- A new interpretation of the Spanish rules allowing tax deductions in connection with the acquisition of shareholdings in non-Spanish companies is in line with EU state aid rules
- A new interpretation allowing amortization of financial goodwill derived from indirect acquisitions complies with EU laws
Tax deductions for foreign company share acquisitions
According to an EC release (IP/13/701, 18 July 2013), the EC found the original version of Spain’s tax treatment of such share acquisitions to be incompatible with the state aid rules because it provided a selective economic advantage for some taxpayers acquiring foreign company shares versus the acquisitions of domestic shares by other taxpayers.
Under consistent administrative practice, the original treatment applied only to direct acquisitions, whereas the new Spanish interpretation would retroactively allow tax deductions also for indirect acquisitions.
At this stage, the EC announced that it considers that the amended rules may again involve state aid, and questions the compatibility of such aid. The opening of an “in-depth investigation” by the EC affords interested third parties an opportunity to submit comments on the measure under assessment. It does not prejudge the outcome of the investigation.
Financial goodwill amortization
Previously, in 2009 and 2011, the EC directed Spain to repeal the corporate tax provision allowing companies to amortize over a 20-year period the "financial goodwill" derived from acquisitions of shareholdings in foreign countries.
The EC also limited the recovery of this “unlawful” aid, due to the existence of legitimate expectations for some beneficiaries.
Spain committed not to grant the exemption to any new beneficiaries, but did not repeal the provision. Accordingly, 20-year amortization is still possible in certain instances when the EC recognized legitimate expectations or authorized a transitory period.
However, in March 2012 the Spanish authorities adopted a new binding administrative interpretation, extending the scope of application of the measure—making it applicable to financial goodwill deriving from indirect acquisitions.
The EC’s preliminary view that this new interpretation involves state aid because Spain is unduly enlarging the application of an “illegal and incompatible” regime. Also, the EC is considering that beneficiaries of this new interpretation have no legitimate expectations because their situation—tax benefits derived from indirect acquisitions—was not covered by the scope of the original measure at the time of the adoption of the 2009 and 2011 EC decisions.
The EC will launch an investigation to confirm whether the new interpretation involves state aid or not and, in the affirmative, whether such aid is in line with EU state aid rules.