The Court of Justice of the European Union (CJEU) has clarified the requirements governing the recovery of State aid granted in breach of EU law and the interest accruing on it. According to the ruling, national limitation rules must not prevent the effective recovery of interest where the limitation period has expired as a result of an administrative practice under which the amount of aid is recovered first and the interest only thereafter (EuGH (CJEU), decision of 8 October 2026 – C‑617/25).
Dispute over interest on aid under the Madeira Free Zone scheme
The proceedings concerned aid granted by Portugal under the “Madeira Free Zone – Scheme III.” The European Commission had classified that scheme, insofar as it had been implemented contrary to earlier Commission decisions, as unlawful and incompatible with the internal market.
Under Decision (EU) 2022/1414, Portugal was required to recover the incompatible aid from the beneficiaries. The amounts to be repaid had to be increased by interest for the period from the date on which the aid was made available until its actual recovery. The decision had to be implemented immediately and effectively and within eight months of its notification.
Enforcement proceedings against Mota Internacional
Mota Internacional – Comércio e Consultadoria Económica, Lda. had received a corporate income tax reduction for the 2015 tax year under Scheme III. Following the adoption of the Commission decision, the Tax and Financial Administration of the Autonomous Region of Madeira issued three demands for payment of the interest associated with the aid.
As the company did not pay the interest, the tax administration initiated three tax enforcement proceedings in 2024. Mota Internacional challenged them before the Funchal Administrative and Tax Court.
The company argued that the limitation period applicable under Portuguese law to the recovery of the interest had already expired. The claims could therefore no longer be enforced.
Position of the tax administration
By contrast, the tax administration took the view that it could issue the demands for payment of interest only after recovering the actual amounts of aid. The limitation period could therefore begin no earlier than the date on which it was legally entitled to demand payment of the interest.
It further argued that, due to the primacy of EU law, national limitation law had to be disapplied insofar as it prevented the recovery of interest. The administration also took the view that the demands for payment and the subsequent enforcement proceedings were merely measures implementing the Commission decision. They could therefore not be challenged before national courts.
EU legal framework for recovery
Art. 16(2) of Verordnung (EU) 2015/1589 (Regulation (EU) 2015/1589) provides that aid to be recovered must include interest. Interest accrues from the date on which the unlawful aid was made available to the beneficiary until the date of its recovery.
Under Art. 16(3) of the Regulation, recovery must be effected without delay and in accordance with the procedural rules of the Member State concerned. This is subject to the condition that those rules allow the Commission decision to be implemented immediately and effectively. Any order of the CJEU under Art. 278 AEUV (Treaty on the Functioning of the European Union, TFEU) remains unaffected.
Under Art. 17(1) of the Regulation, the European Commission’s powers to recover aid are generally subject to a limitation period of ten years.
Portuguese limitation provisions
Portuguese tax law generally provides for an eight-year limitation period for tax debts. In the case of periodically assessed taxes, the period begins at the end of the year in which the relevant taxable event occurred.
Portuguese law also contains rules on the interruption and suspension of limitation periods. Among other things, notification of certain measures, appeals, court proceedings or other circumstances specified by law may affect the running of the period.
The Funchal Administrative and Tax Court noted that Portuguese law contains no separate provisions governing the recovery of State aid and the associated interest.
Questions referred by the Funchal Administrative and Tax Court
In essence, the national court sought clarification on:
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whether the EU principle of effectiveness precludes national rules governing the commencement, interruption and suspension of limitation periods where those rules prevent the recovery of aid or interest;
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which limitation rules apply if the Portuguese provisions must be disapplied;
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whether claims for interest may be assessed only after the amount of aid has been repaid at least in part, meaning that the limitation period can begin only at that point;
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whether tax assessments relating to the aid and demands for payment of interest merely constitute measures implementing the Commission decision.
The CJEU ruled by reasoned order. For some of the questions, it relied on the manifest inadmissibility of the request and, for the remaining questions, on its existing case law.
First question manifestly inadmissible
In the CJEU’s view, the first question did not meet the requirements concerning the content of a request for a preliminary ruling. The national court had failed to set out with sufficient clarity the relevant facts and the relationship between Portuguese law and the relevant provisions of EU law.
Insufficient information on the chronology
In particular, no specific information was provided as to when the tax administration had issued the demands for payment of interest. It also remained unclear whether, and if so when, the amounts of aid granted had been repaid between the adoption of the Commission decision and the initiation of the enforcement proceedings.
Nor was it possible to determine from the request which Portuguese limitation provisions Mota Internacional specifically relied on in support of its limitation defence. The date on which the company considered the limitation period to have expired was likewise not stated.
The reproduction of various national provisions was insufficient for the CJEU. The national court had not explained which of those provisions were intended to apply to the specific facts. The CJEU was therefore unable to assess whether an answer to the first question was necessary to decide the main proceedings.
No answer to the second question
The second question had been asked only in the event that the CJEU answered the first question in the affirmative. As the first question was manifestly inadmissible, there was no need to answer the second question.
The national court’s statement that the request was also intended to consolidate questions arising in other proceedings pending before it did not lead to a different conclusion. According to the CJEU, the preliminary ruling procedure is not intended to provide general or hypothetical opinions. Instead, a specific connection to the decision in the respective main proceedings is required.
Limitation periods must not prevent effective recovery of interest
The CJEU reformulated the third question by taking account of Art. 16(2) and (3) of Regulation (EU) 2015/1589. The decisive issue was whether a national limitation period may be applied to a claim for interest if its expiry results from an administrative practice under which the amount of aid is recovered first and the associated interest only thereafter.
National limitation periods remain permissible in principle
The CJEU clarified that national limitation rules may, in principle, also apply to the recovery of unlawfully granted aid. Such periods serve legal certainty and may generally be compatible with the principle of effectiveness.
However, their application must not render the recovery required under EU law practically impossible. At the same time, the European Union’s interest in fully restoring the situation required under State aid law must be taken into account.
Recovery is complete only when the Member State has actually recovered both the amount of incompatible aid and the interest accruing on it.
Aid and interest are subject to immediate recovery
In the CJEU’s view, the requirement of immediate implementation applies both to the actual amount of aid and to the interest. Art. 16(2) of the Regulation therefore does not justify an administrative practice under which the tax administration is required to recover the amount of aid in full or in part before it can recover the interest.
If the national limitation period expires as a result of such a practice, Art. 16(2), read in conjunction with the principle of effectiveness, precludes its application insofar as that practice is liable to prevent the actual recovery of interest.
The CJEU expressly limited this finding to cases in which the expiry of the period results from the administrative practice described and that practice is capable of impairing the effective recovery of interest. The Funchal Administrative and Tax Court must determine the specific consequences for the proceedings involving Mota Internacional on the basis of the actual circumstances.
Limited role of the national tax administration
With regard to the fourth question, the CJEU held that national authorities have no discretion concerning the recovery of aid declared incompatible by the European Commission. Their role is limited to implementing the Commission decision.
This covers both the amounts of aid unlawfully granted and the interest accruing on them. The tax administration may therefore not decide independently whether recovery is to take place.
Review by national courts remains possible
However, according to the grounds of the decision, the tax administration’s limited role does not mean that its implementing measures are exempt from all judicial review. Where EU law contains no specific procedural rules, recovery is governed by national law.
Those national rules must meet two requirements: they must not render the recovery required under EU law practically impossible, and they must comply with the EU principle of equivalence. Disputes concerning the specific implementation of recovery fall within the jurisdiction of the national courts.
The CJEU thus rejected the tax administration’s view that demands for payment of interest could not be subject to judicial review merely because they constituted implementing measures.
Significance of the decision
The order makes clear that, when implementing a recovery decision, Member States may generally apply their own procedural and limitation rules. However, that procedural autonomy ends where national provisions or administrative practices are capable of preventing the actual and full recovery of aid granted in breach of EU law, including interest.
In the main proceedings, the Funchal Administrative and Tax Court must now assess the specific factual and national-law issues. This includes, in particular, whether the relevant limitation period expired because of the sequence of recovery described by the tax administration and whether that practice impaired the effective recovery of interest. The national court will also decide on the costs of the preliminary ruling proceedings.
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