The European Commission has opened an in-depth investigation to verify whether the new interpretation of a Spanish scheme allowing tax deductions in connection with the acquisition of shareholdings in non-Spanish companies is in line with EU state aid rules.

The Commission had found the original version of the scheme incompatible with the state aid rules because it gave the beneficiaries a selective economic advantage over their competitors performing domestic acquisitions.
According to consistent administrative practice, the original scheme applied only to direct acquisitions, whereas the new Spanish interpretation would retroactively allow tax deductions also for indirect acquisitions. At this stage, the Commission considers that the amended scheme may again involve state aid and has doubts as regards the compatibility of such aid. The opening of an in-depth investigation gives interested third parties an opportunity to submit comments on the measure under assessment. It does not prejudge the outcome of the investigation.
On 28 October 2009 and on 12 January 2011, the Commission ordered Spain to abolish the corporate tax provision allowing companies to amortise over 20 years the «financial goodwill» deriving from acquisitions of shareholdings in foreign countries. The Commission also limited the recovery of the 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 abolish the provision, as amortisation is still possible in certain cases where the Commission recognised legitimate expectations or authorised a transitory period.
However, in March 2012 the Spanish authorities adopted a new binding administrative interpretation, extending the scope of application of the measure, which would now also be applicable to financial goodwill deriving from indirect acquisitions.
The Commission takes the preliminary view that this new interpretation involves state aid, since Spain is unduly enlarging the application of an illegal and incompatible scheme. At this stage, the Commission also considers that beneficiaries of this new interpretation have no legitimate expectations since 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 Commission decisions.
The Commission will now investigate 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. If the Commission finds that the amended scheme is incompatible with state aid rules, Spain may need to recover the aid already granted from the beneficiaries.

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