Daily Tax Report: International

INSIGHT: Spain—Amortization of Financial Goodwill

Jan. 3, 2019, 10:35 AM

In the so-called Spanish goodwill cases, the European Commission considered incompatible with the internal market the Spanish tax amortization regime of financial goodwill (i.e. the difference between the acquisition cost of the shares of the foreign entity and the value of its net equity that is not attributable to the assets of the foreign entity) for the acquisition of foreign shares by undertakings resident for tax purposes in Spain.


The European Commission concluded that the scheme amounted to incompatible state aid in that it treated more favorably Spanish foreign acquisitions as compared to Spanish–Spanish transactions.

The first decision of the European Commission was issued in 2009 and related to shareholding acquisitions in the EU.

The second decision, in 2011, related to acquisitions outside the EU.

There was also a third decision, in 2014, related to indirect acquisitions through holding companies.

With this tax measure it was recognized that an undertaking liable for the corporate income tax (“CIT”) which acquired a shareholding in a company not tax resident in Spain and that shareholding was at least 5 percent and was held without interruption for at least one year.

The resulting “financial” goodwill could be deducted, in the form of an amortization, from the basis of assessment for the corporation tax payable by that undertaking. The third decision in 2014 related to indirect acquisitions through holding companies (decision 2015/314/EC). The deduction was not available when the acquired company was a Spanish company.

Certain Spanish undertakings requested the EU General Court ("EGC") to override the first and the second decisions of the European Commission, which the EGC did by judgment of November 7, 2014.

The EGC found that the European Commission had failed to demonstrate that the measure at issue was selective, because it did not identify a category of undertakings which were exclusively favored by it. According to the EGC, the identification of such a category of beneficiaries would be a prerequisite for recognizing the existence of State aid. The mere finding of a derogation from the common tax regime should not give rise to selectivity where such derogation is available to all undertakings.

However, on December 21, 2016, the Court of Justice of the European Union ("CJEU") set aside the two EGC judgments and adopted a broader approach on the notion of selectivity of a fiscal measure, by which the key aspect for determining the selective nature of a measure is whether it produces the effect of placing the beneficiaries in an advantageous position as compared to other companies in a comparable factual and legal position.

According to the CJEU, a measure may be selective even where the resulting difference in treatment is based on the fact that certain undertakings carry out certain transactions that other undertakings choose not to (and not on the distinction between the undertakings from the perspective of their specific characteristics).


On November 15, 2018, the EGC upheld the decisions of the European Commission and the wider interpretation of selectivity of the CJEU, classifying the tax measure as incompatible state aid.

The EGC concluded that the measure at issue is selective, even though the provided advantage is accessible to all undertakings liable for corporation tax in Spain.

In this respect, the EGC has observed that undertakings liable for corporation tax in Spain, where they acquire shareholdings in companies’ tax resident in Spain, may not obtain the benefit which the deduction arrangement in question provides for in respect of those transactions, unlike undertakings acquiring shareholdings abroad.

The EGC thus infers that a national tax measure such as the one at issue, which grants an advantage upon satisfaction of the condition that an economic transaction is performed, may be selective including where, having regard to the characteristics of the transaction concerned, any undertaking may freely choose whether to perform that transaction.

In finding this tax measure selective, the EGC considered, like the European Commission, that it introduces differences in treatment between undertakings in similar legal and factual situations which are not justified by the nature or general structure of the Spanish system for taxing goodwill.

Effect on Other Tax Ruling Cases

It is still too early to state the consequences of this judgment but soon we will know if the jurisprudence of the CJEU and EGC is unified and the wider approach on the interpretation of the selectivity applied by the CJEU and the European Commission, is consolidated.

There are several schemes cases, currently pending on a resolution of the EGC, which will undoubtedly be affected (e.g. Spanish tax lease scheme or Belgian “Excess Profit” exemption tax scheme) and other “on-hold” State aid investigations (e.g. Gibraltar tax ruling system, Gibraltar opening decision, SA.34914 UK-Gibraltar Corporate Tax regime (ITA 2010), October 1, 2014. The final decision is still pending since the opening in 2014).

The Spanish Goodwill measure was an aid scheme and not an individual aid measure. Despite that there is not a direct link with the most mediatic individual tax ruling cases of DG competition (i.e. Apple, Fiat etc), indirectly the EGC resolution on the Spanish goodwill case could reinforce these other cases.

As regards selectivity, in the individual tax ruling cases, the European Commission referred to the MOL case. According to the MOL case, when examining individual tax ruling cases, the identification of the economic advantage is, in principle, sufficient to support the presumption that it is selective.

By contrast, in case of a general scheme of aid, it is necessary to identify whether the measure in question, notwithstanding the finding that it confers an advantage of general application, does so to the exclusive benefit of certain undertakings or certain sectors of activity.

Planning Points

If the wider approach on the interpretation of the selectivity applied by the CJEU and the European Commission is consolidated and the EGC adopts the same criteria in future resolutions, a measure may be selective even where the resulting difference in treatment is based on the fact that certain undertakings carry out certain transactions that other undertakings choose not to and not on the distinction between the undertakings from the perspective of their specific characteristics.

  • The EGC resolution gives the European Commission more leeway in state aid investigations of tax measures.
  • It could be recommended to examine international tax planning containing a potentially selective scheme and individual tax rulings received with potential selective elements in order to quantify the risk. The tax adjustments, due to a recovery decision, would cause serious economic damage to the companies, without mentioning the administrative burden.
  • Member states should notify any type of potentially selective fiscal measure to the European Commission before its adoption. Each state aid investigation initiated against the tax legislation of a member state represents a serious setback for companies that have benefited from the tax incentive, which ultimately affects the economy of that state.

Dr Patricia Lampreave is an independent European tax/state aid expert and tax professor (Intituto de Estudios Bursatiles, Universidad Complutense) and former senior policy officer on fiscal state aid unit, DG Competition, European Commission.

She may be contacted at patlampreave@icam.es.

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