On 3 March 2005, the ECJ delivered a judgment that formally introduced the doctrine of state aid in the field of European VAT. Since, in principle, state aid must be repaid by the beneficiary, it is important to carefully consider the conditions and circumstances under which the national tax authorities grant tax concessions. In this article, the author examines the general aspects of state aid, and its effects on VAT, on the basis of two judgments of the ECJ and the current investigation by the European Commission of the case of Umicore NV. Incorrect transposition of the provisions of the Sixth Directive into national law may also imply that the Member State in question grants state aid to its citizens. The author presents several examples derived from the Dutch VAT legislation to illustrate the potential financial risks Member States may run in this respect.