 5/ 1552 of 29.09.2010 (

https://parldok.thueringer-landtag.de/ParlDok/dokument/38748/viertes_gesetz_zur_aenderung_des_thueringer_spielbankgesetzes.pdf

‘

This reduction in the municipal share contradicts the will of the legislator to provide the municipalities [where a casino is located] with appropriate compensation for lost taxes, such as trade tax or entertainment tax’; Helmut Siekmann,

https://www.imfs-frankfurt.de/fileadmin/user_upload/IMFS_WP/IMFS_WP_10.pdf

, Institute for Monetary and Financial Stability Johann Wolfgang Goethe-Universität Frankfurt Am Main, working paper series n°.10 (2007)). Most

Länder

also laid down some mechanism granting the municipalities a fraction of the special taxes paid by public casinos operators (see for instance

Verordnung über den Anteil der Spielbankgemeinde(n) an der Spielbankabgabe

in North Rhine-Westphalia, Bavaria or Brandenburg) or Art. 13 of the

Glücksspielverordnung des Landes Nordrhein-Westfalen

(

https://recht.nrw.de/lmi/owa/br_bes_text?sg=2&menu=0&bes_id=12371&aufgehoben=J&anw_nr=2

). See also footnotes 127 and 162.

(21) Law on the authorization of public casinos (

Gesetz über die Zulassung öffentlicher Spielbanken

) of 14 July 1933.

(22) Both the complainants and the German authorities consider the casino tax to be a

Abgeltungsteuer

. See also judgment of the Federal Finance Court of 21.1.1954 (BFH, V D 1/53 S): ‘as a result, the casino tax can be regarded as having paid off the taxes mentioned, and one can consider that levying these taxes would cause some sort of double taxation’. In the past (see footnote 126), depending on the contractual arrangements made with the public authorities, public casinos were sometimes not exempted from some of the normal taxes (trade tax, entertainment tax) so that the special taxes only replaced some of the normal taxes; the casino tax rate was accordingly lower than in cases where the casino tax replaced all the normal taxes.

(23) Judgment of the Federal Finance Court of 21.1.1954 (BFH, V D 1/53 S): ‘The [tax] exemption provided in Article 6(1) [of the 1938 law] lies in a different area, namely that of avoiding possible double taxation’.

(24) This was especially true at a time where gambling halls and gambling machines did not exist.

(25) Judgment of the German Federal Finance Court of 8.3.1995 (BFH, II R 10/93, BStBl II 1995, 432): ‘These profits should be skimmed to the benefit of the State budget as much as possible, i.e. up to the economic viability limit. The entrepreneur should only be left with a reasonable profit. This goal could not be achieved with common taxation’. See also judgment of the Federal Finance Court of 29.3.2001 (III B 79/00): ‘It is intended to lead to a taxation corresponding to the income, trade and turnover tax burden, and also aims to skim off the profits generated by the operation of the casino to the benefit of the State as much as possible, while leaving an appropriate profit for the entrepreneur’. In line with that skimming logic, the German courts also noted that, at least in theory, the special taxes could be levied in addition to – and not instead of – the usual normal taxes, a case in which the special taxes would not have the character of replacement tax (see for instance Niedersächsischer Staatsgerichtshof, 1/05, judgment of 11.6.2007, NdsVBI 2007, 239: ‘[The relevant provision of the German Constitution] not only regulates the case in which a casino tax without compensatory nature [

Abgeltung

] is levied in addition to the usual taxes, but also the case where the casino tax - as has been the case since 1938 - has the character of a compensatory tax for other taxes’).

(26) Judgment of the Federal Constitutional Court of 19.7.2000 (BVerfG, 1 BvR 539/96, BVerfGE 102, 197, paragraph 76): ‘For this reason, but also because profits from the operation of public casinos... come from an inherently undesirable activity that exploits people's passion for gambling, they should in principle not remain with the casino operators, but rather be skimmed off and [...] used to promote social, cultural or other charitable purposes’. See also judgment of the Federal Finance Court of 8.3.1995 (BFH, II R 10/93, BStBl II 1995, 432): ‘The concession to operate a public casino regularly provides the possibility of achieving very high profits. These profits should be skimmed to the benefit of the State budget as much as possible, i.e. up to the economic viability limit. The entrepreneur should only be left with a reasonable profit. This goal could not be achieved with common taxation. In order to achieve this goal, a special regulation is required, which is the aim of the casino tax. The highest possible skimming should be achieved, on the one hand, by the exorbitantly high tax rate - compared to conventional taxes - and, on the other hand, by the fact that the casino tax is not based on the profit, but rather on the gross gaming revenue, i.e. the costs of the casino operator do not have a reducing effect on the tax’.

(27) Recital (144) of the opening decision.

(28) Judgment of the Federal Finance Court of 21.1.1954 (BFH, V D 1/53 S): ‘The [tax] exemption provided in Article 6 of the [1938] law [1938 law] is closely related to Article 5 [laying down the principle of a special tax on public casinos operators]. The two provisions are interrelated in the sense that the exemption from the taxes mentioned in Article 6(1) is the necessary consequence of the skimming of gaming revenue through the casino tax, which is intended to be up to the limit of economic viability. There would be no economic or socio-political reason of any kind to exempt casino operators from the taxes listed in Article 6(1) if the casino tax, which covers gaming revenue to the greatest extent, does not take away the possibility of levying other taxes’. See also judgment of the Federal Finance Court of 8.3.1995 (BFH, II R 10/93, BStBl. 1995 II S. 432): ‘On the other hand, this [provision regulating] the casino tax only becomes practical if it is accompanied by a comprehensive exemption from other taxes […]. The regulation on the casino tax on the one hand and the comprehensive tax exemption on the other hand are inextricably linked’.

(29) Judgment of the Court of Justice of 8 December 2011,

France Télécom SA v European Commission

, C-81/10 P, ECLI:EU:C:2011:811, paragraph 50.

(30) Case C-81/10 P,

France Télécom SA v European Commission

(31) Judgment of the Court of Justice of 15 November 2011,

Commission and Spain v Government of Gibraltar and United Kingdom

, Joined Cases C-106/09 P and C-107/09 P, ECLI:EU:C:2011:732.

(32) Commission Notice on the notion of State aid as referred to in Article 107(1) of the Treaty on the Functioning of the European Union C/2016/2946 (

OJ C 262, 19.7.2016, p. 1

(33) At the time, the Treaty in force was the Treaty establishing the European Economic Community (Treaty of Rome). For practical reasons, TFEU will be used throughout this Decision.

(34) Commission Decision 2012/140/EU of 20 September 2011 on the measure C 35/10 (ex N 302/10) which Denmark is planning to implement in the form of duties for online gambling in the Danish Gaming Duties Act (

OJ L 68, 7.3.2012, p. 3

(35) The entity was also associate (

Kommanditist

) of the Spielbank Mainz/ Trier/ Bad Ems GmbH & Co. KG, operator of the public casinos in Mainz, Trier and Bad Ems until 31.3.2017.

(36) The Federal Centre for Health Education (

Bundeszentrale für gesundheitliche Aufklärung

) is a specialised authority within the Federal Ministry of Health.

(37) Judgment of the Court of Justice of 19 March 2013,

Bouygues SA

, Joined Cases C-399/10 P and C-401/10 P ECLI:EU:C:2013:175, paragraphs 103 and 104.

(38) Judgment of the Court of First Instance of 30 November 2009,

France et France Télécom/Commission

, Joined Cases T-427/04 and T-17/05, ECLI:EU:T:2009:474, paragraph 199; Judgment of the Court of Justice of 11 July 1996,

SFEI and Others

, C-39/94, ECLI:EU:C:1996:285, paragraph 60; Judgment of the Court of First Instance of 15 September 1998,

BP Chemicals v Commission

, T-11/95, ECLI:EU:T:1998:199, paragraphs 169 and 170.

(39) Judgment of the General Court of 13 September 2013,

Poste Italiane

, T-525/08, ECLI:EU:T:2013:481, paragraph 61.

(40) In spite of changes that may have affected certain aspects of the scheme (change of the rate of the casino tax for instance), there is in each

Land

(only) one scheme constituted by the mere existence of special tax rules (without a claw back mechanism).

(41) Judgment of the Court of Justice of 16 May 2000,

France v Ladbroke Racing Ltd and Commission

, C-83/98 P, ECLI:EU:C:2000:248, paragraphs 48 to 51. Likewise, a measure allowing certain undertakings a tax reduction or to postpone payments of tax normally due can amount to State aid, see Judgment of the Court of Justice of 8 September 2011,

Paint Graphos and Others

, Joined Cases C-78/08 to C-80/08, ECLI:EU:C:2011:550, paragraph 46.

(42) Recital 37 of the opening decision: sales of gambling magazines and rental of ties/jackets.

(43) The fact alone that public casinos operators are remunerated by their clients is not sufficient to qualify their activities as economic; this uncontested fact remains however relevant to qualify their activity as economic. See judgment of the Court of Justice of 12 July 2012,

Compass-Datenbank GmbH

, C-138/11, ECLI:EU:C:2012:449, paragraph 39.

(44) As the German Federal Constitutional Court (BVerfG) itself clarifies (see judgment of 19 July 2000, 1 BvR 539/96, paragraph 70), its former statement that ‘the operation of public casinos is not an economic activity’ (made in a judgment of 18 March 1970 (2 BvO 1/65, BVerfGE 28, 119), paragraph 113) was made in connection to Article 74(1)(11) of the Basic Law (

Grundgesetz

) concerning legislative power in ‘economic matters’ and concerned the question whether the public casinos law as such (

Spielbankenrecht

) was to be regarded as economic law (

Recht der Wirtschaft

), labor law (

Arbeitsrecht

), or tax law (

Steuerrecht

). In the judgment mentioned by the German authorities (judgment of 18 March 1970, 2 BvO 1/65), the court explicitly also notes that there is no need to determine whether the operation of a public casino constitutes an economic activity (

Gewerbe

) for tax law purposes (paragraph 109) and never mentions Union law, let alone State aid law.

(45) Judgment of the German Federal Constitutional Court (BVerfG) of 18 March 1970 (2 BvO 1/65, BVerfGE 28, 119), paragraph 114: ‘Without a doubt, operating a public casino is aimed at making a profit. The games of chance authorised in public casinos are designed in such a way that, as a rule, the bank ultimately wins. This is the only reason why entrepreneurs decide to operate public casinos’.

(46) For the purpose of Art. 12(1) of the Basic Law (about freedom to choose an occupation or profession defined as ‘any activity aimed at gainful employment […] that is intended to be permanent and serves to create and maintain a livelihood’). Judgment of the German Federal Constitutional Court (BVerfG) of 19 July 2000 (1 BvR 539/96, BVerfGE 102, 197-224), paragraphs 65 and 69.

(47) See respectively Article 2(1) (

Gewerbliches Unternehmen

) and Article 2(3) (

wirtschaftlichen Geschäftsbetrieb

) of the trade tax law (

Gewerbesteuergesetz, GewStG

(48) Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (

OJ L 347 of 11.12.2006, p. 1

, ELI:

http://data.europa.eu/eli/dir/2006/112/oj

), see in particular Article 9 (taxable persons) and Article 135(1), point (i), (possible exemption for gambling activities).

(49) Commission Decision C(2015) 1644 final of 17.3.2015 in case SA.34469 Differential tax rates for online and land-based gambling in Spain (

OJ C 136, 24.4.2015, p. 1

), recital 42.

(50) Judgment of the General Court of 16 July 2014,

Zweckverband Tierkörperbeseitigung

, T-309/12, ECLI:EU:T:2014:676, paragraphs 70 and 71.

(51) They do not mention any legal basis confirming such allegations.

(52) In Berlin, Hamburg, Hesse, Mecklenburg-Vorpommern, North Rhine-Westphalia, Lower Saxony, Rhineland-Palatinate and Saxony-Anhalt.

(53) Judgment of the Court of Justice of 18 March 1997,

Calì & Figli

, C-343/95, ECLI:EU:C:1997:160, paragraph 22.

(54) See the explicit wording of the State treaty on gaming of 2011 (

Staatsvertrag zum Glücksspielwesen

Glücksspielstaatsvertrag

of 15.12.2011): Tasks of the State: Article 9 - Gambling supervision (

Glücksspielaufsicht

), Article 10 - Ensuring a sufficient offer of gambling services

(Sicherstellung eines ausreichenden Glücksspielangebotes

). See, by analogy, judgment of the General Court of 16 July 2014,

Zweckverband Tierkörperbeseitigung

, T-309/12, ECLI:EU:T:2014:676, paragraphs 59 and 83. The public task is the act of giving the concession and to regulate public casinos which is carried out by the public authorities, not the public casinos operators.

(55) Judgment of the Higher Regional Court (Oberlandesgericht, OLG) of Munich of 28.10.2010 (29 U 2590/10): ‘The operation of a public casino by the plaintiff cannot [...] be classified as a mere exercise of purely sovereign activity; Rather, the plaintiff offers services for a fee as part of the casino operation’.

(56) Judgment of the Court of Justice of 17 September 1980,

Philip Morris

, 730/79, ECLI:EU:C:1980:209, paragraph 11; Judgment of the General Court of 15 June 2000,

Alzetta

, Joined Cases T-298/97, T-312/97 etc., ECLI:EU:T:2000:151, paragraph 80.

(57) Judgment of the General Court of 15 June 2000,

Alzetta

, Joined Cases T-298/97, T-312/97 etc., ECLI:EU:T:2000:151, paragraphs 141 to 147; Judgment of the Court of Justice of 24 July 2003,

Altmark Trans

, C-280/00, ECLI:EU:C:2003:415.

(58) See the public annual accounts of the public casinos operators (Bremen, 2007, 2010 and 2012; North Rhine-Westphalia 2007, 2010; Rhineland-Palatinate 2006; Bad Homburg 2015; Baden-Württemberg 2010; Duisburg 2015, Mainz 2007 and 2017; Saarland 2006, 2007 and 2014): ‘[…] the commercial slot machine industry [is] a strong competitor after the new ordinance on gaming’, ‘[public casinos are] in direct competition with the commercial gambling halls’, ‘competition from commercial gaming [Spielhallen]’, ‘the providers of commercial gambling machines […] are increasingly approaching the gaming market’, ‘the German public casinos [had] in 2014 only a market share of 5.3 % (EUR 508 million) [...], while the gaming machines in gambling halls and restaurants had a share of almost 49 % (EUR 4 700 million) […]’, ‘However, the market environment in the gambling machines segment, in particular the ongoing expansion of commercial gambling [halls], continues to put strong pressure on earnings’, ‘It can also be seen that operators of commercial gaming (gambling arcades) are trying intensively to penetrate the market of state-concessioned gaming operators [public casinos]. […] a large [gambling hall], comparable to the slot machines of the public casinos, […] slot machines in the commercial sector are increasingly visually similar to the slot machines of the public casinos. […] Overall, it cannot be ruled out that from the player’s point of view, today's gambling machines in gambling halls increasingly represent an acceptable alternative to the offerings of public casinos and can therefore be qualified as a further and very serious competitor in the gaming market’, ‘At all three locations, the public casinos are in competition with a large number of gambling halls’, ‘There is also practically no difference in the individual games offered that come from the same manufacturer’, ‘This has created competition for the public casinos’. See also the statement of the

Bundesverband privater Spielbanken

(professional association of gambling halls): ‘In addition to the branch of the Berlin public casino in Hasenheide, two gambling halls opened in 2009. One next door, the other 15 meters away. From one year to the next, turnover fell from ten to four million euros’ (

https://www.tagesspiegel.de/berlin/gluecksspiel-nichts-geht-mehr-in-berlins-spielbanken/1663894.html

, last consulted on 10 June 2024).

(59) Judgment of the German Federal Constitutional Court (BverfG) of 7.3.2017 (1 BvR 1314/12, BverfGE 145, 20 – 105), paragraph 122 (‘[different] forms of gambling are potentially in competition with each other’ […] ‘the State [through the public casinos] is also active in parts of the gaming market itself’) and paragraph 142 (‘In this respect, it cannot be ruled out that […] the […] restrictions in the new laws on gambling halls also indirectly promote the fiscal interests of the

Länder

by shifting the offer to the public casinos. In this respect, there is a competitive relationship between the gambling halls – which are regulated here – and the public casinos – which are also operated with fiscal interests and which operate branches in Berlin and Saarland in which comparable gambling on machines or devices is offered […]’.See also judgment of the Finance court (Finanzgericht, FG) of Mecklenburg-Vorpommern of 20.1.2016 (3 K 234/13): ‘The cause of the significant decline in gross gaming revenue is the increased competition on the gaming market and possibly also restrictive regulations in the State Treaty on Gaming. State-concessioned public casinos now have to share the gambling market with private gambling halls, State lotteries, and legal and illegal gaming offerings on the Internet’.

(60) General Accounting Office of Bavaria (

Bayerischer oberster Rechnungshof

), 2009 Annual Report (

https://orh.bayern.de/mam/berichte/jahresberichte/archiv/orh-bericht_2009.pdf

, last consulted on 10 June 2024): ‘Strong competition for gambling machines in public casinos (

kleines Spiel

) from commercial gambling halls with gambling machines’. See Accounting Office of Saxony (

Sächsischer Rechnungshof

), 2017 report (

https://www.rechnungshof.sachsen.de/JB2017-I-31.pdf

), p. 203: ‘This means that the public casinos are in actual competition with the commercial gambling halls’.

(61) Commission Notice on the definition of relevant market for the purposes of Community competition law (97/C 372/03) (

OJ C 372, 9.12.1997, p. 5

(62) Judgment of the Court of Justice of 17 September 1980,

Philip Morris

, 730/79, ECLI:EU:C:1980:209; Judgment of the General Court of 4 September 2009,

Italy v Commission

, T-211/05, ECLI:EU:T:2009:304, paragraphs 157 to 160; Judgment of the General Court of 15 June 2000,

Alzetta

, Joined Cases T-298/97, T-312/97 etc., ECLI:EU:T:2000:151, paragraph 95.

(63) Recital 17 of Commission

Decision

of 4/6/2004, C(2004)2057, in case M.3373 ACCOR/COLONY/DESSEIGNE-BARRIERE/JV, referring to case M.3109 Candover/Cinven/Gala.

(64) Annual public accounts of the public casinos operators (Rhineland-Palatinate 2006, Bad Homburg 2014 and 2015, Mainz 2006 and 2007): ‘The general risk factors also include the development of the gambling market as a whole. In addition to the state-concessioned public casinos, this area includes, among other things, commercial gambling [gambling halls] and competitions, lotto/Toto, lottery, betting transactions and online gambling’, ‘German public casinos are competing for this smaller part [of disposable household income] with a growing number of alternative leisure and entertainment offerings’, ‘the German public casinos in 2014 [had] only a market share of 5.3 % (EUR 508 million) [...], while [...] the German Lotto and Totoblock had a market share of 37 % (EUR 3 563 million)’, ‘The offers from Toto/Lotto and sports betting continue to have an impact on the development of the [public casinos] sector’. See also press release of the

Deutscher Spielbankenverband

of 25 January 2019 (‘Competition with other forms of leisure and gaming [is] becoming tougher’) and of 1 December 2016 (‘The concessioned gambling [

Das konzessionierte Glücksspiel

] in German public casinos is exposed to growing competition from non-licensed sports betting providers’).

(65) Annual public accounts of the public casinos operators (Bremen 2012, Bad Homburg 2015): ‘The political evaluation and regulation of the online market, which operates with double-digit growth rates in an often illegal or at least grey market area and denies the public casinos their original clientele, is still completely unclear’.

(66) Article 4(4) (general prohibition) and Article 4(5) (exception for lotteries and sports betting) of the State Treaty on Gaming 2011 (

Staatsvertrag zum Glücksspielwesen in Deutschland – Glücksspielstaatsvertrag – vom 15. Dezember 2011

). As Schleswig-Holstein allowed online casinos at least since 2012, it is also incorrect to state that online gambling was forbidden in all

Länder

before 2021.

(67) Article 4 of the new State Treaty on Gaming 2021 of 27.10.2020.

(68) See for example the competition relationship public casinos located in the same geographic area:

- public casinos of Hamburg and public casino of Schenefeld (Schleswig-Holstein);

- public casino in Mainz (Rhineland-Palatinate) and public casino in Wiesbaden (Hesse) (see public accounts of the public casinos operator in Mainz in 2017 and 2018: ‘direct competition with the public casino in Wiesbaden in neighbouring Hesse poses considerable risks in particular for the public casinos in Mainz’);

- public casino in Leipzig (Saxony) and public casino in Günthersdorf (Saxony-Anhalt) (see

https://www.volksstimme.de/varia/sachsens-spielbankchef-kritisiert-neue-spielbank-in-sachsen-anhalt-586917

: ‘The managing director of the public casinos in Saxony is concerned about the announced establishment of a public casino in Saxony-Anhalt, right outside Leipzig. “You certainly would not go to Günthersdorf because Günthersdorf has such a great potential. Günthersdorf was chosen to tap the potential of Leipzig” said Siegfried Schenek in Leipzig’).

(69) See for example public casinos located close to a border:

- the public casino in Bad Bentheim (Lower Saxony) advertises in Dutch to Dutch speaking players (official website,

https://www.spielbanken-niedersachsen.de/bad-bentheim-nl

, last consulted on 1 March 2021);

- the public casinos in Saarland consider that casinos in France (Amnévillle) and Luxemburg (Mondorf) are their competitors (see the annual public accounts of the public casinos operator for 2008: ‘In view of the investments made by foreign competitors in Amnéville and Mondorf and the strong dependence on French guests, the offerings in both casinos will increasingly have to focus on the German market’);

- all Bavarian public casinos, especially the casinos in Lindau (in competition with the Austrian casino in

Bregenz

), Bad Reichenhall (close to Austria), or Bad Füssing (in competition with operators in Czechia and Austria). See, more generally, 2009 Annual Report of the General Accounting Office of Bavaria (

Bayerischer oberster Rechnungshof

https://orh.bayern.de/mam/berichte/jahresberichte/archiv/orh-bericht_2009.pdf

, last consulted on 10 June 2024): ‘increasingly strong competition from neighbouring countries due to the “peripheral location” of the Bavarian public casinos. Czech and Austrian casinos have attractive offers and less strict regulations’).

(70) Judgment of the Court of Justice of 14 January 2015,

Eventech v The Parking Adjudicator

, C-518/13, ECLI:EU:C:2015:9, paragraph 65; Judgment of the Court of Justice of 8 May 2013,

Libert and others

, Joined Cases C-197/11 and C-203/11, ECLI:EU:C:2013:288, paragraph 76.

(71) Case C-518/13,

Eventech v The Parking Adjudicator

, paragraph 66; Joined Cases C-197/11 and C-203/11,

Libert and others

, paragraph 77; Judgment of the General Court of 4 April 2001,

Friulia Venezia Giulia

, T-288/97, ECLI:EU:T:2001:115, paragraph 41.

(72) Case C-518/13,

Eventech v The Parking Adjudicator

, paragraph 67; Joined Cases C-197/11 and C-203/11,

Libert and others

, paragraph 78; Case C-280/00,

Altmark Trans

, paragraph 78.

(73) Case C-280/00,

Altmark Trans

, paragraphs 77 and 78.

(74) For instance, Novomatic, an Austrian group, already owns about 1 000 gambling halls (under brands LöwenPlay CasinoRoyal and Admiral) in Germany.

(75) Judgment of the German Federal Constitutional Court (BVerfG) of 18.3.1970 (2 BvO 1/65, BVerfGE 28, 119), paragraph 114: ‘This circumstance and the source of income it created for the public sector was one of the motives of the legislature in 1933. Economic considerations also played a role: increasing the amount of foreign currency by attracting foreigners, in particular the promotion of tourism in general and the promotion of certain Spa and seaside resorts in particular […]’. See also article 1 of the 1933 law (not in force anymore): casinos can only be opened in areas with 15 % of foreign customers or which are close to a foreign casino.

(76) Judgment of the German Federal Constitutional Court (BVerfG) of 18.3.1970 (2 BvO 1/65, BVerfGE 28, 119), paragraph 116: ‘especially in health resorts with an international audience’.

(77) See the former public casino located in the Frankfurt airport.

(78) Even though public casinos operators generally restrict their action to the casinos they operate in Germany, some public casinos are owned by groups active in other Member States (such as the Gauselmann group which owns the public casinos operators in Sachsen-Anhalt and North Rhine-Westphalia since 2021).

(79) At least in the

Länder

where there are no specific restrictions regarding the ownership of public casinos operators. For example, the Austrian group Novomatic is a shareholder of the public casinos operators in Berlin, Mecklenburg-Vorpommern and Kassel/Bad Wildungen (Hesse) and the public casinos operator in Lower Saxony is owned by Casinos Austria International GmbH. Hamburg also stated that the choice of the public casinos operator in the

Land

was organised through a tender open to any operator in Europe. This was also the case in Mecklenburg-Vorpommern according to press articles (see for example press article of 14.5.2014 in Nordkurier

Hat das Heringsdorfer Casino noch eine Chance?

‘A spokeswoman for the Schwerin Interior Ministry confirmed that a total of three applicants responded to the Europe-wide tender for the state of Mecklenburg-Western Pomerania’

https://www.nordkurier.de/regional/usedom/hat-das-heringsdorfer-casino-noch-eine-chance-1265184

(80) Information showing that the public casinos in Hamburg and Wiesbaden are more than 1 hour away (by car) from the next border while some public casinos in Lower Saxony are less than 1 hour away from the next border (1 hour allegedly being the time customers are ready to travel to play table games).

(81) The regional scheme however applies to other public casinos in the

Land

, in particular the one located in Nürburg. The associate of that public casino stated that the customer base is international (

https://www.general-anzeiger-bonn.de/region/ahr-und-rhein/die-aelteste-spielbank-vor-grossen-herausforderungen_aid-41509427

: ‘the clientele is international’).

(82) It is the case in particular in the three

Länder

at stake (Lower Saxony, Hesse and Hamburg).

(83) Judgment of the Court of Justice of 9 June 2011,

Comitato ‘Venezia vuole vivere’ and others v European Commission and others

, Joined cases C-71/09 P, C-73/09 P and C-76/09 P, ECLI:EU:C:2011:368, paragraph 115.

(84) Judgment of the Court of Justice of 2 July 1974,

Italy v Commission

, 173/73, ECLI:EU:C:1974:71, paragraph 17.

(85) Judgment of the Court of Justice of 8 November 2001,

Adria-Wien Pipeline

, ECLI:EU:C:2001:598, C-143/99, paragraph 38.

(86) Judgment of the Court of Justice of 15 December 2005,

Italy v Commission

, C-66/02, ECLI:EU:C:2005:768, paragraph 78; Judgment of the Court of Justice of 10 January 2006, Ca

ssa di Risparmio di Firenze and Others

, C-222/04, ECLI:EU:C:2006:8, paragraph 132; Judgment of the Court of Justice of 9 October 2014,

Ministerio de Defensa and Navantia

, C-522/13, ECLI:EU:C:2014:2262, paragraphs 21 to 31.

(87) Judgment of the Court of Justice of 15 June 2006,

Air Liquide Industries Belgium

, Joined Cases C-393/04 and C41/05, ECLI:EU:C:2006:403, paragraph 30 and Judgment of the Court of Justice of 15 March 1994,

Banco Exterior de España

, C-387/92, ECLI:EU:C:1994:100, paragraph 14.

(88) Judgment of the Court of Justice of 15 December 2005,

Unicredito Italiano SpA v Agenzia delle Entrate, Ufficio Genova 1

, case C-148/04, ECLI:EU:C:2005:774, paragraphs 50-52; Case C-81/10 P,

France Télécom SA v European Commission

, paragraph 24.

(89) For the German federal authorities, the reference to assess the advantage cannot be the normal tax rules because this is a matter of selectivity which is a specific and autonomous criterion. It is true that both criteria (selectivity and advantage) indeed need to be assessed, but both criteria can be in this case assessed (using a different method or reasoning) with reference to the normal tax rules.

(90) Judgment of the Court of Justice of 6 September 2006,

Portugal v Commission

, C-88/03, ECLI:EU:C:2006:511, paragraph 56.

(91) Judgment of the Court of Justice of 6 October 2021,

World Duty Free Group SA v Commission

, Joined Cases C-51/19 P and C-64/19 P, ECLI:EU:C:2021:793, paragraphs 62 and following.

(92) VAT is a generally applicable tax on turnover but public casinos operators are subject to the normal VAT rules, also for their gambling activities. It is thus not necessary to mention that tax (or other general taxes which are not deemed to be replaced by the special taxes i.e. from which public casinos operators are not exempted) for the assessment.

(93) Articles 2 and 4 of the income tax law (

Einkommensteuergesetz

, EStG), Articles 7(1) and 8(1) of the corporate tax law (

Körperschaftsteuergesetz

, KStG) and Articles 2(1), 6 and 7 of the trade tax law (

Gewerbesteuergesetz

, GewStG). The tax base of the trade tax is almost the same as the tax base of the corporate tax.

(94) If the entity is transparent for income/corporate tax purposes (which is the case of several public casinos operators operating as

Kommanditgesellschaften

– KG), income/corporate tax applies at the level of the associates/shareholders (

Mitunternehmer

) depending on their legal form.

(95) Article 3(1) of the tax ordinance: Taxes ‘shall mean payments of money, other than payments made in consideration of the performance of a particular activity, which are collected by a public body for the purpose of raising revenue and imposed by the body on all persons to whom the characteristics on which the law bases liability for payment apply; the raising of revenue may be a secondary objective.’ See in particular judgment of the Federal Finance Court of 21.1.1954 (BFH, V D 1/53 S): ‘The [casino tax] rather fulfils the definition of taxes given in Article 1, paragraph 1, first sentence, of the tax ordinance [

Abgabenordnung

].’ ‘The casino tax is therefore to be viewed as a tax within the meaning of the tax ordinance, and more specifically as a self-standing tax [

selbständige Steuer

] with regard to its provisions that exclusively regulate the tax situation of public casinos.’

(96) In order to subject public casinos operators to VAT in April 2006, it was sufficient to remove the explicit VAT exemption from the German VAT law (see recital (122) of the opening decision). In the past, some public casinos operators also used to pay the entertainment tax and trade tax when their concession contracts did not provide for a corresponding tax exemption (and there were no other legal provision exempting them); see footnote 126. Before the 1938 law, they were subject to the normal taxes (See Rudolf Illing,

Die Rechtsnatur der Spielbankabgabe

, Kiel 1956, A12 Besteuerung im 19. Jahrhundert), which shows that the 1938 law and the other provisions laying down the measures had an actual effect and introduced a substantial derogation. Furthermore, in 1953, Germany thought of changing completely the tax system of public casinos by removing all the exemptions and simply adding (to the normal tax rules which would have been applicable again) a top up tax of 30 % of the GGI (ibid, Anhang VII).

(97) Germany does not argue that the tax exemptions are superfluous (merely confirmatory) because they would for instance result from the general principles of taxation under German law. See judgment of the General Court of 20 September 2019,

Havenbedrijf Antwerpen

, T-696/17, ECLI:EU:T:2019:652, paragraphs 137 to 139 and 156.

(98) See for instance, judgment of the Federal Finance Court (BFH) of 8 March 1995 (II R 10/93) (‘[…] replacement/compensation effect [

Abgeltungswirkung

] of the casino tax compared to the taxes that would otherwise be levied’). See also Section 2.2.3 and recital (37) (

Abgeltung

(99) See footnote 22.

(100) See recital (38).

(101) Judgment of the Court of Justice of 4 June 2015,

Kernkraftwerke Lippe-Ems GmbH v Hauptzollamt Osnabrück

, C-5/14 P, ECLI:EU:C:2015:354.

(102) The replacement objective of the special taxes however makes it clear that the reference are the normal tax rules.

(103) Judgment of the Court of Justice of 6 September 2006,

Portugal v Commission

, C-88/03, ECLI:EU:C:2006:511.

(104) Case C-81/10 P,

France Télécom SA v European Commission

, paragraphs 18, 19, 23 and 24 (see also the opinion of Advocate General Jääskinen in that case, in particular paragraphs 53, 54, 58, 59 and 62).

(105) Judgment of the Court of Justice of 4 March 2021,

European Commission v Fútbol Club Barcelona

, C-362/19 P, ECLI:EU:C:2021:169, paragraphs 86-89 and 95-99.

(106) Case C-81/10 P,

France Télécom SA v European Commission

, paragraphs 21 and 22. Case C-362/19 P,

European Commission v Fútbol Club Barcelona

, paragraph 98.

(107) Recitals (85) to (89) of the opening decision-.

(108) Case C-81/10 P,

France Télécom SA v European Commission

, paragraph 50. These mechanisms would ensure, by means of an adjustment of the amount of special tax, that the amount of tax ultimately paid under the special tax treatment corresponds to the tax burden that would have been due under the normal tax rules.

(109) Case C-362/19 P,

European Commission v Fútbol Club Barcelona

, paragraphs 88 and 101.

(110) In particular, the normal income taxes are calculated on the basis of the highest tax rate laid down by law (while a lower rate may be justified in the light of the actual circumstances). The way the entertainment tax is calculated is also in line with the principles laid down in the recovery part of this Decision (see in particular recital (273)).

(111) Case C-280/00,

Altmark Trans

, paragraph 87 to 95.

(112) In some

Länder

, the operators are designated directly in the law (see for instance Article 2(2) of the law of Bavaria on public casinos). In certain cases, a tender was organised; it is however not a requirement under German law and there is thus no guarantee that this was in the past and will in the future be the case.

(113) Judgment of the Court of Justice of 19 December 2018,

Finanzamt B v A-Brauerei

, C-374/17, ECLI:EU:C:2018:1024, paragraphs 36 and 44.

(114) This concerns their gambling related income (and except for VAT which applies normally).

(115) Joined Cases C-78/08 to C-80/08,

Paint Graphos and others

, paragraph 54. Case C-374/17,

A-Brauerei

, paragraphs 39-41.

(116) Joined Cases C-51/19 P and C-64/19 P,

World Duty Free Group SA v Commission

, paragraph 125.

(117) ‘[The entertainment tax] is based on the general idea that anyone who enjoys something for themselves can also be expected to pay an additional tax for the community’ (ruling of the German Federal Constitutional Court (BVerfG) of 10.5.1962 (1 BvL 31/58, BVerfGE 14, 76) paragraphs 13 and 15). Also, the actual tax base (

Steuergut

) is the amount played by the player to entertain itself (

Vergnügungsaufwand des Spielers

) (Judgment of the Federal Administrative Court (BVerwG) of 13.4.2005 (10 C 5.04) which can be the bets placed by the players or, for example, the GGI used as proxy. This is because the tax aims at burdening the economic capacity of the player reflected by the sums played by the player (‘the tax aims to burden the economic capacity [

wirtschaftliche Leistungsfähigkeit

] expressed by the use of income and wealth for entertainment purposes’, see judgment of the Federal Finance Court (BFH) of 21.2.2018 (II R 21/15), paragraph 21). This is reflected in the various entertainment tax laws at municipal level.

(118) Joined Cases C-106/09 P and C-107/09 P,

Commission and Spain v Government of Gibraltar and United Kingdom

(119) The competition relationship between erotic shows and gambling machines, both often taxed under the entertainment tax laws of the cities, is obviously of a lower intensity compared to the competition relationship between gambling machines operated by gambling halls and gambling machines operated by public casinos operators.

(120) Judgment of the administrative tribunal (Verwaltungsgericht, VG) of Saarland of 25.9.2015 (

https://recht.saarland.de/bssl/document/NJRE001237257

), ECLI:DE:VGSL:2015:0925.3K527.14.0A), paragraph 20: in line with the general case-law about entertainment taxes, what is relevant are the sums played by the players, not the profit of the operator providing the games.

(121) Judgment of the Federal Constitutional Court (BVerfG) of 4.2.2009 (1 BvL 8/05, BVerfGE 123, 1-39, ECLI:DE:BVerfG:2009:ls20090204.1bvl000805,

https://www.bundesverfassungsgericht.de/SharedDocs/Entscheidungen/DE/2009/02/ls20090204_1bvl000805.html

), paragraph 89 (

Eindämmung der Spielsucht

i.e. containing gaming addiction), judgment of the Federal Constitutional Court (BVerfG) of 3.9.2009 (

1 BvR 2384/08

) paragraph 33 and following, and judgment of the Federal Administrative Court (BVerwG) of 13.4.2005 (

10 C 5.04

(122) For instance the use (against remuneration) of music machines (

Musikapparaten

). See also the replies of the

Land

Saxony of 13.9.2019 to the information request of 12.4.2019.

(123) Judgment of the Federal Constitutional Court (BVerfG) of 3.9.2009 (1 BvR 2384/08), paragraph 33.

(124) Judgment of the Federal Administrative Court (BVerwG) of 13.4.2005 (10 C 5.04, DE:2005:130405U10C5.04.0), paragraph 52: ‘Of course, this alternative standard [

Ersatzmaßstab,

as an alternative to the main

Steuermaßstab

] has to be designed in such a way that it does not call into question the main tax standard [

Steuermaßstab

] that adequately reflects the players' entertainment expenditure, also in terms of its actual taxation effect’.

(125) Judgment of the regional Constitutional Court of Lower Saxony (Niedersächsischer Staatsgerichtshof, NdsStGH), of 11.6.2007 (StGH 1/05, NdsVBI 2007, 239): ‘The casino tax is regulated in the

NSpielbG

[law of the land on public casinos] as an independent, self-contained tax that cannot be broken down into a portion that relates to fictive income or corporation tax, another portion that relates to fictive trade tax, and another portion that relates to fictive entertainment tax etc. and another portion which makes up the “actual” casino tax’. See also the reasoning in Section 2.2.3 about the fact that the special taxes (in particular the casino tax) are a replacement tax (

Abgeltungsteuer

(126) Hans G. Schmitz,

Die Spielbankabgabe in der Bundesrepublik Deutschland

, FinanzArchiv 1965, p. 476 and 480 (concerning the Spielbank in Bad Homburg). See also p. 492-494 and 496. At that time, most of the activity of public casinos focused on table games.

(127) See footnotes 20 and 162. Germany confirmed that such a compensation (for foregone revenues from the entertainment tax and the trade tax) exists (in Lower Saxony) or could exist in all

Länder

except Baden-Württemberg (and Berlin, Bremen and Hamburg due to their particular situation as city-States).

(128) Joined Cases C-78/08 to C-80/08,

Paint Graphos and others

, paragraph 65.

(129) The mention by Germany of the objective of taxation until the economic viability limit (

Wirtschaftlichkeitsgrenze

) can only be regarded as relevant for the assessment to the extent it is similar to the principle of prevention of double and excessive taxation. To the extent it would constitute a reference to a specific objective of the special tax rules, it is not a guiding principle of the system of reference.

(130) Judgment of the Federal Constitutional Court (BVerfG) of 18.1.2006, (2 BvR 2194/99, BVerfGE 115, 97), paragraphs 44 and 46.

(131) The case-law requires that the justification is consistent with the principle of proportionality and not go beyond what is necessary, in that the legitimate objective being pursued could not be attained by less far-reaching measures (Joined Cases C-78/08 to C-80/08,

Paint Graphos and others

, paragraph 75, and Joined Cases C-51/19 P and C-64/19 P,

World Duty Free Group SA and others

, paragraph 140).

(132) Judgment of the Finance court (Finanzgericht, FG) of Mecklenburg-Vorpommern of 20.1.2016 (3 K 234/13).

(133) The provisions in the laws of the Länder on public casinos which allow the ministry of the Land to reduce the tax burden (by adopting the ad hoc reductions) sometimes refer to the economic viability limit (

Wirtschaftlichkeitsgrenze

). The ad hoc reductions however come on top of the possibly unlimited advantage already granted under the special schemes in each

Land

and thus cannot be proportionate.

(134) There are

Länder

without public casinos or in which public casinos operators disappeared, sometimes precisely because of the high tax burden arising from the special taxes.

(135) There are in many

Länder

no provisions in the laws on public casinos allowing a reduction of the special taxes that could be used to implement that alleged objective. When such provisions exist, Germany explained that they do not need to safeguard the financial ability of public casino operators at all costs.

(136) The case-law rather shows that the

Wirtschaftlichkeitsgrenze

was used as a ceiling limiting the additional taxation – going beyond normal tax rules regarded as insufficient to reach the objective of skimming the profit of public casinos – and not as a principle allowing public casinos operators to be taxed less than under the normal tax rules, see footnote 25.

(137) As certain public casinos operators went bankrupt after they unsuccessfully challenged in court the high amount of special taxes they supported.

(138) Council Regulation (EU) 2015/1589 of 13 July 2015 laying down detailed rules for the application of Article 108 of the Treaty on the Functioning of the European Union (

OJ L 248, 24.9.2015, p. 9

, ELI:

http://data.europa.eu/eli/reg/2015/1589/oj

(139) See footnote 33.

(140) Judgment of the Court of Justice of 28 October 2021,

Eco Fox Srl and Others v Fallimento Mythen Spa and Others

, Joined Cases C-915/19 to C-917/19, ECLI:EU:C:2021:887, paragraph 41.

(141) Commission Regulation (EC) No 794/2004 of 21 April 2004 implementing Council Regulation (EU) 2015/1589 laying down detailed rules for the application of Article 108 of the Treaty on the Functioning of the European Union (

OJ L 140, 30.4.2004, p. 1

, ELI:

http://data.europa.eu/eli/reg/2004/794/oj

(142) For instance a limitation of the scope of beneficiaries. See case C-362/19 P,

European Commission v Fútbol Club Barcelona

, paragraphs 134 to 136.

(143) Judgment of the Court of First Instance of 30 April 2002,

Gibraltar v Commission

, Joined Cases T-195/01 and T-207/01, ECLI:EU:T:2002:111, paragraph 111.

(144) In view of the limitation period of 10 years starting as from 8 March 2007 (see recital (267)).

(145) They were also exempted from VAT, wealth tax and the capital duty and from the lottery tax (the latter being a tax of the

Länder

), these exemptions being not relevant anymore.

(146) Article 1 of

Anordnung über die Erhebung einer Spielcasinosteuer

of 27.3.1990 (GBl. I Nr. 22, S. 217), Article 6 of

Verordnung über die Zulassung öffentlicher Spielcasinos

of 4.7.1990 (GBl. I Nr. 50, S. 952).

(147) The first public casino in East Berlin opened in May 1990 (Alexanderplatz). The first public casino in Saxony opened in July 1990 (Dresden).

(148) The first public casino in Brandenburg opened in 1998 (Cottbus). The first public casino in Mecklenburg-Vorpommern opened in 1997 (Heringsdorf). The first public casino in Saxony-Anhalt opened in 1993 (Magdeburg). The first public casino in Thuringia opened in 2005 (Erfurt).

(149) Order of the Court of 7 December 2017,

Ireland v Commission

, C-369/16 P, ECLI:EU:C:2017:955, paragraphs 28-30.

(150) Judgment of the Federal Finance Court (BFH) of 26.6.1996 (II R 1/95), paragraph 18. See also article 1 of the

Zweite Verordnung über öffentliche Spielbanken

(second ordinance on public casinos) of 18 August 1933, stating that the level of the special taxes is to be determined in the licence granted to the gambling entrepreneur. See also Rudolf Illing,

Die Rechtsnatur der Spielbankabgabe

, Kiel 1956, p. 35.

(151) Deutscher Bundestag, Drucksache 13/3084 (

https://dserver.bundestag.de/btd/13/030/1303084.pdf

) of 22.11.1995, p. 25.

(152) See footnote 126.

(153) In any event, for the reasons mentioned in the following sections (in particular the existence of substantial alterations after the entry into force of the TFEU), considering that the different parts of each special tax scheme can be assessed separately would not change the conclusion that any possible advantage for public casinos operators would constitute new aid.

(154) Period starting in 2007 were recovery can a priori be ordered, see recital (267).

(155) I.e. applicable to any public casinos operator, for any casino and without limit in time.

(156)

Gesetz über die Zulassung einer öffentlichen Spielbank in Berlin

of 13.4.1973 (GVBl. S. 646).

(157)

Gesetz über die Zulassung einer öffentlichen Spielbank

of 20.2.1978 (Brem.GBl. 1978, 67).

(158)

Gesetz über die Zulassung einer öffentlichen Spielbank

of 24.5.1976 (HmbGVBl. Nr. 22, 1976, 139).

(159)

Gesetz über die Zulassung öffentlicher Spielbanken

of 25.7.1973 (Nieders. GVBl. 2. 253).

(160)

Gesetz über die Zulassung öffentlicher Spielbanken im Land Nordrhein-Westfalen

of 19.3.1974 (GV NRW, 93).

(161)

Saarländisches Spielbankgesetz

of 9.7.2003 (Amtsblatt 7.8.2003, S. 2136).

(162) Bavaria submitted documents reflecting the view that the exemptions from municipal taxes should normally be granted and that the municipalities received a fraction of the casino tax as replacement for the trade tax and entertainment tax. But this does not establish that the exempting provisions were granted by law, for an unlimited time, to any operator in general and for the operation of any public casino.

(163) One of the two public casinos existing when the TFEU entered into force was located in Bad Dürkheim. The

Land

Rhineland-Palatinate submits that the operator of that casino never paid any (normal) taxes and that this fact was well known. This is however not substantiated by any document (and in particular by a document preceding entry into force of the TFEU, let alone the legal basis of such tax treatment).

(164) A number of public casinos (locations) and public casinos operators did not exist before the entry into force of the TFEU.

(165) The operator existing at the time of entry into force of the TFEU (Spielbank Baden-Baden GmbH & Co KG, which operated both ‘existing’ public casinos in Baden-Baden and Konstanz) stopped operating in 2003, as it was replaced by the operator of the public casino of Stuttgart, set up in 1995 and exempted on the basis of the 1995 law of the

Land

. This operator took over the operation of the existing public casinos of Baden-Baden and Konstanz after the concessions expired.

See

https://www.landtag.nrw.de/portal/WWW/dokumentenarchiv/Dokument/MMI17-195.pdf

(166) The operator existing at the time of entry into force of the TFEU (Spielbank Baden-Baden GmbH & Co KG) was individually (nominally) exempted from trade tax and entertainment tax and subject to the casino tax by a notice (

Gemeinsamer Bescheid vom Innenministerium und Finanzministerium

) of 7.10.1955, which was not limited in time but limited to the casino in Baden-Baden. For the other ‘existing’ casino in Konstanz, an additional licence (

Ergänzung der Urkunde über die Erlaubnis

) was issued by the ministry of internal affairs of the

Land

on 2 May 1951, with an expiry date on 31 March 1960 at the latest; this act extended the specific tax treatment granted for the operation of the casino in Baden-Baden to the operation of the casino in Konstanz. The specific tax treatment granted for the operation of the casino in Baden-Baden was originally laid down by the ministry of internal affairs of the

Land

on 30 March 1950 (

Besondere Bedingungen

) and was to expire on 31 March 1960.

(167) The public casino operator existing at the time of entry into force of the TFEU (Kasino Bad Neuenahr, Foerster & Co., KG, which operated both existing public casinos in Bad Neuenahr and Bad Dürkheim) was, with regard to the existing public casino in Bad Neuenahr, exempted from municipal taxes by a contract (

Vertrag

) of 3.11.1948 between the municipality of Bad Neuenahr and the operator. This contract was valid only for the duration of the contract signed by the operator and the

Land

(see below) and was repealed by another contract (

Vertrag

) of 19.10.1962 between the municipality of Bad Neuenahr and the operator (which laid down new exemptions from municipal taxes). The contracts (

Verträge

) of 11.12.1948 and 26.9.1949 between the

Land

and the operator of the two existing public casinos had a duration of 15 years. The contracts were automatically renewable but the Land had the possibility to oppose the renewal. By act (

Regelungen

) of 20.2.1963 (Article XIII), the contracts (

Verträge

) of 11.12.1948 and 26.9.1949 ceased to be in force as from 1.7.1963 and were replaced by the provisions laid down in the act of 20.2.1963.

(168) See, by analogy, recital (209) and footnote 142.

(169) Changes of the special tax rules were not adopted in reaction or in parallel to changes of the normal tax rules (see recitals (244) and (245)) and the special tax rules do not include any mechanism allowing to link the tax burden to the tax burden under the normal tax rules.

(170) See by analogy ‘reduction of aid intensity’ in Article 4(2)(c) of Regulation (EC) No 794/2004.

(171) When the casino tax was split into a casino tax and an additional tax on the GGI, this change did not constitute an alteration to the original measure only if the cumulated rate (for each fraction of the GGI, in case the tax was progressive) remained the same (the change had no effect at all as to the way the tax burden was calculated and its level).

(172) There are ‘existing schemes’ only to the extent they were introduced as fully fledged measure before the entry into force of the TFEU without any material alteration afterwards. This is not the case in the West German

Länder

(main line of reasoning, see Sections 4.3.1.2 and 4.3.2.1).

(173) Judgment of the Federal Finance Court of 8.3.1995 (footnote 26).

(174) Preliminary calculations show that actual advantages never arose before such changes. This means that, even if the alterations at stake would not be regarded as affecting the substance of the existing schemes, so that only the difference of taxation arising from the alterations would be regarded as new aid, this would, according to preliminary calculations, be sufficient to qualify as new aid any actual advantage for public casinos operators (the – in this (hypothetical) situation – severable element – the lower taxation under special tax rules arising from the alteration – covers the actual advantage that arose afterwards).

(175) And there were before the entry into force of the TFEU no similar provisions.

(176) Judgment of the Court of Justice of 27 June 2017,

Congregación de Escuelas Pías Provincia Betania v Ayuntamiento de Getafe

, case C-74/16, ECLI:EU:C:2017:496, paragraph 88 and opinion of Advocate General Kokott of 16 February 2017 in that case, ECLI:EU:C:2017:135, paragraph 92. See also by analogy order of the Court of 7 December 2017,

Ireland v Commission

, C-369/16 P1, ECLI:EU:C:2017:955, paragraphs 28 to 30.

(177) Judgment of the General Court of 30 April 2019, Union des ports de France – UPF v European Commission, case T-747/17, ECLI:EU:T:2019:271, paragraphs 134 and 135.

(178) In that decision, the Commission regarded a lower tax rate (of an additional special tax on gambling) applicable to online gambling activities as State aid and compatible aid under Article 107(3), point (c), TFEU, because that lower rate constituted an incentive for operators providing (so far illegally) online games to obtain a licence in Denmark and thus to provide online gambling services legally and in a controlled manner, in the framework of the market liberalisation. The Commission in particular checked that the taxation of online gambling activities was set at an ‘

appropriate level

’ (recital 136) and ‘

not lower than is necessary

’ (recital 137) to ensure that the objectives of the Danish Gaming Act are achieved, so that the aid measure met ‘

the proportionality requirement set out in the case-law of the Court of Justice

’ (ibid.).

(179) Judgment of the Court of Justice of 22 September 2020 in case C-594/18 P,

Austria, v. Commission

, ECLI:EU:C:2020:742, paragraph 119.

(180) Communication from the Commission — European Union framework for State aid in the form of public service compensation (2011), (

OJ C 8, 11.1.2012, p. 15

). See in particular paragraphs 21 and paragraph 16 of that Communication.

(181) Communication from the Commission — Criteria for the analysis of the compatibility with the internal market of State aid to promote the execution of important projects of common European interest (

OJ C 188, 20.6.2014, p. 4

(182) Judgment of the Court of Justice of 12 July 1973,

Commission v Germany

, C-70/72, ECLI:EU:C:1973:87, paragraph 13.

(183) Judgment of the Court of Justice of 21 March 1990,

Belgium v Commission

, C-142/87, ECLI:EU:C:1990:125, paragraph 66.

(184) Judgment of the Court of Justice of 17 June 1999,

Belgium v Commission

, C-75/97, ECLI:EU:C:1999:311, paragraphs 64 and 65.

(185) Case C-81/10 P,

France Télécom SA v European Commission

, paragraphs 80 to 85.

(186) For income tax see Article 10d of the income tax law (Einkommensteuergesetz, EStG), for corporate tax see Articles 8c and 8d of the corporate tax law (Körperschaftsteuergesetz, KStG), for trade tax see Article 10a of the trade tax law (Gewerbesteuergesetz, GewStG).

(187) Article 226 of the tax ordinance, according to which, unless otherwise stipulated, the provisions of civil law shall apply mutatis mutandis with regard to using both claims from the tax debtor-creditor relationship and counterclaims to set off claims.

(188) Case T-525/08,

Poste Italiane SpA v European Commission

, paragraphs 60-63.

(189) In

Länder

where the law of the

Land

does not forbid the imposition of the entertainment tax.

(190) The difference in addictive risks do not seem relevant in the light if the objective of the entertainment tax (recital (192)). They are taken into account by non-fiscal regulatory features, see recital (198)). Thus these factual and legal differences (in terms of addictive risks and regulatory framework) neutralise themselves and cannot justify a different treatment.

(191) This would be the case in cities where the entertainment tax law lays down specific tax features (tax base and tax rate) for ‘playing/betting money’ (

Ausspielen von Geld, Geldausspielungen

(192) Public casinos offer games with higher pay-out as compared for example to gambling machines in gambling halls (public casinos thus make less GGI for the same amount of bets). This specificity of public casinos should be reflected in the choice of the tax rate by the cities. When doing so, inspiration can be taken from what some cities (Dortmund, Aachen, Hamburg, Leipzig) did when they introduced an entertainment tax using bets as tax base (to replace lump sum taxation or taxes on the GGI). It was at the time sometimes impossible to know the bets placed by players in gambling halls (the gambling machines could not technically register the bets, only the GGI). The cities thus had to lay down, at least for a transition period, a ‘conversion factor’ allowing the tax on (the unknown) bets to be calculated on the basis of the (known) GGI. In these cases, the cities aimed at replacing the previous/existing tax on the GGI (or as a lump sum)

without increasing the tax burden

. In order to do so, the cities explicitly relied on the specific pay-out of gambling halls (about 75 %) so as to determine the tax rate of the tax on bets. For instance, the city of Bad Oeynhausen switched in June 2014 from a tax on the GGI with a rate of 15 % to a tax on the bets with a rate of 3.5 % (the pay-out of about 75 % in gambling halls ensured that the 3.5 % tax on bets corresponded – in terms of tax burden – to the 15 % tax on the GGI).

(193) Unless specificities of a given municipal tax law or of the factual and legal framework suggest otherwise. The 25 % rate applicable in the following cities was challenged as unconstitutional (excessive) but judges rejected the action: unnamed city – Judgment of the Administrative Tibunal (VG) of Sigmaringen of 17.10.2012 (5 K 2242/11;

https://openjur.de/u/608424.html

, last consulted on 10 June 2024), another unnamed city – Judgment of the Administrative Tribunal (VG) of Karlsruhe of 19.10.2021 (2 K 2649/19;

https://openjur.de/u/2383651.html

), Radolfzell am Bodensee – judgment of the Administrative Court (Verwaltungsgerichtshof, VGH) of Baden-Württemberg of 21.12.2021 (2 S 457/21;

https://openjur.de/u/2388718.html

) and Bersenbrück – judgment of the Administrative Court (Oberverwaltungsgericht, OVG) of Niedersachsen of 24.1.2023 (9 KN 238/20;

https://voris.wolterskluwer-online.de/browse/document/02392527-fe57-4690-8340-ded83c9793e4

(194) Case C-148/04,

Unicredito Italiano SpA v Agenzia delle Entrate, Ufficio Genova 1

, paragraphs 118 and 119.

(195) Judgment of the General Court of 22 April 2016,

French Republic v European Commission

, T-56/06 RENV II, ECLI:EU:T:2016:228, paragraph 43.

(196) Commission Notice on the recovery of unlawful and incompatible State aid (2019/C 247/01) (

OJ C 247, 23.7.2019, p. 1

), paragraphs 68 and 72.

(197) Council Regulation (EU) 2015/1588 of 13 July 2015 on the application of Articles 107 and 108 of the Treaty on the Functioning of the European Union to certain categories of horizontal State aid (

OJ L 248, 24.9.2015, p. 1

, ELI:

http://data.europa.eu/eli/reg/2015/1588/oj

(198) Council Regulation (EC) No 994/98 of 7 May 1998 on the application of Articles 92 and 93 of the Treaty establishing the European Community to certain categories of horizontal State aid (

OJ L 142, 14.5.1998, p. 1

, ELI:

http://data.europa.eu/eli/reg/1998/994/oj

ELI: http://data.europa.eu/eli/dec/2025/317/oj

ISSN 1977-0677 (electronic edition)