Spanish Takeover Tax Break Illegal

October 29, 2009 Taxation in EUTaxation in Spain  No comments

The European Commission (EC) has declared that a tax break available to Spanish companies participating in corporate takeovers is illegal and should be revoked.

Following an investigation initiated in 2007, the EC concluded on the 28th of October that tax breaks received by Spanish companies completing corporate takeovers of non-Spanish entities within the European Union, are illegal. Instated in 2002, the law allowed Spanish companies to deduct the goodwill element of a takeover transaction. The EC has decided that it will require any instances of the tax break being utilized after the commencement of the investigation to be reversed. All transaction involving the tax scheme that occurred before December 21st, 2007, will not be altered.

The Spanish Government has made it clear that it is fully prepared to cooperate with the decision. Reportedly, the number of Spanish firms taking advantage of the tax opportunity had greatly dwindled in recent times, with the majority of instances occurring before the December 2007 deadline.

Neelie Kroes, EC Competition Commissioner, commenting on the announcement of the decision said, “This tax provision gives a discriminatory advantage to Spanish companies when acquiring shares in other European companies,” and “To preserve a level playing field in the single market, Spain must put an end to this measure and recover unlawful aid given since December 2007”.

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