The Catalan High Court of Justice has ordered El Prat de Llobregat Council to refund AENA approximately €300,000 for 2020 Business Activities Tax (IAE). This ruling, issued on 21 January, concerns the period when Barcelona-El Prat Airport halted operations due to the COVID-19 State of Alarm.

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The court’s decision overturns an earlier administrative court ruling. It supports AENA’s claim for a proportional reduction in its 2020 tax liability. AENA, the airport operator, had paid €1.1 million in IAE for 2020. The court found the airport’s activity was “substantially paralysed” from 14 March until June 2020. This period represents roughly one-third of the fiscal year.

AENA sources confirmed they cannot provide further details on the case. This is because El Prat de Llobregat Council has appealed the resolution to the Supreme Court. The court did not quantify the exact amount, but recognised AENA’s right to a “proportional reduction” for the period of total activity paralysis.

Broader Tax Claims in Catalonia

This ruling aligns with a series of recent judgments from the Catalan High Court of Justice and the Supreme Court. These judgments support tax claims by large companies against various Catalan councils. The court applied the ‘industry paralysis regime’ doctrine. This specific mechanism allows taxpayers to adjust their tax burden when extraordinary circumstances, like the pandemic, prevent normal business operations.

In AENA’s case, the tribunal accepted that its activity remained “substantially paralysed” between March and June 2020. The court acknowledged a “minimum operability” at Barcelona-El Prat Airport. This ensured essential air traffic for basic or urgent needs. However, it accepted AENA’s evidence of traffic and operations reductions exceeding 90% during the cited period. El Prat de Llobregat Council did not dispute these figures, so the court considered them unchallenged.

Council’s Arguments Rejected

The council argued against a tax reduction in the case. They claimed the cessation of activity was not total. Additionally, the council had already applied a 25.27% IAE bonus for 2021 compared to 2020. The Catalan High Court found these arguments insufficient. It concluded that a proportional reduction in AENA’s 2020 IAE quota adequately accommodates the taxation to constitutional principles.

AENA’s financial claim connects to a wider dispute between the operator and Spanish airport commercial sectors during the pandemic. The Spanish Congress previously compelled AENA to reduce rent for airport shops and restaurants. AENA stated it was “not acceptable” for them to “assume the costs of the pandemic in their entirety.” This followed nearly a year of negotiations and pressure from the commercial sector.

Impact on Local Governance

The Business Activities Tax (IAE) is a municipal tax in Spain. It applies to companies, professionals, and artists for their economic activities. The tax is based on factors like business size and location. It represents a significant revenue source for local councils. El Prat de Llobregat is a municipality in the Barcelona metropolitan area. It hosts Barcelona-El Prat Airport, a major international gateway crucial for the region’s economy and tourism.

This refund could impact the council’s budget. However, the exact amount will only be formally fixed during the sentence execution phase. The court’s decision ensures that taxation remains constitutional. It accommodates the tax burden to reflect periods of complete operational paralysis. This principle could set a precedent for other companies facing similar pandemic-related claims.

The final amount of the refund will be determined during the execution phase of the sentence. El Prat de Llobregat Council’s appeal to the Supreme Court means the legal process continues. This case highlights the ongoing financial repercussions of the COVID-19 pandemic for both businesses and local governments.

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Originally published by El Periódico Barcelona. Read original article.