Spain Ordered To Recover Taxes
Thursday 27 January 2011By Nikki Sinclaire MEP
The Commission has requested that Spain abolishes a 2002 provision in its corporate tax law that allows Spanish companies to amortise 'financial goodwill' following acquisitions of shareholdings in companies in third countries.
The Spanish provision allows for the amortisation of the financial value of goodwill (the difference between the cost of the shares and the market value of the target company's assets) in the acquisition of shareholdings in foreign companies. This is a clear exception from the general Spanish tax legislation. The provision, which effectively amounts to state aid, is illegal under EU rules. It allows for the writing-off over a period of time of the financial value of goodwill: it is in effect the granting of state aid in order to assist Spanish companies to acquire assets outside of the EU.
The Commission began its investigations into the matter in 2007, and in 2009 confirmed the illegality of the practice. Spain is now being asked not only to repeal the legislation, but also to recover the aid granted since 2007. Acquisitions in China and India will be excepted, as obstacles present in those countries do, Spain has successfully argued, justify aid. The question of state aid remains problematic, as some EU member states continue to seek loopholes whereby they give unfair advantages to their own industries.