Italy's tax breaks for Vatican may be 'illegal state aid,' EU warns

Brussels, Belguim - Italian tax provisions that allow the Catholic Church to skip paying taxes on its property may run afoul of European Union rules against state aid, the bloc's executive warned Tuesday.

Vatican-owned properties on Italian soil currently are all exempt from the municipal tax on property because they are classified as non-commercial, even in the case of religious hostels or hospitals that actually make a profit.

In a statement, the European Commission said its "preliminary view is that the relevant provisions could provide a selective advantage to their beneficiaries' commercial activities and therefore constitute (illegal) state aid under EU rules."

The EU executive said it would open an "in-depth investigation," which would allow "interest parties" to air their point of view, and would "not prejudge the outcome of the procedure."

But it added that so far, "Italian authorities have not provided sufficient evidence to enable the commission to consider that the measures at issue could be justified."