The General Court of the European Union on October 7 ruled that a Spanish tax incentive which allows for amortization of goodwill in foreign company share acquisitions is not incompatible with EU state aid rules. As such, the Court has annulled 2009 and 2011 European Commission decisions that reached the opposite conclusion.
The tax incentive allows Spanish companies to amortize over 20 years the difference between the acquisition price of foreign shares and the market value of the underlying assets acquired, namely the “goodwill”.
In October 2009 and in January 2011, the European Commission, in decisions concerning Banco Santander, Autogrill Espana, and Santusa Holding, concluded that the Spanish measure violated state aid rules because it gave beneficiaries a selective economic advantage over competitors that carry out domestic acquisitions. The Commission reached a similar conclusion in October 2014, declaring that Spain’s decision to permit amortization of goodwill for indirect acquisitions of foreign shareholdings violated state aid.
The three companies challenged the Commission decisions in EU General Court, which has now concluded that the Commission failed to establish that the Spanish regime was selective, and, as such, one of the criteria for classifying a measure as state aid was not met. The General Court reasoned that the Spanish regime is not aimed at any particular category of undertakings or the production of goods but a category of economic transactions.
The Commission can appeal the verdict in the European Court of Justice.
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