The European Commission (which is the executive arm of the European Union) has ruled that Real Madrid and Barcelona are among seven professional teams in Spain that have to pay back millions of euros of what was deemed by the commission as “illegal state aid.”
Real Madrid has come into hot water because the European Commission said that the Spanish giants benefitted from an illegal state subsidy in the form of land near the Santiago Bernabeu, instead of a site in suburban Las Tablas, which had been promised back in 1998. The property was sold to the club in 1998 for 488,000 euros. Real Madrid, in turn, sold the land back to the city in 2011 for a whopping 22.7 million euros.
The club has since appealed the European Commission’s ruling and have put the blame on a Barcelona architect’s office, putting the sum in question. They detailed their response with a press release that stated:
“1. Regarding the agreement signed in 2011 between our club and the Madrid City Council, that had the basic aim that the City Council would compensate itself in the way most beneficial to them, in the case of the a failure to deliver the plot of land B-32 in Las Tablas, as it was public land. This obligation was contracted by the Madrid City Council for the barter execution convention of the Sports City, signed with Real Madrid in 1998. Any other compensation formula would have cost the City Council practically double the value of the plot of land B-32 fulfilled in the convention.
“3. It is a surprise that the European Commission have used a valuation made by an architect’s office in Barcelona to dictate their decision, when said firm has little experience in making similar estimates in general and almost none in the city of Madrid. Real Madrid, despite the only objective and legally obliging valuation being the cadastral value, presented in the report a valuation made by one of the most important companies in the world, Aguirre Newman, whose report concluded that Real Madrid had even been under-compensated by more than 7.5 million euros.
“Due to these reasons, once Real Madrid know the decisions made, will appeal in the Court of Justice of the European Union with confidence that those decisions will be revoked. In any case, Real Madrid, following a prudential accounting criteria, has in their provisional accounts all of the quantities whose reimbursement may finally be obliged.”
The commission also ruled that the clubs must pay back funds that were given in the form of state tax breaks that date as far back as 20 years ago. Real Madrid, Barcelona, Athletic Bilbao and Osasuna have been hit with fines as the commission ruled that Spain had created a tax shelter over the past 20 years for the four clubs, who benefited from being classified as nonprofit organizations.
Barcelona also provided a statement, as they face a five million euro fine, “Since January of 2016, FC Barcelona is taxed according to the reformed corporate tax code and no longer has any difference in taxation with respect to other Spanish clubs. The club will defend the interests of its members against abusive interpretations of the law.”
And what finalized what was a crazy day in Spanish finances relating to its football, the European Commission found that loans given to clubs in Valencia by the state-owned Valencia Institute of Finances also constituted unfair state support, finding that they required no collateral. The commission ruled that Valencia CF must pay back 20.4 million euros, meanwhile Hercules and Elche must pay 6.1 million and 3.7 million euros, respectively.