Spain must scrap corporate tax break

Author (Person) ,
Series Title
Series Details 29.10.09
Publication Date 29/10/2009
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The European Commission has requested Spain, under EC Treaty state aid rules, October 2009, to abolish a Spanish corporate tax provision that allows Spanish companies to amortise goodwill (i.e. write off over a period of time the excess price paid for the acquisition of a business over the market value of the assets composing it) deriving from acquiring a stake in non-Spanish companies.

After an in-depth investigation, opened in October 2007 (see IP/07/1469 ), the Commission concluded that the scheme distorts competition within the Single Market because it confers an unjustified advantage to Spanish companies especially in the context of competitive takeover bids. The Commission has therefore ordered Spain to recover any unlawful aid granted under this provision as regards European acquisitions since 21 December 2007. As regards the application of this provision to acquisitions outside the EU, the Commission will continue its investigation.

The European Commission has demanded that a tax break that fuelled a spate of Spanish international mergers and acquisitions during the credit bubble be abolished and some of the money refunded.

Related Links
European Commission: Press Release: IP/09/1601: State aid: Commission requires Spain to abolish tax scheme favouring acquisitions of other European companies
BBC News, 28.10.09: Spain to end takeover tax breaks
ESO: Background information: State aid: Commission welcomes phasing out of Spain’s tax incentives for investment abroad
ESO: Background information: Tax breaks fuel Spain's conquest of Europe

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