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ESPN FC  By ESPN staff

Real Madrid, Barcelona among La Liga clubs ordered by EU to repay state aid

Real Madrid, Barcelona and five other La Liga clubs were ordered Monday by the European Commission, the European Union's executive arm, to repay money to the Spanish government over various instances of the state providing aid to them.

European champions Real Madrid, Spanish league champions Barcelona, Athletic Bilbao and Osasuna were ordered to repay state tax credits given to them by Spain that date back 20 years.

The initial sum total was estimated to be €68.8 million euros, according to Spanish media reports.

Real Madrid were also told to repay regarding the settlement on a transfer of land from the City of Madrid to the club that was agreed upon in 1998 and was found to be overvalued by €18.4m. Finally, three other clubs -- Valencia, Hercules and Elche -- were deemed to have been given unfair loan bailouts from Spain. 

Real Madrid were ordered to repay the €18.4m to the Madrid City Council for the sale of land in Las Tablas. The land was initially sold to the club in 1998 for €488,000. Real Madrid then sold the land back to the city council in 2011 for €22.7m. European Commissioner Margrethe Vestager wrote in her statement that the resale "gave Real Madrid an unjustified advantage over other clubs, which it now needs to pay back."

In addition, Real Madrid were fined along with Barcelona, Athletic Bilbao and Osasuna after the commission determined that Spain had created a tax shelter over the past 20 years for the four clubs, who benefited unfairly by being classified as non-profit organisations, which pay a five percent lower tax rate on profit than limited liability companies.

Real Madrid's transfer policy in recent seasons has differed from the <i>Galactico</i> era seen under Florentino Perez in the early stages of his two terms.
Real Madrid president Florentino Perez was in charge of the club at the time of the land transfer in 1998.

Real Madrid said they would appeal the decision.

The commission did not detail the total of the fines for the tax credits, but Vestager said in her statement that it would be up to the Spanish tax authorities to determine the amounts.

"To remove the undue advantage received in the past, the clubs now have to return the unpaid taxes. Based on available information the Commission estimates that the amounts that need to be recovered are limited (€0-5 million per club) but the precise amounts that need to be paid back are to be determined by the Spanish authorities in the recovery process," her statement said.

La Liga president Javier Tebas on Monday called the objection to non-profit status for some clubs "incredibly silly," and contended that clubs in Ireland pay a 12-percent lower tax rate on profit. He added that the Spanish Primera Division would appeal.

"That [Ireland club tax exemption] generates disloyal competition for the entire European Union," he said. "The subject of taxes I think is not understood properly, it is just a tiny detail. I didn't think that the oversight of the EU would go to such extremes. In Spain, companies have more obligations. I would defend this at any level. The EU has not really looked at all the angles."

Finally, Valencia clubs Valencia, Hercules and Elche were fined €20.4m, €6.1m and €3.7m, respectively, for loans awarded to them by the State-owned Valencia Institute of Finance (IVF) that required no collateral. 

"At the time, those clubs were in financial difficulties," Vestager's statement said. "The public guarantee allowed the clubs to obtain the loans on more favourable terms. As the clubs paid no adequate remuneration for the guarantees, this gave them an economic advantage over other clubs, who have to raise money without state backing. The state financing was not linked to any restructuring plan to make the clubs viable and none of them implemented compensatory measures to offset the distortion of competition created by the subsidy. In order to restore the level playing field with non-subsidised clubs, Valencia, Hercules and Elche now have to pay back the advantage they received."

The European Commission is the EU's executive council. They are politically independent and implement the decisions of the European Parliament and the EU Council.

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