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21.5.2011 Official
Journal
of
the
European
Union L
135/1
II
(Non-legislative acts)
DECISIONS
COMMISSION DECISION
of 12 January 2011
on the tax amortisation of financial goodwill for foreign shareholding acquisitions No C 45/07
(ex NN 51/07, ex CP 9/07) implemented by Spain
(notified under document C(2010) 9566)
(Only the Spanish text is authentic)
(Text with EEA relevance)
(2011/282/EU)
THE EUROPEAN COMMISSION,
(2) By
written
question
No
P-5509/06,
Mr
David
Martin
MEP complained to the Commission about the hostile
takeover bid by the Spanish energy producer Iberdrola
involving purchasing shares of the UK energy generator
Having regard to the Treaty on the Functioning of the European
and distributor Scottish Power Ltd According to
Union, and in particular the first subparagraph of Article 108(2)
Mr Martin, Iberdrola had unfairly benefited from State
thereof,
aid in the form of a tax incentive for the acquisition.
Mr Martin asked the Commission to examine all the
competition issues arising from the acquisition, which
had been notified on 12 January 2007 for review by
the Commission pursuant to Article 4 of Council Regu
Having regard to the Agreement on the European Economic
lation (EC) No 139/2004 of 20 January 2004 on the
Area, and in particular Article 62(1)(a) thereof,
control of concentrations between undertakings ( 3 ) (here
inafter ‘the Merger Regulation’). By Decision dated
26 March 2007 (Case No COMP/M.4517 — Iberdrola/
Scottishpower, SG-Greffe(2007) D/201696)
( 4 ), the
Having called on interested parties to submit their comments
Commission decided not to oppose the notified
pursuant to the provisions cited above ( 1 ) and having regard to
operation and to declare it compatible with the internal
their comments,
market under Article 6(1)(b) of the Merger Regulation.
Whereas:
(3)
By letters dated 15 January and 26 March 2007, the
Commission asked the Spanish authorities to provide
I. PROCEDURE
information in order to assess the scope and the effects
of Article 12(5) TRLIS with respect to its possible clas
(1) By
written
questions
addressed
to
the
Commission
sification as State aid and its compatibility with the
(No E-4431/05, E-4772/05 and E-5800/06) several
internal market.
MEPs indicated that Spain had enacted a special scheme
allegedly providing an unfair tax incentive for Spanish
companies that acquired significant shareholdings in
foreign companies, pursuant to Article 12(5) of the
Spanish Corporate Tax Law (‘Real Decreto Legislativo
4/2004, de 5 de marzo, por el que se aprueba el texto
(4) By
letters
dated
16
February
and
4
June
2007,
the
refundido de la Ley del Impuesto sobre Sociedades’ ( 2 ),
Spanish authorities replied to these requests.
hereinafter ‘TRLIS’).
( 3 ) OJ L 24, 29.1.2004, p. 1.
( 1 ) OJ C 311, 21.12.2007, p. 21.
( 4 ) See: http://ec.europa.eu/competition/elojade/isef/case_details.cfm?proc
( 2 ) Published in the Spanish Official State Gazette of 11.3.2004.
_code=2_M_4517

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L 135/2
EN
Official Journal of the European Union
21.5.2011
(5) By
fax
dated
28
August
2007,
the
Commission
received (12) On
14
July
2008,
the
Spanish
authorities
submitted
addi
a complaint by a private operator alleging that the
tional information regarding the contested measure, in
scheme set up by Article 12(5) TRLIS constituted State
particular data extracted from 2006 tax returns, which
aid and was incompatible with the internal market. The
provided a general overview of the taxpayers benefiting
complainant asked for his identity not to be divulged.
from the contested measure.
(6) By
decision
of
10
October
2007
(hereinafter
‘the
opening (13) By
e-mail
dated
16
June
2009,
the
Spanish
authorities
Decision’), the Commission initiated the formal investi
provided additional information and argued that Spanish
gation procedure laid down in Article 108(2) of the
companies still faced a number of obstacles to cross-
Treaty on the Functioning of the European Union (here
border mergers within the European Union.
inafter ‘TFEU’) (former Article 88(2) of the EC Treaty) in
respect of the tax amortisation of financial goodwill
provided for by Article 12(5) TRLIS, because it
appeared to fulfil all the conditions for being considered
(14) On 28 October 2009, the Commission adopted a
State aid within the meaning of Article 107(1) TFEU. The
negative decision
( 6 ) with recovery concerning aid
Commission informed Spain that it had decided to
granted to beneficiaries on the basis of the contested
initiate the procedure laid down in Article 108(2)
legislation when making intra-EU acquisitions (hereinafter
TFEU. The Opening Decision was published in the
‘the previous Decision’). As indicated in paragraph 119 of
Official Journal of the European Union (
this Decision, the Commission maintained the procedure,

5 ), inviting interested
parties to submit their comments.
as initiated by the opening Decision, open for extra-EU
acquisitions since the Spanish authorities undertook to
provide new details concerning the obstacles to cross-
border mergers outside the EU.
(7) By
letter
dated
5
December
2007,
the
Commission
received comments from Spain on the opening Decision.
(15) On 12, 16 and 20 November 2009, the Spanish
authorities submitted summary information concerning
(8) Between
18
January
and
16
June
2008,
the
Commission
direct investment by Spanish companies in non-EU
received comments on the opening Decision from 32
countries.
third parties. The third parties that did not ask to
remain anonymous are listed in Annex I to this Decision.
(16) On
16
December
2009,
the
Commission
sent
a
request
for information to the Spanish authorities concerning
(9)
By letters of 9 April, 15 May and 22 May 2008 and
transactions in non-EU countries which it deemed
27 March 2009, the Commission forwarded the above-
necessary in order to make the State aid assessment of
mentioned comments to the Spanish authorities, in order
the scheme along the lines suggested by the Spanish
to give them the opportunity to react. By letters of
authorities.
30 June 2008 and 22 April 2009, the Spanish
authorities gave their reactions to the third parties’
comments.
(17) By
letter
dated
3
January
2010
the
Spanish
authorities
submitted detailed information on 15 non-EU countries
in which the vast majority (approximately 70 %) of
(10) On 18 February 2008, 12 May 2009 and 8 June 2009,
Spanish foreign direct investment was located. More
technical meetings took place between the Spanish
precisely, the Spanish authorities presented two reports
authorities and the Commission representatives to
prepared by the law firm Garrigues and by KPMG, which
clarify, among others matters, certain aspects of the
include an analysis of the alleged fiscal and legal
application of the scheme in question and the interpre
obstacles in these third countries.
tation of the Spanish legislation relevant for the analysis
of the case.
(18) By
letter
of
27
January
2010
the
Commission
received
comments from Banesto, a member of the Santander
(11) On
7
April
2008,
a
meeting
took
place
between
the
Group.
Commission’s representatives and Banco de Santander
S.A.; on 16 April 2008 a meeting took place between
the Commission’s representatives and the law firm J&A
Garrigues S.L. representing various interested third
(19) By
e-mail
of
3
March
2010,
the
Spanish
authorities
answered a technical question addressed to them on
parties; on 2 July 2008 a meeting took place between
26 February 2010.
the Commission’s representatives and Altadis S.A.; on
12 February 2009 a meeting took place between the
Commission’s representatives and Telefónica S.A.
( 6 ) See Commission Decision C(2009) 8107 final and subsequent corri
gendum C(2009) 8107 corr, available since January 2010 on the
Commission website: http://ec.europa.eu/competition/elojade/isef/
( 5 ) See footnote 1.
case_details.cfm?proc_code=3_C45_2007

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EN
21.5.2011 Official
Journal
of
the
European
Union L
135/3
(20) By
letter of 9 July 2010 the Commission received
(27) Goodwill is understood to represent the value of a well-
comments from Banco Santander.
respected business name, good customer relations,
employee skills, and other such factors expected to
translate into greater than apparent earnings in the
future. Under Spanish accounting principles ( 8 ), the
price paid for the acquisition of a business in excess of
(21) By
letter
of
25
November
2010
the
Commission
received
the market value of the assets constituting the business is
comments from Telefónica.
termed ‘goodwill’ and should be booked as a separate
intangible asset as soon as the acquiring company takes
control of the target company ( 9 ).
(22) On 27 November 2009, 16 June 2010 and 29 June
2010, technical meetings took place between the
Commission and the Spanish authorities.
(28) Under
Spanish
tax
principles,
with
the
exception
of
the
contested measure, goodwill can only be amortised
following a business combination that arises either as a
result of acquisition or contribution of the assets consti
II. DETAILED DESCRIPTION OF THE CONTESTED
tuting independent businesses or following a merger or
MEASURE
de-merger operation.
(23) The
measure
in
question
provides
for
tax
amortisation
of
the financial goodwill arising from the acquisition of a
significant shareholding in a foreign target company.
(29) ‘Financial
goodwill’,
as
used
in
the
Spanish
tax
system,
is
the goodwill that would have been booked if the share
(24) The measure is governed by Article 12(5) TRLIS
holding company and the target company had merged.
(hereinafter ‘the contested measure’). More precisely,
The concept of financial goodwill under Article 12(5)
Article 2(5) of Law 24/2001 of 27 December 2001
TRLIS therefore introduces into the field of share
amended the Spanish Corporate Tax Law 43/1995 of
acquisitions a concept that is usually used in transfers
27 December 1995, by adding Article 12(5). Royal Legis
of assets or business combination transactions.
lative Decree 4/2004 of 5 March 2005 provides a
According to Article 12(5) TRLIS, the financial
consolidated version of the Spanish Corporate Tax Law.
goodwill is determined by deducting the market value
of the tangible and intangible assets of the acquired
company from the acquisition price paid for the share
holding.
(25) The Commission is aware that the Spanish legislation has
evolved since the date of the opening Decision ( 7 ).
Nonetheless, the Commission considers that the latest
amendments cannot modify or alter the doubts
expressed in the opening Decision. For the sake of
consistency, the Commission will refer in the present
(30) Article
12(5)
TRLIS
provides
that
the
amortisation
of
Decision to the numbering of the Spanish legislation as
financial goodwill is conditional upon meeting the
given in the opening Decision, even though it may have
following requirements, as set by reference to
been modified. Any new legal provision will be expressly
Article 21 TRLIS:
identified as such.
(26) Article 12(5) TRLIS, within Article 12 TRLIS ‘Value
adjustments: loss of value of assets’, entered into force
(a) at least 5 % of the foreign company must be held
on 1 January 2002. It essentially provides that a
directly or indirectly by the Spanish acquiring
company which is taxable in Spain may deduct from
company for an uninterrupted period of at least 1
its taxable income the financial goodwill deriving from
year ( 10 );
the acquisition of a shareholding of at least 5 % of a
foreign company, in yearly instalments, over not less
( 8 ) See Articles 46 and 39 of the 1885 Commercial Code.
than the 20 years following the acquisition.
( 9 ) Resulting from the implementation of Law 16/2007 of 4 July 2007
on ‘the reform and adaptation of company law in the field of
accounting for the purpose of its international harmonisation in
( 7 ) Law 4/2008 of 23 December 2008, which introduced modifications
line with European Union legislation.’
to several tax law provisions.
( 10 ) See Article 21(1)(a) TRLIS.

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L 135/4
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Official Journal of the European Union
21.5.2011
(b) the foreign company must be subject to a tax similar
(31) In addition to the contested measure, it is worth pres
to that applicable in Spain. This condition is
enting briefly the following TRLIS provisions to which
presumed to be met if the country of residence of
the present Decision will refer:
the target company has signed a tax convention with
Spain to avoid international double taxation and
prevent tax evasion ( 11 ) with a clause on exchange
of information;
— Article 11(4) TRLIS ( 14 ), (Article 11 is entitled ‘Value
adjustments: amortisation’ and is contained in
Chapter IV of the TRLIS, which defines the tax
base) provides for a minimum of 20 years’ amorti
(c) the revenue of the foreign company must derive
sation of the goodwill deriving from an acquisition
mainly from business activities carried out abroad,
under the following conditions: (i) the goodwill
or revenue that can be treated as such. This
results from an acquisition for value; (ii) the seller
condition is met when at least 85 % of the income
is unrelated to the acquiring company. The
of the target company:
amendments made to this provision subsequent to
the opening Decision and brought in by Law
No 16/2007 of 4 July 2007, clarified that if
condition (ii) was not met, the price paid used for
calculating the goodwill will be the price paid for the
(i) is not included in the taxable base under Spanish
share acquired by a related company to an unrelated
international tax transparency rules and is taxed
seller, and, in addition, required (iii) a restricted
as profits earned in Spain
(
reserve to have been set up for an amount at least

12 ). Income is
specifically considered to meet these requirements
equivalent to that deducted under Article 12(5)
when it derives from the following activities:
TRLIS,
— Article 12(3) TRLIS, which is contained in Chapter IV
— wholesale trade, when the goods are made
TRLIS, permits partial deduction for depreciation of
available to the purchasers in the country or
domestic and foreign shareholdings, which are not
territory of residence of the target company
listed on a secondary market, up to the difference
or in any country or territory other than
between the theoretical accounting value at the
Spain,
beginning and the end of the tax year. The
contested measure can be applied in conjunction
with this article of the TRLIS ( 15 ),
— services provided to clients that do not have
their tax domicile in Spain,
— Article 89(3) TRLIS (Article 89 is entitled ‘Holdings in
the capital of the transferring entity and the acquiring
entity’), is contained in Title VII, Chapter VIII on the
‘Special system for mergers, divisions, transfers of
— financial services provided to clients that do
assets and exchanges of shares and change of
not have their tax domicile in Spain,
domicile of a European company or European coop
erative society from one European Union Member
State to another’. Article 89(3) TRLIS provides for
the amortisation of goodwill arising from business
restructuring. Under this provision, the following
— insurance services relating to risks not located
conditions must be fulfilled in order to apply
in Spain;
Article 11(4) TRLIS to the goodwill arising from a
business combination: (i) a shareholding of at least
5 % in the target company before the business
combination; (ii) it must be proven that the
goodwill has been taxed and charged to the seller
(iii) the seller is not linked to the purchaser. If
(ii) is dividend income, provided that the conditions
condition (iii) is not met, the amount deducted
on the nature of the income from the share
must correspond to an irreversible depreciation of
holding provided for in Article 21(1)(a) and the
the intangible assets,
level of direct and indirect shareholding of the
Spanish company are met (Article 21(1)(c)(2)
TRLIS) (
(

13 ).

14 ) Under the current legislation, this provision is numbered as
Article 12(6) TRLIS.
( 15 ) As explicitly stated in the second paragraph of Article 12(5): ‘The
( 11 ) See Article 21(1)(b) TRLIS.
deduction of this difference (i.e. that provided for in Article 12(5)
( 12 ) See Article 21(1)(c)(1) TRLIS.
TRLIS) will be compatible, where appropriate, with the impairment
( 13 ) See Article 21(1)(c)(2) TRLIS.
loss referred to in paragraph 3 of this article.’

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21.5.2011 Official
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of
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European
Union L
135/5
— Article 21 TRLIS, entitled ‘Exemption to avoid inter
— intra-EU acquisitions shall mean shareholding
national double taxation on dividends and income
acquisitions, which meet all the relevant conditions
from foreign sources arising from the transfer of
of Article 12(5) TRLIS, in a target company which is
securities representing the equity of entities not
formed in accordance with the law of a Member State
resident in Spain’, is contained in Title IV TRLIS.
and has its registered office, central administration or
Article 21 lays down the conditions under which
principal place of business within the Union,
dividends or income from entities not resident in
Spanish territory are tax exempt when received by
a company which is tax domiciled in Spain,
— extra-EU acquisitions shall mean shareholding
acquisitions, which meet all the relevant conditions
of Article 12(5) TRLIS, in a target company which
— Article 22 TRLIS, entitled ‘Exemption of certain
has not been formed in accordance with the law of a
income obtained abroad via a permanent estab
Member State or does not have its registered office,
lishment’, is contained in Chapter IV TRLIS.
central administration or principal place of business
Article 22 TRLIS lays down the conditions under
within the Union.
which income generated abroad by a permanent
establishment not situated in Spain is tax exempt.
III. GROUNDS FOR INITIATING THE PROCEDURE
(33) In the opening Decision, the Commission initiated
(32) For
the
purposes
of
this
Decision:
the formal investigation procedure laid down in
Article 108(2) TFEU (former Article 88(2) of the EC
Treaty) in respect of the contested measure, because it
appeared to fulfil all the conditions for being considered
State aid within the meaning of Article 107(1) TFEU. The
— transfer of assets shall mean an operation whereby a
Commission also had doubts as to whether the contested
company transfers, without being dissolved, all or
measure could be considered compatible with the
one or more branches of its activity to another
internal market, as none of the exceptions provided for
company,
in Article 107(2) and (3) seemed applicable.
(34) In particular, the Commission considered that the
— business combination shall mean an operation
contested measure departed from the ordinary scope of
whereby one or more companies, on being
the Spanish corporate tax system, which is the tax system
dissolved without going into liquidation, transfer all
of reference. The Commission also held that the tax
their assets and liabilities to another existing
amortisation of the financial goodwill arising from the
company or to a company that they form in
acquisition of a 5 % shareholding in a foreign target
exchange for the issue to their shareholders of
company seemed to constitute an exceptional incentive.
securities representing the capital of that other
company,
(35) The
Commission observed that the tax amortisation
applied only to a specific category of undertakings,
— share acquisition shall mean an operation whereby
namely undertakings which acquire certain shareholdings,
one company acquires a shareholding in the capital
amounting to at least 5 % of the share capital of a target
of another company without obtaining a majority or
company, and only in respect of foreign target
the control of the voting rights of the target
companies provided that the criteria in Article 21(1)
company,
TRLIS are fulfilled. The Commission also underlined
that, pursuant to the case law of the Court of Justice
of the European Union, a tax reduction favouring only
exports of national products constitutes State aid ( 16 ). The
contested measure therefore seemed selective.
— target company shall mean a company not resident
in Spain, whose income fulfils the conditions
( 16 ) See judgment in Joined Cases 6/69 and 11/69 Commission v France
[1969] ECR 523. See also point 18 of the Commission Notice on
described in paragraph 30(c) and in which a share
the application of the State aid rules to measures relating to direct
holding is acquired by a company resident in Spain,
business taxation (OJ C 384, 10.12.1998, p. 3).

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Official Journal of the European Union
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(36) In
this
context,
the
Commission
also
considered
that
the
which the Spanish authorities undertook to provide as
selective advantage did not appear to be justified by the
regards the obstacles to cross-border mergers outside
inherent nature of the tax system. In particular, it
the EU.
considered that the differentiation created by the
contested measure, which departed from the general
rules of the Spanish accounting and tax systems, could
not be justified by reasons linked to technicalities of the
V.
tax system. Indeed, goodwill can only be deducted in the
COMMENTS FROM THE SPANISH AUTHORITIES
case of a business combination or transfer of assets,
AND INTERESTED THIRD PARTIES
except under the provisions of the contested measure.
(42) The
Commission
received
comments
from
the
Spanish
The Commission also considered that it was dispropor
authorities ( 17 ) and from 32 interested third parties ( 18 ),
tionate for the contested measure to claim to attain the
eight of which were associations.
neutrality objectives pursued by the Spanish system
because it is limited solely to the acquisition of
significant shareholdings in foreign companies.
(43) To
summarise, the Spanish authorities consider that
Article 12(5) TRLIS constitutes a general measure and
(37) In addition, the Commission considered that the
not an exception to the Spanish tax system since this
contested measure implied the use of state resources, as
provision allows the amortisation of an intangible asset,
it involved the Spanish Treasury foregoing tax revenue.
which applies to any taxpayer who acquires a significant
Finally, the contested measure could distort competition
shareholding in a foreign company. In the light of
in the European business acquisition market by providing
Commission practice and the relevant case law, the
a selective economic advantage to Spanish companies
Spanish authorities conclude that the contested
engaged in the acquisition of a significant shareholding
measures cannot be considered State aid within the
in foreign companies. Nor did the Commission find any
meaning of Article 107 TFEU. In addition, the Spanish
grounds for considering the contested measure
authorities consider that a different conclusion would be
compatible with the internal market.
contrary to the principle of legal certainty. The Spanish
authorities also contest the competence of the
Commission to challenge this general measure as they
consider that the Commission cannot use State aid
(38) The
Commission
therefore
concluded
that
the
contested
rules as the basis for harmonising tax issues.
measure could constitute incompatible State aid. If this
were the case, recovery should take place according to
Article 14 of Council Regulation (EC) No 659/1999 of
22 March 1999 laying down detailed rules for the appli
(44) In
general,
30
interested
third
parties
(hereinafter
‘the
30
cation of Article 93 of the Treaty. The Commission
interested parties’) support the views of the Spanish
accordingly invited the Spanish authorities and interested
authorities, whereas another two third parties (hereinafter
parties to submit their observations as to the possible
‘the two parties’) consider that Article 12(5) TRLIS
presence of legitimate expectations or any other general
constitutes an unlawful State aid measure incompatible
principle of Union law which would permit the
with the internal market. Hence, the arguments of the 30
Commission to exceptionally waive recovery pursuant
interested parties will be presented together with the
to the second sentence of Article 14(1) of the above-
position of the Spanish authorities, whereas the
mentioned Council Regulation.
arguments of the two parties will be described separately.
IV. THE FIRST PARTIAL NEGATIVE DECISION
A. Comments from the Spanish authorities and the
(39) In the previous Decision, the Commission concluded that
30 interested parties
Article 12(5) TRLIS constitutes an aid scheme within the
meaning of Article 107(1) TFEU when it applies to intra-
(45) As
a
preliminary
remark,
the
Spanish
authorities
stress
EU acquisitions.
that direct taxation lies within the competence of
Member States. Therefore, the Commission’s action in
this field should be in line with the subsidiarity
principle stated in Article 5 EC Treaty (now replaced in
(40) The
Commission
also
found
that,
since
the
contested
substance by Article 5 TFEU). Moreover, the Spanish
measure had been implemented in breach of
authorities recall that Article 3 EC Treaty (now replaced
Article 108(3) TFEU, it constituted an unlawful aid
in substance by Articles 3 to 6 TFEU) and 58(1)(a) EC
scheme to the extent that it applied to intra-EU
Treaty (now replaced by Article 65 TFEU) allow Member
acquisitions.
States to establish different tax systems, according to the
location of the investment or the tax residence of the
taxpayer, without this being considered a restriction to
the free movement of capital.
(41) The
Commission
maintained
the
procedure,
as
initiated
by the opening Decision of 10 October 2007, open for
( 17 ) See paragraph 7.
extra-EU acquisitions in the light of the new elements
( 18 ) See paragraph 8.

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European
Union L
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(46) The
30
interested
parties
also
maintain
that
a
negative
accounting system since both goodwill ( 19 ) and financial
Commission decision would breach the principle of
goodwill ( 20 ) can be amortised over periods up to 20
national fiscal autonomy laid down in the TFEU, as
years. These empirical rules reflect the loss of value of
well as Article 56 EC Treaty (now replaced by
the underlying assets, whether tangible or not. Therefore,
Article 63 TFEU) prohibiting restrictions on the free
Article 12(5) TRLIS would not constitute an exception as
movement of capital.
it does not depart from the rules on amortisation of
goodwill established in the Spanish accounting and tax
systems.
A.1. The contested measure does not constitute State aid
(51) Thirdly, the Spanish authorities point out that the
(47) The
Spanish
authorities
and
the
30
interested
parties
contested measure does not constitute a true economic
consider that the contested measure does not constitute
advantage since, in case of sale of the acquired share
State aid within the meaning of Article 107(1) TFEU
holding, the amount deducted is recovered by taxation
since: (i) it does not confer an economic advantage; (ii)
of the capital gain, thus placing the taxpayer in the same
it does not favour certain undertakings; and (iii) it does
situation as if Article 12(5) TRLIS had not been applied.
not distort or threaten to distort competition between
Member States. In line with the logic of the Spanish
tax system, they consider that the contested measure
should be considered a general measure applying indis
criminately to any type of company and to any activity.
(52) Fourthly, the Commission incorrectly refers to
Articles 11(4) and 89(3) TRLIS to establish the
existence of an advantage. In the opening Decision, the
Commission states that neither a business combination
nor takeover of the target company is necessary to
A.1.1. T h e c o n t e s t e d m e a s u r e d o e s n o t
benefit from Article 12(5) TRLIS. This statement
c o n f e r a n e c o n o m i c a d v a n t a g e
reflects a misunderstanding of the Spanish tax system
since these two articles do not prevent a group of
(48) Contrary
to
the
Commission’s
position
as
expressed
in
companies that jointly acquires control of a target
the opening Decision, Article 12(5) TRLIS does not
company from deducting a corresponding fraction of
constitute an exception to the Spanish corporate tax
the goodwill resulting from the operation. Hence, appli
system since (i) the Spanish accounting system is not
cation of these two articles does not require individual
an appropriate point of reference on which to base the
control of the target company in order to benefit from
existence of an exception to the tax system; and (ii) even
the contested measure. In this context, it would be inap
if it were, the characterisation of financial goodwill as a
propriate to consider that Article 12(5) TRLIS offers
depreciable asset over time has historically been a general
more favourable treatment than Articles 11(4) or 89(3)
feature of the Spanish accounting and corporate tax
TRLIS as regards the controlling position of the bene
system.
ficiaries. Finally, it should be noted that the 5 % share
holding criterion is consistent with the conditions laid
down in Article 89(3) TRLIS and also with Commission
guidelines and practice ( 21 ).
(49) Firstly, because of the lack of harmonisation of
accounting rules, the accounting result cannot serve as
a reference point for establishing the exceptional nature
(53) The
Spanish
authorities
point
out
that
the
Commission
of the contested measure. Indeed, in Spain, the tax base is
also incorrectly refers to Article 12(3) TRLIS to establish
calculated on the basis of the accounting result, adjusted
an alleged advantage under Article 12(5) TRLIS:
according to tax rules. Therefore, in the case at hand,
Article 12(3) applies to situations of depreciation in
accounting considerations cannot, in Spain’s view, serve
case of an objective loss recorded by the target
as a reference point for a tax measure.
company, whereas Article 12(5) TRLIS complements
this provision and reflects the loss of value attributable
to depreciation of the financial goodwill.
( 19 ) The Spanish authorities referred to Article 194 of Royal Decree
1564/1989 of 22.12.1989.
( 20 ) The Spanish authorities referred to ICAC (Institute of Accounting
and Auditing) Resolution No 3, BOICAC, 27.11.1996.
(50) Secondly,
it
is
incorrect
to
consider
goodwill
amorti
( 21 ) See Commission Decision of 22.9.2004 in case N 354/04, Irish
sation not to be within the logic of the Spanish
Holding Company Regime (OJ C 131, 28.5.2005, p. 10).

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L 135/8
EN
Official Journal of the European Union
21.5.2011
(54) Fifthly,
the
Commission
Notice
on
the
application
of
the
(57) Secondly,
according
to
the
Spanish
authorities
and
the
State aid rules to measures relating to direct business
30 interested parties, in its opening Decision the
taxation ( 22 ) (hereinafter ‘the Commission Notice’)
Commission mixed up the concept of selectivity and
explicitly states that amortisation rules do not imply
the objective conditions of the contested measure
State aid. Since the current amortisation coefficient for
which refer only to certain transactions (i.e. shareholding
financial goodwill over a minimum of 20 years is the
in a foreign target company). Indeed, the Commission
same as the amortisation coefficient for goodwill, the rule
alleges that Article 12(5) TRLIS is selective since the
does not constitute an exception to the general tax
same treatment is not granted to comparable investments
system.
in Spanish companies. However, the Commission fails to
recognise that the selectivity criterion is not determined
by the fact that the beneficiary of the contested measure
is a group of companies or a multinational company that
has a share in a target company. The fact that a measure
benefits only companies that comply with the objective
criterion laid down in the contested measure does not in
itself make it selective. The selectivity criterion implies
that subjective restrictions should be imposed on the
beneficiary of the contested measure. The selectivity
(55) Finally,
the
30
interested
parties
also
consider
that
if
the
criterion created for this procedure is inconsistent with
contested measure constituted an advantage, the ultimate
previous Commission practice and too vague and broad.
beneficiaries would be the target company’s shareholders
Taking this concept further would lead to the erroneous
since they would receive the price paid by the acquiring
conclusion that most tax-deductible expenses fall within
company benefiting from the contested measure.
the scope of Article 107(1) TFEU.
(58) The
Spanish
authorities
add
that
the
fact
of
limiting
the
A.1.2. T h e c o n t e s t e d m e a s u r e d o e s n o t
amortisation of financial goodwill to that resulting from
f a v o u r c e r t a i n u n d e r t a k i n g s o r t h e
the acquisition of a significant shareholding in a target
p r o d u c t i o n o f c e r t a i n g o o d s
company is not sufficient to remove the general character
of the contested measure, since it applies indiscriminately
(56) Firstly,
Spain
maintains
that
Article
12(5)
TRLIS
is
a
to any company that is tax resident in Spain with no
general measure since it is open to any Spanish
further requirements. In line with the case law of the
company whatever its activity, sector, size, form or
Court of Justice ( 26 ), a measure which benefits all under
other characteristics. The only condition for the
takings in national territory, without distinction, cannot
taxpayer to be able to benefit from the contested
therefore constitute State aid.
measure is to be tax resident in Spain. The fact that
not all taxpayers benefit from the measure in question
does not make it selective. Therefore, Article 12(5) TRLIS
is neither de facto nor de jure selective within the
meaning of Article 107(1) TFEU. Accordingly, by letter
dated 14 July 2008 ( 23 ), the Spanish authorities provided
data extracted from the 2006 Spanish tax returns which
show that all types of companies (SMEs and large under
takings), as well as companies active in different
economic sectors, had benefited from the contested
(59) Thirdly,
as
regards
the
5
%
threshold,
this
level
does
not
measure. The Spanish authorities also stress that in a
set a minimum amount to be invested and therefore the
recent judgment (
contested measure does not benefit only large under

24 ), the General Court indicated that a
limited number of beneficiaries is not sufficient in itself
takings. As for the fact that there is no requirement for
to establish the selectivity of the measure since that
the seller to pay for capital gains in order for the
group can actually represent all of the undertakings in
contested measure to apply, the Spanish authorities
a particular legal and factual situation. In particular, the
consider this to be irrelevant since control of income
Spanish authorities stress that the contested measure
received abroad by a seller who is not liable for tax in
bears similarities with a recent case
(
Spain lies outside their field of competence. Lastly,

25 ) that the
Commission considered to be a general measure and
limiting the scope of a measure — for fiscal technical
they therefore request the same treatment.
reasons — to shareholding acquisitions in target

companies is consistent with the situation resulting
from the implementation of various Community
( 22 ) OJ C 384, 10.12.1998, p. 3.
Directives.
( 23 ) See paragraph 12.
( 24 ) See Case T-233/04 Netherlands v Commission [2008] ECR II-591.
( 25 ) See Commission Decision of 13.2.2008 in case N 480/07, Reduction
( 26 ) See judgment in Case C-143/99 Adria-Wien Pipeline and Wieters
in revenue from certain intangible assets (OJ C 80, 1.4.2008, p. 1).
dorfer & Peggauer Zementwerke [2001] ECR I-8365.

---

EN
21.5.2011 Official
Journal
of
the
European
Union L
135/9
(60) Fourthly, the introduction of the contested measure is in
(62) To conclude, the contested measure is designed to
any case justified by the principle of neutrality, which
remove the tax barriers that the Spanish tax system
underlies all Spanish tax legislation. This principle
generates in investment decisions by penalising share
implies that the tax treatment of an investment should
acquisitions in foreign companies as opposed to
be neutral irrespective of the instruments used, whether
acquisitions in domestic companies. The contested
transfer of assets, business combination or share
measure guarantees the same tax treatment for both
acquisition. Therefore, the tax amortisation of an
types of acquisition (direct acquisitions of assets and
investment should be identical whatever the instrument
indirect acquisitions by purchasing shareholdings):
used to carry out the acquisition in question. The final
goodwill arising from both of them (direct goodwill
aim of the contested measure, in this broader perspective,
and financial goodwill) can thus be identified in order
is to ensure the free movement of capital by avoiding
to promote the integration of the different markets, until
discriminatory tax treatment between transactions with
factual and legal barriers to cross-border business combi
target companies and purely domestic transactions.
nations have been removed. The Spanish authorities thus
Given that acquisitions of significant shareholdings in
ensure that taxpayers can opt to invest at local or cross-
resident companies could lead to a business combination
border level without being affected by these barriers.
of the acquiring and the acquired companies with no
Article 12(5) TRLIS basically restores fair conditions of
legal or fiscal barriers, the goodwill that would ensue
competition by eliminating the adverse impacts of the
for tax purposes as a result of the combination could
barriers.
be amortised ( 27 ). However, goodwill of cross-border
operations cannot arise because harmonisation at
Community level is not complete or — even worse —
because there is no harmonisation outside the European
Union.
A.1.3. T h e
c o n t e s t e d
m e a s u r e
n e i t h e r
d i s t o r t s c o m p e t i t i o n n o r a f f e c t s
U n i o n t r a d e
(63) The
Spanish
authorities
state
that
the
Commission
has
(61) Moreover, in the course of the investigation, the Spanish
not established, to the requisite legal standard, that
authorities and some of the 30 interested parties
Article 12(5) TRLIS restricts competition, as (i) the
provided a very detailed description of the legal
alleged ‘market for the acquisition of shares in
obstacles that existed in the legislation of 15 third
companies’ does not constitute a relevant market for
countries. The technical information contained in the
the purposes of competition law; and (ii) even if this
submissions presented by the Spanish authorities and
were the case, the amortisation of financial goodwill
the 30 interested parties are summarised in Annexes II
does not in itself affect the competitive position of
and III to this Decision (hereinafter ‘the reports’). These
Spanish undertakings.
descriptions have to be read more broadly in the context
of the following statement by the Spanish authorities ( 28 ):
‘the Spanish tax system thus provides for different tax
schemes, as in the case of shareholding acquisitions in
foreign companies compared with acquisitions in Spanish
companies (impossible to undertake merger operations,
risk assumption, etc.), in order to achieve the tax
(64) First, the Commission qualified the contested measure as
neutrality sought by the Spanish domestic legislation
an anti-competitive advantage on the grounds that
and EU law itself and also in order to ensure that the
Article 12(5) allows Spanish taxpayers to obtain a
Spanish tax system is consistent and efficient’. According
premium for the acquisition of significant shareholdings
to those authorities and the 30 interested parties, the
in a target company. However, the Commission did not
barriers described in the reports make business combi
carry out any benchmarking study on the economic
nations between companies from different Member States
circumstances of Spanish and international companies.
impossible. Therefore, the aim of the contested measure
is to remove the negative impact of these barriers, for
whose existence Spain is not answerable. Consequently,
limiting the scope of the contested measure to cross-
border acquisitions is necessary to enforce the neutrality
principle. In this way, still according to the Spanish
authorities, the Spanish tax system treats differently
taxpayers who are in different situations (
(65) Second, since the contested measure is open to any

29 ), thereby
ensuring that the Spanish tax system is neutral as
Spanish company with no restrictions, it cannot distort
required by the Spanish tax system itself and by the
competition. Indeed, any company in the same situation
TFEU.
as a beneficiary of the contested measure can benefit
from the measure, thus reducing its tax burden, which
cancels any competitive edge that might derive from it.
( 27 ) In application of Article 89(3) TRLIS.
In addition, a lower rate of taxation in a Member State
( 28 ) See the letter of 5 December 2007 addressed by the Spanish
that can increase the competitive edge of local companies
authorities to the Commission, p. 35, mentioned in paragraph 7.
( 29 ) As stated on p. 8 of the Spanish authorities’ letter of 30 June 2008
should not come under the State aid rules as long as it is
— see paragraph 9.
of a general nature.

---

L 135/10
EN
Official Journal of the European Union
21.5.2011
(66) Finally,
the
Commission
has
already
examined,
in
the
(71) Therefore, for the Spanish authorities,
Article 12(5)
light of the Merger Regulation ( 30 ), many Spanish cross-
TRLIS is compatible with the internal market since, in
border operations that could have benefited from the
the absence of European tax harmonisation, it achieves
contested measure. Yet the Commission did not raise
the objective of breaking down barriers to cross-border
any concerns about potential distortions of competition
investment in a proportionate manner. The contested
in any of these cases.
measure is effectively aimed at removing the adverse
impact of obstacles to cross-border business combi
nations and aligning the tax treatment of cross-border
and local business combinations in order to ensure that
the decisions taken as regards such operations are based
not on tax considerations but exclusively on economic
(67) The
Commission’s
allegations
are
not
only
far
removed
considerations.
from reality but also out of touch with the investment
situation of Spanish companies. The contested measure
neither distorts competition nor adversely affects intra-
EU trading conditions to an extent contrary to the
common interest.
A.3 Legitimate expectation and legal certainty
(72) Finally, and in the event that the Commission declares
that Article 12(5) TRLIS constitutes State aid incom
patible with the internal market, the Commission must
acknowledge the existence of certain circumstances that
(68) In a non-harmonised market, as a result of competition
justify the non-recovery of the alleged State aid received
between tax systems, identical operations have a different
pursuant to Article 12(5) TRLIS. The beneficiaries should
fiscal impact depending on where traders are resident.
have the right to complete the exceptional amortisation
This situation distorts competition even if the national
of the financial goodwill corresponding to acquisitions
measures at stake are general measures. In other words,
made before the date of publication of the final decision.
this distortion is not the result of State aid but of a lack
of harmonisation. If the Commission’s reasoning were
followed through, it would have to open formal investi
gations into hundreds of national measures, which would
(73) Firstly,
the Commission seems to recognise, in the
create a situation of legal uncertainty that is highly detri
opening Decision, the probable existence of legitimate
mental to foreign investment.
expectations. Therefore, in line with the case law of the
General Court ( 32 ), this statement constitutes a clear indi
cation of the existence of legitimate expectations. Since
the opening Decision does not prejudge the outcome of
the formal investigation, legitimate expectations should
A.2 Compatibility
be recognised for all the operations that took place
before the date of publication of the final decision.
(69) Even
if
the
Commission
considers
that
Article
12(5)
TRLIS constitutes State aid within the meaning of
Article 107(1) TFEU, this provision is compatible with
Article 107(3) TFEU since it contributes to the Union
(74) Secondly, in its answers to written questions from
interest of promoting the integration of international
MEPs (
companies.

33 ), the Commission stated that Article 12(5)

TRLIS does not constitute State aid. This statement
constitutes a clear position from the Commission
which offers obvious legitimate expectations to the
Spanish authorities and the beneficiaries of the
contested measure.
(70) As
stated
in
the
State
Aid
Action
Plan
( 31 ), a measure can
be considered compatible if it addresses a market failure,
if it fulfils clearly defined objectives of common interest
and if it does not distort intra-EU competition and trade
(75) Thirdly,
in
line
with
the
conclusion
reached
by
the
to an extent contrary to the common interest. In the case
Commission in similar cases ( 34 ), the Commission has
at hand, the market failure is the difficulty (or virtual
provided a series of indirect evidence that Article 12(5)
impossibility) of carrying out cross-border business
TRLIS does not constitute State aid. Taking into account
combinations. The effect of Article 12(5) TRLIS is to
these decisions, a prudent undertaking would not have
promote the creation of pan-European undertakings, by
been able to predict that the Commission could take an
putting domestic and cross-border acquisitions on the
opposite position.
same footing.
( 32 ) Judgment in Case T-348/03 Koninklijke Friesland Foods v Commission
( 30 ) See the Commission Decisions of 10.6.2005 on Cesky Telecom, of
[2007] ECR II-101.
10.1.2005 on O 2 , of 23.5.2006 on Quebec, GIC, BAA, of
( 33 ) Written questions E-4431/05 and E-4772/05.
15.9.2004 on Abbey National and of 26.3.2007 on Scottish
( 34 ) For example, the Commission Decision of 22.9.2004 in case
Power available at http://ec.europa.eu/competition/mergers/cases/
N 354/04, Irish Holding Company Regime (OJ C 131, 28.5.2005,
( 31 ) State Aid Action Plan — Less and better targeted state aid: a
p. 10), and the Commission Decision of 13.7.2006 in case
roadmap for state aid reform 2005-2009, COM/2005/107 final.
C 4/07 (ex N 465/06), Groepsrentebox (OJ C 66, 22.3.2007, p. 30).

---

EN
21.5.2011 Official
Journal
of
the
European
Union L
135/11
(76) Finally,
the
contested
measure
should
continue
to
apply
(80) From an economic point of view, the Spanish authorities
to all operations prior to the publication date of a
are not only providing an interest-free loan that will be
negative decision until amortisation of the financial
drawn over a period of 20 years (interest-free tax
goodwill is completed. The contested measure
deferral), but also effectively leaving the repayment date
corresponds to a right to deduct a given amount,
of the interest-free loan to the discretion of the borrower
determined at the time of the acquisition, whose
— if indeed the loan is repaid. If the investor does not
deduction is spread over the following 20 years.
transfer the significant shareholding, the effect is the
Moreover, because of the position taken by the
same as cancellation of the debt by the Spanish
Commission in similar cases
( 35 ), it is justified to
authorities. In this case, the measure turns into a
assume that the legitimate expectations should remain
permanent tax exemption.
until the date of publication of the final decision.
(81) One
of
the
two
parties
estimates
that,
as
a
result
of
the
B. Comments from the two parties
contested measure, Spanish acquirers, for instance in the
banking sector, are able to pay some 7 % more than they
(77) According to the two parties, Article 12(5) TRLIS
would otherwise be able to. However, it also recognises
constitutes State aid. They maintain that there are no
that as the offer price is a combination of various addi
legitimate expectations in the case at hand and
tional elements, the contested measure is not the only
therefore call on the Commission to order recovery of
factor, although probably one of the most decisive
any unlawful aid granted. Their arguments are
factors behind the aggressiveness of potential Spanish
summarised below.
bidders benefiting from the contested measure. This
party considers also that the measure provides a
definite advantage to Spanish bidders in international
auctions.
B.1. The contested measure constitutes State aid
B.1.1. T h e c o n t e s t e d m e a s u r e c o n f e r s a n
e c o n o m i c a d v a n t a g e
B.1.2. T h e
c o n t e s t e d
m e a s u r e
f a v o u r s
(78) According
to
the
two
parties,
Article
12(5)
TRLIS
is
c e r t a i n
u n d e r t a k i n g s
o r
t h e
exceptional in nature because the Spanish tax system,
p r o d u c t i o n o f c e r t a i n g o o d s
with the exception of this provision, does not allow
any amortisation of financial goodwill but only a
(82) There
is
a
clear
parallel
between
the
case
at
hand
and
the
deduction in the event of an impairment test. Until the
circumstances which led to the Court of Justice judgment
introduction of Article 12(5) TRLIS the Spanish
of 15 July 2004 ( 36 ). Despite the arguments put forward
corporate tax legislation did not allow the amortisation
by the Spanish authorities that the contested measure in
of shareholdings regardless of whether or not there
the latter case is not selective because Article 37 TRLIS
had actually been an impairment. They stress that
applies to all Spanish undertakings that invest inter
Article 12(5) TRLIS is probably unique in the European
nationally, the Court concluded that the measure
context, as no other Member State has a similar system
constituted State aid since it was limited to one
for cross-border transactions not involving the
category of undertakings, namely undertakings making
acquisition of controlling shares.
certain international investments. This same reasoning
can be applied to Article 12(5) TRLIS. The selectivity
of Article 12(5) TRLIS is therefore due to the fact that
only companies acquiring shareholdings in foreign
companies are eligible for this provision.
(79) Under
the
Spanish
tax
system,
goodwill
can
be
amortised
only if there is a business combination — the sole
exception is the contested measure, which allows amor
tisation in an exceptional case: if a minority shareholding
is acquired in a target company. This diverges from the
(83) Furthermore,
only enterprises of a certain size and
general tax system since amortisation is possible not only
financial strength with multinational operations can
without there being a business combination but also in
benefit from Article 12(5) TRLIS. Although the
cases where the purchaser does not even acquire control
company’s balance sheet discloses the book values of
of the foreign target company. Article 12(5) TRLIS thus
assets, it is unlikely that it also reflects the tacit market
confers a benefit on certain Spanish companies vis-à-vis
values of assets. Therefore, in practice, only operators
(i) other Spanish companies that operate only at national
with a controlling interest in target companies have
level and (ii) other EU operators that compete inter
sufficient access to a company’s records to ascertain the
nationally with the Spanish beneficiaries of the
tacit market value of the company’s assets. Consequently,
contested measure.
the 5 % threshold favours companies that perform multi
national operations.
( 35 ) See the Commission Decision 2001/168/ECSC of 31 October 2000
on Spain’s corporation tax law (OJ L 60, 1.3.2001, p. 57).
( 36 ) Case C-501/00 Spain v Commission [2004] ECR I-6717.

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L 135/12
EN
Official Journal of the European Union
21.5.2011
(84) Moreover,
only
a
Spanish
operator
with
existing
business
(88) Takeover
bids usually
presuppose
the payment of a
in Spain has a Spanish tax base and can benefit from the
premium over the share price of the target company
depreciation. Therefore, only companies resident in Spain
that would almost always result in financial goodwill.
with a significant Spanish tax base can in practice benefit
On several occasions, the financial press has reported
from it, since the potential benefit is linked to the size of
on large acquisitions by Spanish companies and the
the Spanish operation rather than of the acquisition.
respective tax benefits accruing from the Spanish tax
Although Article 12(5) TRLIS is drafted to apply to all
rules on the amortisation of financial goodwill. For one
operators established in Spain, in practice only a limited
of those acquisitions by an investment bank, the tax
and identifiable number of companies with a Spanish tax
benefit resulting from Article 12(5) TRLIS was
base, which make foreign acquisitions in the relevant tax
estimated to be EUR 1,7 billion, or 6,5 % of the offer
year and have a sizeable tax base against which to offset
price. Another report indicated that the Spanish acquirer
the financial goodwill deduction, can benefit from the
had been able to bid about 15 % more than non-Spanish
application of the measure on an annual basis. As a
competitors.
result, the contested measure in fact gives a different
tax treatment even to Spanish operators in the same
position of making acquisitions abroad.
(89) The contested measure also seems to favour certain
export activities (export aid for foreign share acquisitions)
of Spanish companies, which is at odds with established
Commission policy ( 38 ) in this area.
(85) The
two
parties
consider
that
they
have
not
been
able
to
identify any objective or horizontal criterion or condition
that justifies the contested measure. On the contrary,
they are of the view that the basic intention of the
measure is to give a benefit to certain Spanish operators.
In addition, if the contested measure is inherent in the
Spanish tax system, foreign shareholdings acquired prior
B.1.4. T h e
c o n t e s t e d
m e a s u r e
i m p a c t s
to that date should also qualify for the measure, which is
s t a t e r e s o u r c e s
not the case since the tax relief is granted only for
shareholdings acquired after 1 January 2002.
(90) The contested measure is of benefit to undertakings that
meet certain requirements and enables them to reduce
their tax base and thereby the amount of tax that would
normally be due in a given year if this provision did not
exist. It therefore provides the beneficiary with a financial
advantage, the cost of which is directly borne by the
budget of the Member State concerned.
(86) Accordingly,
and
in
the
light
of
Commission
policy
( 37 ),
the contested measure must be considered selective.
VI. REACTION FROM SPAIN TO THE COMMENTS FROM
THIRD PARTIES
(91) The
Spanish
authorities
point
out
that
the
vast
majority
of third parties’ comments support their point of view.
Only two parties consider that the contested measure
B.1.3. T h e c o n t e s t e d m e a s u r e d i s t o r t s
constitutes State aid, whereas all the others conclude
c o m p e t i t i o n a n d a f f e c t s E U t r a d e
that Article 12(5) TRLIS does not constitute State aid
within the meaning of Article 107(1) TFEU. Otherwise,
(87) The contested measure is clearly discriminatory as it gives
fewer economic operators would have submitted
Spanish operators a clear fiscal and monetary benefit that
comments. In addition, the wide range of activities and
foreign operators are not able to enjoy. In a situation of
size of the interested third parties demonstrates the
an auction or other competitive procedure for the
general nature of the contested measure.
acquisition of a company, such an advantage makes a
significant difference.
( 38 ) See Commission Decision 82/364/EEC of 17 May 1982 concerning
the subsidising of interest rates on credits for exports from France
( 37 ) See Section II.1.b) et seq. of the Commission Report on the appli
to Greece after the accession of that country to the European
cation of the state aid rules to measures relating to direct business
Economic Community (OJ L 159, 10.6.1982, p. 44), in particular
taxation, available at http://ec.europa.eu/competition/state_aid/
Part IV, which refers to Joined Cases 6/69 and 11/69 Commission v
studies_reports/rapportaidesfiscales_en.pdf
France.

---

EN
21.5.2011 Official
Journal
of
the
European
Union L
135/13
(92) Regarding the exceptional nature of the contested
addition, the contested measure has not been shown to
measure, the Spanish authorities reject this qualification
affect trade between Member States. Moreover, the conse
by recalling the common feature of goodwill and
quence of amortising financial goodwill is not necessarily
financial goodwill amortisation according to Spanish
to increase the price offered by a competitor.
accounting rules ( 39 ). In addition, the deduction of
goodwill amortisation constitutes the general rule of
the Spanish corporate tax system in accordance with
the provisions laid down in Articles 11(4) and 89(3)
TRLIS. Article 12(5) TRLIS follows the same logic. It is
incorrect to present Article 12(3) TRLIS as the general
rule for amortisation of financial goodwill since this
(95) As regards the compatibility of the contested measure
article refers to the deduction of shareholdings in non-
with the internal market, the Spanish authorities
listed entities. This provision is related to the depreciation
consider Article 12(5) TRLIS to be appropriate and
of the theoretical accounting value and not to financial
proportionate to address a market failure by establishing
goodwill. Article 12(3) and 12(5) TRLIS are two comple
a neutral tax system for domestic and cross-border
mentary general rules: the first refers to the depreciation
operations that fosters the development of pan-
attributed to the losses generated by the target company,
European companies.
whereas the second refers to the deduction only of the
part of the depreciation attributable to the depreciation
of financial goodwill. Finally, the fact that no other
Member State has a measure similar to the contested
measure is irrelevant since tax systems are not
harmonised within the European Union.
VII. ASSESSMENT OF THE SCHEME
(96) In
order
to
ascertain
whether
a
measure
constitutes
aid,
the Commission has to assess whether the contested
measure fulfils the conditions of Article 107(1) TFUE.
This provision states that ‘Save as otherwise provided
(93) Regarding the selective nature of the contested measure,
in the Treaties, any aid granted by Member State or
the parallels drawn with the Court of Justice judgment of
through State resources in any form whatsoever which
15 July 2004 ( 40 ) are incorrect since in that case the
distorts or threatens to distort competition by favouring
Commission had clearly defined the profile of the bene
certain undertakings or the production of certain goods
ficiary, whereas in the present case this could not be
shall, in so far as it affects trade between Member States,
done. Indeed, Article 12(5) TRLIS does not require any
be incompatible with the internal market’. In the light of
link between the shareholding acquisition and the export
this provision, the Commission will assess hereunder
of goods and services. Therefore the contested measure
whether the contested measure constitutes State aid.
does not have the effect of increasing exports of Spanish
goods or services. The fact that this non-selective
measure is not available for domestic operations does
not affect its general nature. In fact, the final objective
of the contested measure is the same as that of the
Cross-border Tax Directive, which is to ensure that
investment decisions are based on economic rather
A. Selectivity and advantage inherent in the measure
than tax considerations. Therefore, since it is possible
(97) To
be
considered
State
aid,
a
measure
must
be
specific
or
to carry out business combinations with domestic
selective in the sense that it favours only certain under
acquisitions and not with cross-border acquisitions,
takings or the production of certain goods.
treating domestic operations and cross-border operations
differently is not only legally justified but also necessary
in order to guarantee the neutrality of the tax system.
(98) The Commission Notice
( 41 ) states that ‘The main
criterion in applying Article 92(1) (now Article 107(1)
(94) Regarding
the
alleged
distorting
features
of
the
contested
TFEU) to a tax measure is therefore that the measure
measure, the Spanish authorities point out that any tax
provides in favour of certain undertakings in the
relief that reduces the operating costs of a company
Member State an exception to the application of the
increases the competitive edge of the beneficiary.
tax system. The common system applicable should thus
However, this statement is irrelevant since the
first be determined. It must then be examined whether
contested measure is a general measure. The different
the exception to the system or differentiations within
tax rates applied across the Member States, which
that system are justified “by the nature or general
impact on the competitiveness of their resident
scheme” of the tax system, that is to say, whether they
companies, do not fall under the State aid rules. In
derive directly from the basic or guiding principles of the
tax system in the Member State concerned.’
( 39 ) See ICAC Resolution No 3 of November 1996, BOICAC 27.
( 40 ) See footnote 36.
( 41 ) See footnote 22.

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(99) According to the case law of the Court of Justice ( 42 ), ‘as
contested measure should be assessed in the light of the
regards the assessment of the condition of selectivity,
general provisions of the corporate tax system, and more
which is a constituent factor in the concept of State
precisely the rules on the tax treatment of financial
aid, it is clear from settled case law that Article 87(1)
goodwill (see paragraphs 48 to 69).
EC (now Article 107(1) TFEU) requires assessment of
whether, under a particular statutory scheme, a State
measure is such as to “favour certain undertakings or
the production of certain goods” in comparison with
other undertakings which are in a legal and factual
situation that is comparable in the light of the
objective pursued by the measure in question’ ( 43 ).
(103) The Commission has also analysed whether the factual
hypothesis used as a basis by the Spanish authorities is
sound and whether there are barriers in the legislations
of third countries. However, it should be pointed out that
this exercise cannot constitute a recognition that such
barriers could justify a different tax treatment in the
present case. Moreover, the purpose of the present
Decision is not to set out the conditions which would
(100) The Court has also held on numerous occasions that
have allowed the Member State concerned to avoid the
Article 107(1) TFEU does not establish a distinction
classification of the contested measure as State aid.
between the causes or the objectives of state measures,
but rather defines them in relation to their effects ( 44 ). In
particular, tax measures which do not constitute an adap
tation of the general system to particular characteristics
of certain undertakings, but have been conceived as a
means of improving their competitiveness, fall within
the scope of Article 107(1) TFEU ( 45 ).
(104) Even if an alternative reference system inspired by the
one suggested by the Spanish authorities were chosen,
the Commission concludes that the contested measure
would still constitute a selective advantage, essentially
due to the absence of different factual and legal
conditions required for the different scenarios to benefit
from the provisions on the goodwill or financial goodwill
on foreign transactions. More importantly still, under the
(101) The concept of State aid does not, however, apply to
contested measure the financial goodwill can be
state measures which differentiate between undertakings
recognised separately and can also be amortised if the
where that differentiation arises from the nature or the
beneficiary acquires a minority shareholding of 5 %. This
overall structure of the system of which they form part.
level is well below that needed to apply the general rules
As explained in the Commission Notice ( 46 ), ‘some
on amortisation of goodwill ( 47 ). The contested measure
conditions may be justified by objective differences
is therefore an exception to the reference system,
between taxpayers’.
whatever its definition.
(105) In addition to this, the Commission notes other
(102) As explained in more detail in the following section, the
differences as regards the implementing conditions
Commission considers that the contested measure is
applying to the contested measure and the provisions
selective in that it only favours certain groups of under
of the reference system. Indeed, under the contested
takings that carry out certain investments abroad and
measure, shareholding acquisitions made before
that this specific character is not justified by the nature
1 January 2002 are not taken into account for the calcu
of the scheme. The Commission considers that the
lation of the base to be amortised. By contrast, under a
business combination scenario, such a cut-off date does
( 42 ) See judgments in Cases C-308/01 GIL Insurance [2004] ECR I-4777,
not exist when calculating the goodwill and the taxpayer
paragraph 68; C-172/03 Heiser [2005] ECR I-1627, paragraph 40;
has to prove that the combination is made for valid
and C-88/03 Portugal v Commission [2006] ECR I-7115,
economic reasons to avoid combinations being aimed
paragraph 54.
at purely obtaining tax benefits
( 48 ), whereas the
( 43 ) See judgment in Case C-88/03 Portugal v Commission [2006] ECR
contested measure only provides tax benefits. The
I-7115, paragraph 54.
( 44 ) See, for instance, judgments in Cases C-56/93 Belgium v Commission
Spanish authorities have been unable to provide
[1996] ECR I-723, paragraph 79; C-241/94 France v Commission
convincing arguments to justify these differences, and
[1996] ECR I-4551, paragraph 20; C-75/97 Belgium v Commission
thus the measure cannot be considered to be justified
[1999] ECR I-3671, paragraph 25; and C-409/00 Spain v
by the logic of the Spanish tax system.
Commission [2003] ECR I-1487, paragraph 46.
( 45 ) See, for instance, judgment in Case C-66/02 Italy v Commission
[2005] ECR I-10901, paragraph 101.
( 47 ) Article 89(3) TRLIS, see paragraph 31.
( 46 ) See footnote 22.
( 48 ) See Article 96(2) TRLIS.

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EN
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European
Union L
135/15
(106) Hence, the contested measure is too imprecise and indis
(108) The Commission’s reasoning, summarised above, is
criminate since it does not set any conditions, such as the
developed in the following paragraphs.
existence of specific, legally circumscribed situations
which would justify different tax treatment.
Consequently, situations which have not been demon
strated to be sufficiently different to justify a selective
derogation from general goodwill rules end up benefiting
from the contested measure. The Commission therefore
A.1. Tax treatment of financial goodwill under the Spanish
considers that the contested measure concerns the tax
tax system with respect to non-EU acquisitions
deduction of specific types of costs and covers a broad
category of transactions in a discriminatory manner,
A.1.1. R e f e r e n c e s y s t e m
which cannot be justified by objective differences
between taxpayers.
(109) In the opening Decision as well as in the previous
Decision, the Commission considered that the appro
priate reference system is the Spanish corporate tax
system and, more precisely, the rules on the tax
treatment of financial goodwill set out in the Spanish
tax system. This approach is in line with previous
Commission practice and the case law of the European
Courts, which consider the ordinary corporate tax system
to be the reference system ( 51 ). This approach is main
tained in the present Decision.
(107) Moreover, in line with the case law of the Court of
Justice ( 49 ), the Commission considers that it is not
necessary, in order to arrive at a conclusion regarding
the State aid qualification of a scheme, to demonstrate
that all individual aid granted under that scheme qualifies
(110) The Spanish authorities state that, in general, the
as State aid within the meaning of Article 107(1) TFEU.
constraints on cross-border business combinations place
For this purpose, it is sufficient that the implementation
taxpayers buying shareholdings in domestic companies in
of the scheme under review leads to situations which
a different legal and factual situation from those buying
qualify as aid to be able to conclude that the scheme
shareholdings in non-resident companies, and in
contains aid elements within the meaning of
particular in companies located in non-EU countries.
Article 107(1) TFEU. Hence, reviewing the legislation of
The Spanish authorities have explained that the
all possible non-EU countries for which the Commission
objective of the contested measure is to avoid a
investigation procedure is still open is unnecessary in the
difference of tax treatment between, on the one hand,
context of this Decision. Therefore, as indicated already
an acquisition followed by a business combination for
in paragraphs 115 et seq. of the previous Decision ( 50 ),
valuable consideration and, on the other hand, a share
the Commission has verified — on the basis of
acquisition without a business combination. On this
methodology explained in detail below — whether
basis, the scope of the contested scheme would be
some of the individual applications of the contested aid
limited to the acquisition of significant shareholdings in
scheme in non-EU transactions involve State aid. This
a company not resident in Spain because some obstacles
analysis focused on those non-EU countries with which
would make it more difficult to perform a cross-border
Spain maintains close economic relations and which
business combination compared with a local one ( 52 ). As
were therefore selected according to their importance in
a consequence of the existence of these obstacles,
terms of foreign direct investment (FDI) between
Spanish taxpayers investing abroad would be placed,
1 January 2002 and 1 June 2009. Of these non-EU
legally and factually, in a different situation from those
countries, the Commission focused its analysis on the
investing in Spain. In this respect, the Spanish authorities
countries likely to yield a greater number of individual
state that ( 53 ): ‘In summary, the mere differential nature
applications of the contested measure: United States of
of certain tax measures does not necessarily imply that
America (EUR 35 billion FDI), Mexico (EUR 18 billion
they are State aid, since these measures also need to be
FDI), Argentina (EUR15 billion FDI) and Brazil (EUR 13
examined to see whether they are necessary or functional
billion FDI). According to the information submitted by
as regards the efficiency of the tax system, as stated in
the Spanish authorities in the course of the procedure, it
the Commission Notice. Hence the Spanish tax system
would appear that, of the 15 non-EU countries for which
envisages different tax schemes for objectively different
the Spanish authorities presented information, trans
situations, as is the case for acquisitions of shareholdings
actions took place not only in the above-mentioned
in foreign companies as against acquisitions in Spanish
four countries but also in the Republic of Colombia,
companies (impossible to perform merger operations,
the Republic of Peru and the Republic of Ecuador. The
risk management, etc.) with a view to achieving the tax
Commission has therefore extended its review to these
three countries also.
( 51 ) See, inter alia, judgment of the Court of First Instance in Case
T-308/00 Salzgitter v Commission [2004] ECR II-1933,
( 49 ) See judgment of the Court of First Instance in Joined Cases
paragraph 82.
T-227/01 to T-229/01, T-265/01, T-266/01 and T-270/01 Dipu
( 52 ) See the e-mail dated 16 June 2009 from the Spanish authorities
tación Foral de lava and Others v Commission [2009] ECR II-3029,
mentioned in paragraph 13.
paragraphs 381 et seq.
( 53 ) See in particular page 6 of the letter dated 22 April 2009 (A-9531)
( 50 ) See paragraph 14.
from the Spanish authorities mentioned in paragraph 9.

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L 135/16
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Official Journal of the European Union
21.5.2011
neutrality imposed by Spanish domestic legislation and
control over a target company in that country cannot
by Community law itself, and ensuring that the logic of
be regarded as a relevant explicit legal barrier in the
the Spanish tax system is consistent and efficient’.
sense alleged by the Spanish authorities: as a result of
such provisions, Spanish companies/taxpayers can
never fulfil the condition of effective influence since
they will always be minority shareholders of the
target company. Therefore, they can never have the
(111) Providing specific tax treatment for cross-border share
necessary effective capacity to impose a business
holding acquisitions would, according to these
combination. The Commission would like to point
authorities, be necessary to ensure the neutrality of the
out that the condition of control was assessed at
Spanish tax system and to prevent more favourable
the level of the beneficiary of the measure (and not
treatment for domestic shareholding acquisitions.
of the group to which it may belong) in line with the
Therefore, the Spanish authorities and the 30 interested
Spanish tax system. Following the same line of
parties consider that the correct reference framework for
reasoning, the Commission considers that an
the assessment of the contested measure would be the
explicit prohibition on non-resident entities directly
tax treatment of goodwill for foreign acquisitions.
owning specific assets (for instance, property on the
coast) cannot constitute an explicit legal barrier in the
context of this exercise.
(112) In the previous Decision, the Commission maintained the
procedure in order to allow the Spanish authorities to
provide new information as regards the existence of
explicit legal obstacles to cross-border business combi
The Commission considers that a mere administrative
nations in non-EU countries.
burden or formality ( 56 ) required of non-resident
companies by non-EU countries cannot be regarded
as an explicit legal barrier simply because it generates
additional costs — which may be tax-deductible
under the Spanish tax system — but does not
(113) In this context, and essentially on the basis of the
make the business combination impossible,
elements contained in the reports, the Commission has
investigated the legislation of various non-EU countries
simply in order to check the Spanish authorities’ alle
gations about the existence of explicit legal obstacles to
cross-border combinations. This examination does not,
however, constitute recognition of the fact that such
— second, an allegation that there are no known
obstacles could justify a different reference system in
examples of cross-border business combinations
the present case. In the course of this examination, the
between Spanish companies and companies from
Commission checked mainly whether a Spanish parent
certain non-EU countries cannot constitute sufficient
company had the legal capacity to combine with a
evidence or demonstrate the existence of obstacles.
subsidiary resident in a non-EU country.
The elements taken into account by companies
when deciding to carry out a business combination
are diverse and not limited only to the capacity of the
companies concerned to combine their business
activities. This is clearly illustrated by the fact that
(114) The following premises underpin this investigation which
some of the 30 interested parties own numerous
was limited to examining the truth of the allegations
fully-controlled Spanish subsidiaries without having
made in the arguments:
combined their Spanish businesses, even though the
Spanish authorities recognise that there are no
obstacles to domestic business combinations.
Therefore, the Commission considers that, of the
elements in the reports, only explicit prohibitions of
— first, the Commission checked whether, as stated in
cross-border business combinations set out in the
the previous Decision ( 54 ), Spanish companies face an
laws of non-EU countries can be accepted. Indeed,
explicit legal barrier, attributable to a non-EU country
as already indicated in paragraph 93 of the
and not to Spain ( 55 ), that prevents them from
previous Decision, if unsubstantiated elements of a
converting a foreign subsidiary into a branch. Such
general nature were taken into account, this analysis
legal provisions can only constitute a barrier,
would risk becoming largely arbitrary.
however, if the company concerned would have
been able to exercise effective influence, most
(
notably by means of a majority shareholding, over

56 ) The Commission would underline that any technicalities necessary
to achieve a cross-border business combination, such as setting up
the target company to such an extent that it would
a permanent establishment in the country of residence of the target
be able to impose a merger if the obstacles were not
company prior to the combination or complying with certain
there. Hence, legal provisions in non-EU countries
formalities involving the central bank of the non-EU country,
which prevent a Spanish taxpayer from acquiring
constitute administrative formalities. The Commission also
considers that there are valid tax reasons for adopting rules
aimed at avoiding arrangements which do not reflect economic
( 54 ) See paragraphs 117 and 118 of the previous Decision.
reality or whose main reason is to achieve a tax reduction. Such
( 55 ) See paragraph 94 of the previous Decision.
rules also exist in the Spanish tax system.

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(115) The findings presented below are based on the
least the State of Delaware makes cross-border
information provided by the Spanish authorities in the
business combinations ( 63 ) explicitly feasible on
reports, the truthfulness and completeness of which have
condition that the inverse is permitted by the
been checked by the Commission in the light of the
legislation of the country where the foreign
methodological remarks set out above. On this basis,
company is resident. Therefore, if such a trans
the Commission considers that, contrary to the
action is not feasible between companies located
arguments of the Spanish authorities, it cannot be
respectively in Delaware and Spain, the
considered that all the laws of non-EU countries raise
Commission considers that the obstacles are
explicit legal obstacles to cross-border business combi
attributable to Spain, and therefore not relevant
nations. Therefore, similar to what was stated in
for the present assessment. This finding should
relation to intra-EU transactions in the previous
be looked at in the context of the importance of
Decision ( 57 ), the Commission cannot share the views
the State of Delaware for the location/incor
expressed by the Spanish authorities, supported by the
poration of companies in the USA ( 64 );
arguments of the 30 interested parties, as regards the
general existence of these alleged obstacles. The
Commission considers that outside the EU Member
States, and at least in the following relevant non-EU
(iv) fourth, specific tax provisions apply to domestic
countries, no explicit legal obstacles can be recognised,
business combinations in order to avoid unfa
as indicated below:
vourable taxation when carrying out restruc
turing operations. There is, to the Commission’s
knowledge, no explicit prohibition on applying
them to cross-border business combinations,
— United States of America:
even though the applicable administrative
formalities may differ;
(i) first of all, the Commission notes that, in a
(v) finally, the Commission did not find any case law
report presented by the Spanish authorities ( 58 ),
by the competent US courts that would
when assessing whether there are any precedents
contradict its conclusion regarding the absence
for cross-border business combinations, the
of explicit legal obstacles to cross-border
author states ‘Not found, but it is likely that
business combinations with a company resident
this event happened in Delaware’. In contra
in the United States.
diction with the Spanish authorities’ main
arguments, the conclusion in one of the
reports ( 59 ) regarding this country seems to be
that there is no general, explicit legal prohibition
— Mexico:
on cross-border business combinations;
(i) first of all, the Commission notes that
(ii) second, under the general rules of company
Article 8(3) of the tax convention ( 65 ) between
law ( 60 ) and tax law ( 61 ), there is no explicit
Spain and Mexico, signed on 6 October 1994
prohibition on business combinations with
and still in force, explicitly provides for cross-
foreign entities;
border business combination transactions. As a
consequence of this provision, such transactions
benefit from roll-over relief since unrealised
capital gains are not taxed. As far as the
(iii) third, specific company law provisions (
Commission can see, the purpose of this

62 ) apply
to domestic business combinations. There is, to
international tax convention is to remove the
the Commission’s knowledge, no explicit
possible exclusion ( 66 ) of cross-border business
prohibition on applying those provisions to
cross-border business combinations, even
( 63 ) See, inter alia, section 252(a) of the Delaware General Corporation
though the applicable administrative formalities
Law available at: http://delcode.delaware.gov/title8/c001/sc09/index.
may differ. The Commission points out that at
shtml
( 64 ) According to the official website of the State of Delaware, available
at http://www.corp.delaware.gov/aboutagency.shtml, ‘The State of
( 57 ) See in particular paragraphs 93 et seq.
Delaware is a leading domicile for U.S. and international
( 58 ) See page 19 of the KPMG report entitled ‘Analysis of the existence
corporations. More than 850 000 business entities have made
of specific legal and tax obstacles in cross-border mergers in a
Delaware their legal home. More than 50 % of all publicly-traded
number of jurisdictions’ — December 2009.
companies in the United States including 63 % of the Fortune 500
( 59 ) See the section regarding United States of America in Annex II to
have chosen Delaware as their legal home’.
this Decision, which contains a summary of the KPMG report.
( 65 ) Available at http://www.agenciatributaria.es/wps/portal/
( 60 ) See footnote 61.
Listado?channel=
( 61 ) See, inter alia, sections 351 et seq. of the Internal Revenue Code of
de40217740119010VgnVCM10000050f01e0a____&ver=L&site=
1986, as amended, section 7874 of the same code, and the
56d8237c0bc1ff00VgnVCM100000d7005a80____&idioma
Treasury Regulation of 23 January 2006 (T.D. 9242) available at
=es_ES&menu=1&img=8
http://www.law.cornell.edu/uscode/
( 66 ) See, inter alia, Article 14(b) of the tax code of the Mexican
( 62 ) See footnote 59, sections 361 et seq. and sections 367 et seq. of
Federation available at: http://info4.juridicas.unam.mx/ijure/fed/7/
the Internal Revenue Code http://www.law.cornell.edu/uscode/
18.htm?s=

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L 135/18
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Official Journal of the European Union
21.5.2011
combinations from the benefit of the specific tax
this is precisely the situation which arises from
rules applying to domestic business combi
the Brazilian legislation referred to in the two
nations;
reports;
(ii) second, under Mexican legislation (company law
(iv) finally, the Commission did not find any case law
and tax law), and taking into account the above
that would contradict its conclusion regarding
tax convention, there is no explicit legal
the absence of explicit legal obstacles to cross-
prohibition on business combinations with
border business combinations with a company
Spanish entities;
resident in Brazil.
— Argentina:
(iii) finally, the Commission did not find any case
law by the competent Mexican courts that
would clearly contradict its conclusion
(i) first of all, the Commission notes that Article 5
regarding the absence of explicit legal obstacles
of the tax convention (
to cross-border business combinations with a

71 ) between Spain and
Argentina, signed on 26 August 1994 and still
company resident in Mexico.
in force, explicitly provides for cross-border
business combinations. As a result of this
provision, cross-border restructuring operations
— Brazil:
cannot give rise to unfavourable taxation;
(ii) second, under the general rules of company
(i) first of all, the Commission notes that a
law ( 72 ) and tax law ( 73 ), there is no explicit
precedent of a cross-border business combination
legal prohibition on business combinations with
(not with Spain) was found by the Spanish
foreign entities although the applicable adminis
authorities ( 67 );
trative formalities may differ;
(ii) second, under the general rules of company law
(iii) third, the Commission did not find any case law
and tax law (
that would contradict its conclusion regarding

68 ), there is no explicit legal
prohibition on business combinations with
the absence of explicit legal obstacles to cross-
foreign entities, although administrative
border business combinations with a company
formalities may differ (
resident in Argentina. Moreover, the Commission

69 );
does not agree with the interpretation in the two
reports of the rulings ( 74 ) issued by the tax
administration in certain planned cross-border
(iii) third, some explicit legal restrictions apply to the
transactions. These rulings simply clarify the
performance of economic activities in certain
conditions of the Argentinian tax roll-over
sectors (
arrangements. They do not mention the

70 ) by entities controlled by foreign
companies. However, as stated above (see
existence of a general and explicit prohibition
paragraph 114), legal provisions in non-EU
on applying these arrangements to cross-border
countries preventing a Spanish taxpayer from
restructuring operations. Moreover, the interpre
taking control of a target company in that
tation given in the reports of these specific
country cannot be regarded as a relevant
rulings contradicts the general provision in the
explicit legal barrier in the sense alleged by the
above-mentioned tax convention ( 75 ) between the
Spanish authorities: as a result of this provision,
Kingdom of Spain and the Argentine Republic.
Spanish companies/taxpayers can never fulfil the
condition of effective influence since they will
( 71 ) Available at http://www.agenciatributaria.es/wps/portal/
always be a minority shareholder in the target
Listado?channel=
company. As far as the Commission can see,
de40217740119010VgnVCM10000050f01e0a____&ver=L&site=
56d8237c0bc1ff00VgnVCM100000d7005a80____&idioma
=es_ES&menu=1&img=8
( 67 ) See page 29 of the second report. In 2004, Labatt Brewing Canada
( 72 ) See, inter alia, Commercial Companies Law No 19 550, and Law
Holding Ltd, a beverage company with headquarters in the Bahamas
No 25 156, available at http://infoleg.mecon.gov.ar/
and Beverage Associates Holding Lts, also with headquarters in the
( 73 ) See, inter alia, Decree 649/97 (Law on Taxation of Earnings) and
Bahamas, were combined to form the Brazilian Companhia de
Decree 1344/98, available at http://infoleg.mecon.gov.ar/
Bebidas das Américas, with headquarters in So Paulo.
( 74 ) See the opinion of the AFIP No 37/1997 of 8 July 1997, No
( 68 ) See, inter alia, Law 10 460/02, Law 9 249/95, Law 6 404/76, and
6/1998 of 30 January 1998 available at http://biblioteca.afip.gob.
Law 9 249/95.
ar/.
( 69 ) See, inter alia, Decree-Law 2
627/40, Law 10
406/02, Law
( 75 ) Available at http://www.agenciatributaria.es/wps/portal/
4 132/62, Law 5 709/1, Law 6 634/79 and Federal Decree
Listado?channel=
74 965/74 available at http://www.jusbrasil.com.br/
de40217740119010VgnVCM10000050f01e0a____&ver=L&site=
( 70 ) See, inter alia, Law 9 472/97 and Decree 2 617/98, available at
56d8237c0bc1ff00VgnVCM100000d7005a80____&idioma
http://www.jusbrasil.com.br/
=es_ES&menu=1&img=8

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— Ecuador:
— Colombia:
(i) first of all, the Commission notes that, under the
(i) first of all, the Commission notes that the Super
general rules of company law and tax law, there
intendencia de Sociedades ( 81 ) explicitly confirms
is no explicit legal prohibition on business combi
that cross-border business combinations are
nations with foreign entities ( 76 );
feasible under Colombian legislation ( 82 );
(ii) Second, the Commission notes that a report
(ii) second, under the general rules of company law
presented by the Spanish authorities
(
and tax law ( 83 ), there is no explicit legal

77 )
recognises that a cross-border business combi
prohibition on business combinations with
nation is feasible provided that the Spanish
foreign entities even though the applicable
acquirer has set up a branch in Ecuador
administrative formalities may differ;
beforehand.
(iii) third, the Commission notes that a report
presented by the Spanish authorities
(
— Peru:

84 )
recognises that cross-border business combi
nations are feasible provided that the Spanish
acquirer has set up a branch in Colombia
beforehand.
(i) first of all, the Commission notes that, under the
general rules of company law and tax law, there
is, to the Commission’s knowledge, no explicit
legal prohibition on business combinations with
(116) The Spanish authorities submitted information on the
foreign entities ( 78 );
laws of eight other non-EU countries. As already stated
in paragraph 107, the Commission considers that the
above findings are sufficient to confirm that, in any
event, even if one were to admit that the existence of
legal obstacles to cross-border business combinations are
(ii) second, the Commission notes that Article 2074
significant, the reference system is the rules on the tax
of the Peruvian Civil Code sets out the principles
treatment of financial goodwill in the Spanish system.
applicable to cross-border business combinations
Nonetheless, applying the same methodology and
and the General Companies Law allows business
criteria as described in paragraphs 114 et seq., the
combinations involving a branch of a foreign
Commission considers, on the basis of the information
entity and a company resident in Peru ( 79 );
available, that no explicit legal obstacles to cross-border
business combinations of a general nature exist in the
laws of Chile, Venezuela, Algeria, Canada, Australia,
Japan or Morocco.
(iii) third, the Law on Income Tax ensures neutral
treatment of business combinations involving a
branch of a foreign entity and a company
resident in Peru ( 80 );
(117) Therefore, on the basis of the above findings, the
Commission cannot agree with the Spanish authorities
that each potential individual beneficiary of the
contested measure is faced, be it only in practice, with
insurmountable obstacles to cross-border business
(iv) the Commission therefore considers that a cross-
combinations.
border business combination is in any case
feasible provided that the Spanish acquirer has
set up a branch in Peru beforehand.
( 81 ) This institution is described as the technical body through which
the President of the Colombian Republic inspects and monitors
commercial companies (see http://www.supersociedades.gov.co/ss/
( 76 ) See, inter alia, Ecuador’s Companies Law, Organic Law on the Tax
drvisapi.dll?MIval=sec&dir=280).
System, and Taxation Code, available at http://www.supercias.gov.
( 82 ) See, for instance, the replies by the Superintendencia de Sociedades to
ec/
questions 220-16478 and number 220-62883 available at http://
( 77 ) See the conclusion in the Annex on Ecuador’s legislation prepared
www.supersociedades.gov.co/ss/drvisapi.dll?MIval=sec&ldir=45&id=
by Garrigues.
18036
( 78 ) See, inter alia, the Civil Code, General Companies Law and the Law
( 83 ) See the Taxation Law, available at: http://www.secretariasenado.gov.
on Income Tax available at http://www.supercias.gov.ec/
co/senado/basedoc/codigo/estatuto_tributario.html#14-1.
( 79 ) See footnote 3 of the Annex on Peru in the Garrigues report.
( 84 ) See the conclusion in the Annex on the legislation of Colombia
( 80 ) See page 8 of the Annex on Peru in the Garrigues report.
produced by Garrigues.

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L 135/20
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21.5.2011
(118) In the light of the above, the Commission considers that
adjustments are then made by applying specific tax rules.
there is no reason to depart from the reference system in
As a preliminary remark and on a subsidiary basis, the
the opening Decision and the previous Decision: the
Commission notes that the contested measure derogates
appropriate reference framework for assessing the
from the Spanish accounting system. The emergence of
contested measure is the general Spanish corporate tax
financial goodwill can only be computed in abstract by
system and, more precisely, the rules on the tax
consolidating the accounts of the target company with
treatment of financial goodwill in the Spanish tax
those of the acquiring company. However, under the
system. This conclusion cannot be affected by the fact
Spanish accounting system, the consolidation of
that the Commission found two non-EU countries where
accounts is required in case of ‘control’ ( 86 ) and is done
explicit legal obstacles do exist (India and China). As
for both domestic and foreign associations of companies,
already stated in paragraph 107, in line with the case
in order to provide the global situation of a group of
law of the Court of Justice
( 85 ), the Commission
companies subject to unitary control. Such a situation is
considers that, in order to arrive at a conclusion
deemed ( 87 ) to exist, for instance, if the parent company
regarding the State aid qualification of a scheme, it is
holds the majority of the voting rights of the subsidiary
not necessary to demonstrate that all individual aid
company. Nonetheless, the contested measure does not
granted under that scheme qualifies as State aid within
require any such type of control and applies as from a
the meaning of Article 107(1) TFEU.
5 % level of shareholding. Finally, the Commission also
notes that, from 1 January 2005 ( 88 ), in line with
accounting rules, financial goodwill can no longer be
amortised by most Spanish companies. In effect, in this
respect the 30 interested parties refer to provisions ( 89 )
that are no longer in force under the current Spanish
accounting system. As a result of Law 16/2007 of
4 July 2007 reforming and adapting commercial law in
(119) More precisely, as regards China, the 2005 Company
the field of accounting for the purposes of international
Law applying to mergers involving only limited liability
accounting harmonisation under EU legislation, as well as
companies or joint stock limited companies incorporated
Royal Decree 1514/2007 of 16 November 2007 on the
in China, and Articles 2 and 55 of the regulation entitled
General Accounting Plan, from an accounting point of
‘Provisions on Acquisitions of Domestic Enterprises by
view the amortisation of neither goodwill nor financial
Foreign Investors’ issued by the Chinese Ministry of
goodwill is allowed any more. These amendments to
Commerce on 22 June 2009, explicitly exclude non-
Spanish accounting law are in line with Regulation (EC)
resident companies from the scope of application of
No 1606/2002 of the European Parliament and of the
the business combination rules so that a Spanish
Council of 19 July 2002 on the application of inter
company would not be able to combine its business
national accounting standards
( 90 ). Therefore, given
with a Chinese-controlled subsidiary.
these considerations, the contested measure constitutes
an exception to the ordinary accounting rules applicable
in Spain.
(120) With reference to the legislation in force in India, Articles
391 to 394 of the Indian Companies Law of 1956
explicitly exclude non-resident companies from the
scope of application of the business combination rules
so that a Spanish company would not be able to
combine its business with any Indian-controlled
(122) That being said, because of the fiscal nature of the
subsidiary.
contested measure, the existence of an exception must
be assessed in comparison with the reference tax system,
and not merely on an accounting basis. In this context,
the Commission notes that the Spanish tax system has
never permitted the amortisation of financial goodwill,
except under Article 12(5) TRLIS. In particular, no such
amortisation is possible for domestic transactions. This is
clear from the following:
A.1.2. E x i s t e n c e o f a d e r o g a t i o n f r o m t h e
r e f e r e n c e s y s t e m
( 86 ) Pursuant to Article 42 of the 1885 Commercial Code.
( 87 ) See Article 42(1) of the 1885 Commercial Code.
(121) Under the Spanish tax system, the tax base is calculated
( 88 ) Companies having issued securities admitted to trading on a
on the basis of the accounting result, to which
regulated market of any Member State within the meaning of
Article 1(13) of Council Directive 93/22/EEC, pursuant to
Article 4 of this Directive.
( 85 ) See judgment of the Court of First Instance in Joined Cases
( 89 ) Article 194 of Royal Decree 1564/1989 of 22 December 1989
T-227/01 to T-229/01, T-265/01, T-266/01 and T-270/01 Dipu
approving the revised version of the Law on Limited Liability
tación Foral de lava and Others v Commission, cited above,
Companies.
paragraphs 381 et seq.
( 90 ) OJ L 243, 11.9.2002, p. 1.

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(123) For Spanish tax purposes, goodwill can only be booked
advantage. It takes the form of a reduction in the tax to
separately following a business combination ( 91 ), which
which the companies concerned would otherwise be
materialises either in the case of acquisition or
liable. This reduction is proportionate to the difference
contribution of the assets that make up an independent
between the acquisition price paid and the market value
business, or following a legal business combination. In
of the underlying booked assets of the shareholdings
such cases, the goodwill arises as the accounting
purchased.
difference between the acquisition cost and the market
value of the assets that make up the business acquired or
held by the combined company. When the acquisition of
the business of a company is made by way of the
acquisition of its shares, as in the case of the contested
measure, goodwill can only arise if the acquiring
company combines subsequently with the acquired
(127) The precise amount of the advantage with respect to the
company, over which it will then have control.
acquisition price paid corresponds to the net discounted
value of the tax burden reduction provided by the amor
tisation that is deductible throughout the amortisation
period following the acquisition. It therefore depends
on the corporate tax rate in the years concerned and
the discount interest rate applicable.
(124) However, under the contested measure, neither control
nor the combination of the two businesses is necessary.
The mere acquisition of a shareholding of at least 5 % in
a foreign company is sufficient. Thus, by allowing the
financial goodwill, which is the goodwill that would
have been booked if the businesses had combined, to
appear separately even in the absence of a business
(128) If the acquired shareholdings are resold, part of this
combination, the contested measure constitutes an
advantage would be recouped by means of capital gain
exception to the reference system. It must be stressed
taxation. Indeed, by allowing amortisation of financial
that the exception does not result from the duration of
goodwill, if the foreign shareholding in question is
the period during which the financial goodwill is
resold, the amount deducted would lead to an increase
amortised compared with the period that applies to tradi
in the capital gain taxed at the time of sale. However, in
tional goodwill
(
the event of such uncertain circumstances, the advantage

92 ), but rather from the different
treatment of domestic and cross-border transactions.
would not disappear completely since taxation at a later
The contested measure cannot be considered a new
stage does not take the liquidity cost into account. As
general accounting rule in its own right because the
rightly pointed out by the two parties, from an economic
amortisation of financial goodwill deriving from the
point of view, the amount of the advantage is at least
acquisition of domestic shareholdings is not allowed.
similar to that of an interest-free credit line that allows
up to 20 annual withdrawals of one-20th of the financial
goodwill for as long as the shareholdings are held on the
taxpayer’s books.
(125) Given all the above considerations, the Commission
concludes that the contested measure derogates from
the reference system. As will be demonstrated in
paragraphs 153 to 163, the Commission considers that
(129) Taking a hypothetical example, already mentioned by the
neither the Spanish authorities nor the 30 interested
Commission in the opening Decision, a shareholding
parties have put forward sufficiently coherent
acquired in 2002 would yield an advantage corre
arguments to alter this conclusion.
sponding to 20,6
% of the amount of financial
goodwill, assuming a discount interest rate of 5 % ( 93 )
and considering the existing structure of corporate
tax rates until 2022 as currently set out in Law
No 35/2006 ( 94 ). The third parties have not contested
these figures. In the event that the acquired shareholdings
A.1.3. E x i s t e n c e o f a n a d v a n t a g e
are resold, the advantage would correspond to the

interest that would have been charged to the taxpayer
(126) Under Article 12(5) TRLIS, part of the financial goodwill
for a credit line with the characteristics described in the
deriving from the acquisition of shareholdings in foreign
previous paragraph.
companies can be deducted from the tax base by way of
derogation from the reference system. Therefore,
( 93 ) In accordance with the TRLIS as amended by Law 35/2006, the
by reducing the tax burden of the beneficiary,
corporate tax rate used for the calculation was 35 % from 2002 to
Article 12(5) TRLIS provides them with an economic
2006, 32,5 % in 2007 and 30 % thereafter.
( 94 ) Eighth Additional provision, Law 35/2006 of 28 November on
Personal Income Tax and partial amendment of the Laws on
( 91 ) Pursuant to Article 89(3) TRLIS.
Corporate Tax and on Income Tax for Non-Residents and Tax on
( 92 ) Pursuant to Article 11(4) TRLIS.
Personal Net Wealth, Official State Gazette No 285, 29.11.2006.

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L 135/22
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Official Journal of the European Union
21.5.2011
(130) Finally, the Commission cannot share the views of the
operations abroad, the Commission notes that this
Spanish authorities and the 30 interested parties that the
condition is required for the application of other
final beneficiary of the contested measure would only be
Spanish tax provisions ( 97 ) but not for the contested
the seller of the foreign shareholding since it would
measure.
receive a higher price. The Commission rejects this
argument after assessing the effect of the contested
measure in its current form. First, there is no
mechanism guaranteeing that the advantage is passed
(134) Secondly, the contested measure does not constitute a
on in full or in part to the seller. Second, the acquisition
mechanism to avoid double taxation of future
price results from a series of different elements, not just
dividends that would be taxed upon realisation of
from the contested measure. Third, even if the above two
future profits and should not be taxed twice when
conditions were met, the Spanish taxpayer benefiting
distributed to the company that holds a significant share
from the contested measure must still be considered
holding for the acquisition of which financial goodwill
the beneficiary of the measure. Even if an economic
was paid. In fact, the contested measure creates no
advantage were transferred to the seller, the contested
relation between the dividends received and the
measure would still give the acquirer greater capacity to
deduction enjoyed as a result of the contested measure.
offer a higher price, which is of the utmost importance in
On the contrary, the dividends received from a significant
the case of a competitive acquisition operation.
shareholding in a foreign company already benefit from
both the exemption provided for by Article 21
TRLIS and the direct tax neutrality provided for by
Article 32 TRLIS to avoid international double taxation.
In this connection, the amortisation of the financial
(131) Therefore, the Commission concludes that, in any event,
goodwill results in an additional advantage with respect
the contested measure provides an advantage at the time
to the acquisition of significant shareholdings in foreign
of acquisition of foreign shareholdings.
companies.
(135) Thirdly, the Spanish authorities have not demonstrated
that the contested measure is an extension of the
A.1.4. J u s t i f i c a t i o n o f t h e m e a s u r e b y t h e
impairment rules which presuppose that there is
l o g i c o f t h e S p a n i s h t a x s y s t e m
objective evidence of losses based on a detailed and
(132) The Commission considers that, in line with the settled
objective calculation that is not required by the
case law of the Court of Justice (
contested measure. On the contrary, Article 12(3)

95 ), the measures intro
ducing a differentiation between undertakings do not
TRLIS permits partial deductions for depreciation of
constitute State aid when that differentiation arises
equity shareholdings in domestic and foreign share
from the nature and overall structure of the system of
holdings which are not traded on a secondary market
charges of which they form part. This justification based
for impairments occurring between the beginning
on the nature or overall structure of the tax system
and the end of the tax year. The contested measure —
reflects the consistency of a specific tax measure with
which is, for beneficiaries, compatible with Article 12(3)
the internal logic of the tax system in general.
TRLIS ( 98 ) — provides for further deductions over and
above the decrease in the theoretical accounting value
linked to impairment.
(133) In this regard, the Commission considers, firstly, that the
(136) Fourthly, the Commission notes that the financial
Spanish authorities have not demonstrated that the effect
goodwill deriving from the acquisition of domestic share
of the contested measure would be to eliminate double
holdings cannot be amortised whereas the financial
taxation. The scheme in fact does not establish any
goodwill of foreign companies is amortised under
conditions to prove that the seller has been effectively
certain conditions. Different tax treatment of the
taxed on the gain derived from the transfer of the share
financial goodwill of foreign companies compared with
holding, even though such a condition is imposed for
domestic ones is a differentiation introduced by the
amortising the goodwill arising from a business combi
contested measure which is neither necessary nor propor
nation ( 96 ). It should be underlined that, although the
tionate in terms of the logic of the tax system. In fact,
Spanish authorities claim not to be competent to
the Commission considers that it is disproportionate for
exercise control over a foreign seller carrying out
the scheme at hand to impose substantially different
nominal and effective taxation on companies in
( 95 ) See Case C-88/03 Portugal v Commission, cited above, paragraph 81.
comparable situations just because some of them are
See footnote 49 of this Decision. See also judgments of the Court
involved in investment opportunities abroad.
of First Instance in Joined Cases T-227/01 to T-229/01, T-265/01,
T-266/01 and T-270-01 Diputación Foral de lava and Others v
Commission, cited above, paragraph 179 and Joined Cases
( 97 ) See Articles 89, 21 and 22 TRLIS.
T-230/01 to T-232/01 and T-267/01 to T-269/01 Diputación
( 98 ) As explicitly stated in the second subparagraph of Article 12(5): ‘the
Foral de lava and Others v Commission [2009] ECR II-139,
deduction of this difference (i.e. Article 12(5) TRLIS) will be
paragraph 190.
compatible, where appropriate, with the impairment losses
( 96 ) Pursuant to Article 89(3)(a)(1) TRLIS.
referred to in paragraph 3 of this Article.’

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(137) Moreover, the Commission considers that the comments
equal tax burden certainly form part of the basis of the
made by one of the 30 interested parties ( 99 ) mean that
Spanish tax system, they do not require that taxpayers in
even the rationale behind the justification put forward by
different situations be accorded the same treatment’.
Spain would be contrary to the logic of the Spanish tax
system. In fact, according to this submission, in a cross-
border business combination scenario, the goodwill that
would arise would, in all likelihood, be located abroad,
more precisely in the foreign permanent establishment
(139) In the light of the above, the Commission considers that
resulting from the dissolution of the target company.
the neutrality principle cannot justify the contested
Therefore, again according to this submission, even in
measure. Indeed, as highlighted also by the two parties,
a cross-border business scenario, Spain would not
the fact that the acquisition of a 5 % minority share
allow goodwill to be amortised in Spain as the
holding acquired after a given date benefits from the
goodwill is not located in Spain. In addition to this,
contested measure demonstrates that the measure
the Commission notes additional differences in the
would include certain situations that bear no significant
conditions applying to each of these two scenarios.
similarity. In this way it could be said that, under the
Under the contested measure, shareholding acquisitions
reference system, situations which are both factually and
made before 1 January 2002 are not taken into account
legally different are treated in an identical manner. The
for the calculation of the base to be amortised. However,
Commission considers therefore that the neutrality
in a business combination scenario, this cut-off date does
principle cannot be invoked to justify the contested
not exist when calculating the goodwill. Moreover, in a
measure.
business combination scenario, the taxpayer has to prove
that the main objective of the combination derives from
economic considerations in order to avoid combinations
only aimed at obtaining tax benefits ( 100 ), whereas the
(140) Given the above considerations, the Commission must
contested measure only provides tax benefits. The
conclude that the selective advantage aspect of the tax
Spanish authorities have not been able to provide
scheme under review is not justified by the nature of the
convincing arguments to justify these differences, which
tax system. Therefore, the contested measure must be
are thus to be considered as not being duly justified by
considered as including a discriminatory element in the
the logic of the Spanish tax system.
form of a limitation regarding the country in which the
transaction benefiting from the tax advantage takes place,
and this discrimination is not justified by the logic of the
Spanish tax system.
(138) Finally, the Spanish authorities also argue that the
contested measure is justified by the neutrality principle
which must be applied in the corporate tax context ( 101 ).
A.2. Complementary reasoning: analysis of the contested
Indeed, the explanatory memorandum to the Corporate
measure from the point of view of a reference system
Tax Law ( 102 ) in force when the contested measure was
based on the one suggested by the Spanish authorities
introduced clearly referred to this principle. In this
respect, the Commission notes that the ‘competitiveness
(141) Although the Commission considers, as stated in the
principle’ ( 103 ) invoked by the Spanish authorities, who
previous paragraphs, that the arguments raised by the
expressly refer to ‘an increase in exports’, also drives this
Spanish authorities rely on an incorrect analysis of the
reform. In this context, it should be recalled that,
de facto legislation of non-EU countries, as in the
according to previous Commission Decisions ( 104 ), it is
previous Decision, the Commission also analysed the
disproportionate to impose different effective taxation
contested measure from the point of view of a hypo
on companies in comparable situations just because
thetical reference system based on the one suggested by
they are involved in export-related activities or pursue
the Spanish authorities.
investment opportunities abroad. In addition, the
Commission recalls that, as the Court stated,
( 105 )
‘…whilst the principles of equal tax treatment and
(142) The Spanish authorities have explained that the objective
( 99 ) See comments received from Telefonica on 20 September 2010,
of the contested measure is to avoid a difference of tax
page 2.
( 100 ) See Article 96(2) TRLIS.
treatment between, on the one hand, an acquisition
( 101 ) See in particular paragraph 60.
followed by a business combination for valuable
( 102 ) Corporate Tax Law 43/1995, which was repealed by Royal Legis
consideration and, on the other hand, a share acquisition
lative Decree 4/2004.
without a business combination. On this basis, the scope
( 103 ) Defined by the Spanish authorities in the explanatory
of the contested scheme would be limited to the
memorandum to Law 43/1995, as ‘The competitiveness principle
acquisition of significant shareholdings in a company
requires the corporate tax system to support and be consistent
with the economic policy measures to enhance competitiveness
not resident in Spain because some obstacles would
…, and it also requires incentives to make businesses more inter
make it more difficult to perform a cross-border
national and thereby give rise to an increase in exports, to comply
business combination than a local one ( 106 ). As a result
with this principle.’
of these barriers, Spanish taxpayers investing abroad
( 104 ) See, inter alia, the Commission Decision of 22 March 2006 on
direct tax incentives in favour of export related investments
(OJ C 302, 14.12.2007, p. 3) paragraph 51.
( 106 ) See the e-mail dated 16 June 2009 from the Spanish authorities
( 105 ) See paragraph 127 of the judgment cited in footnote 36.
referred to in paragraph 13.

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would be placed, legally and factually, in a different
taxable in Spain that acquire a significant shareholding in
situation from those investing in Spain. Indeed, the
foreign companies for a period of at least 20 years
Spanish authorities state that ( 107 ): ‘In summary, the
following the acquisition.
mere differential nature of certain tax measures does
not necessarily imply that they are State aid, since
these measures also need to be examined to see
whether they are necessary or functional as regards the
efficiency of the tax system, as stated in the Commission
Notice. Hence the Spanish tax system envisages different
(145) The forgoing of tax revenues mitigates the charges which
tax schemes for objectively different situations, as is the
are normally included in the budget of an undertaking
case for acquisitions of shareholdings in foreign
and which thus, without being subsidies in the strict
companies as against acquisitions in Spanish companies
sense of the word, are similar in character and have
(impossible to perform merger operations, risk
the same effect. Likewise, a measure allowing certain
management, etc.) with a view to achieving the tax
undertakings to benefit from a tax reduction or to
neutrality imposed by Spanish domestic legislation and
postpone payment of tax normally due amounts to
by Community law itself, and ensuring that the logic of
State aid. From a budgetary point of view and in line
the Spanish tax system is consistent and efficient.’ Hence,
with the case law of the Court of Justice ( 108 ) and the
providing specific tax treatment for cross-border share
Commission Notice ( 109 ), the contested measure leads to
holding acquisitions would be necessary to ensure the
a loss of tax revenue for the state, resulting from the
neutrality of the Spanish tax system and to avoid more
reduction in the tax base, which is equivalent to
favourable treatment of domestic shareholding
consumption of state resources.
acquisitions. Therefore, the Spanish authorities and the
30 interested parties consider that the correct reference
framework for the assessment of the contested measure
would be the tax treatment of the goodwill for foreign
acquisitions.
(146) For these reasons, the Commission considers that the
contested measure involves the use of state resources.
(143) However, the Commission points out that, even under
this alternative reference system which could be defined
C. Distortion of competition and trade between
as the tax treatment of goodwill and financial goodwill
Member States
deriving from an economic interest in a company
resident in a country other than Spain, the contested
(147) According to the case law of the Court of Justice ( 110 ),
measure still constitutes a derogation which is not
‘…for the purpose of categorising a national measure as
consistent with the logic of the Spanish tax system.
prohibited State aid, it is necessary, not to establish that
The fact that the acquisition of 5 % minority share
the aid has a real effect on trade between Member States
holding which has been acquired after a given date
and that competition is actually being distorted, but only
benefits from the contested measure demonstrates that
to examine whether that aid is liable to affect such trade
the measure would include certain situations which bear
and distort competition. In particular, when aid granted
no significant similarity to other transactions requiring at
by a Member State strengthens the position of an under
least majority control. In this way it can be said that,
taking compared with other undertakings competing in
under this hypothetical alternative reference system,
intra-Community trade, the latter must be regarded as
situations which are both factually and legally different
affected by that aid…In addition, it not necessary that
are treated identically. The Commission considers,
the beneficiary undertaking itself be involved in intra-
therefore, that the contested measure constitutes a dero
Community trade. Aid granted by a Member State to
gation even under this alternative reference system and
an undertaking may help to maintain or increase
that the neutrality principle cannot be invoked to justify
domestic activity, with the result that undertakings estab
it.
lished in other Member States have less chance of
penetrating the market of the Member State concerned.’
Moreover, in line with the settled case law of the
Court ( 111 ), for a measure to distort competition it is
sufficient that the recipient of the aid competes with
other undertakings on markets open to competition.
The Commission considers that the conditions set out
B. Presence of state resources
in the case law are fulfilled for the following reasons.

(144) The measure involves the use of state resources as it
( 108 ) See judgment in Case C-222/04 Cassa di Risparmio di Firenze and
implies forgoing tax revenue for the amount corre
others [2006] ECR I-289.
sponding to the reduced tax liability of the companies
( 109 ) See footnote 21. In particular, see points 9 and 10 of the
Commission Notice.
( 110 ) See footnote 42, paragraphs 139–143.
( 107 ) See, in particular, page 6 of the Spanish authorities’ letter of
( 111 ) Judgment of the Court of First Instance in Case T-214/95 Vlaams
22 April 2009 (A-9531), cited in paragraph 9.
Gewest v Commission [1998] ECR II-717.

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(148) First, the contested measure provides an advantage in
D. The Commission’s reaction to the comments
terms of financing and, therefore, strengthens the
received
position of the economic unit that can be formed by
the beneficiary and the target company. In that regard
(152) Before concluding on the classification of the measure,
and in line with the case law of the Court ( 112 ), the mere
the Commission considers it appropriate to analyse in
fact of owning controlling shareholdings in a target
more detail certain arguments raised by the Spanish
company and exercising that control by involving itself
authorities and by third parties, which have not yet
directly or indirectly in the management of it, must be
been explicitly or implicitly addressed in the paragraphs
regarded as taking part in the economic activity carried
concerning the assessment of the scheme (paragraphs 96
on by the controlled undertaking.
et seq.).
D.1. Reaction to the data extracted from the 2006 tax returns
and to the comments about the judgment of the Court of
Justice in Case C-501/00
(149) Second, the contested measure is liable to distort
competition, most clearly amongst European (153) As regards the data extracted by the Spanish authorities
competitors, by providing a tax reduction to Spanish
from the 2006 tax returns in order to demonstrate that
companies that acquire a significant shareholding in
the contested measure is not selective
( 113 ), the
target companies. This analysis is confirmed by the fact
Commission underlines the general lack of precision of
that several companies complained or intervened after
the information submitted. First, the data present the
the opening Decision to state that the contested
distribution of beneficiaries by category (activity,
measure provided a significant advantage fuelling the
turnover), but do not indicate whether the beneficiaries
merger appetite of Spanish companies, in particular in
concerned represent a small or large part of each of the
the context of tendering procedures. These interventions
categories concerned. Secondly, although statistics based
confirm at least that a series of non-Spanish companies
on the size of the turnover of the beneficiaries could be
consider that their position on the market is affected by
an interesting indicator in order to demonstrate that the
the contested measure, irrespective of the correctness of
contested measure applies to all companies in Spain, it
their detailed submissions as regards the existence of aid.
must be underlined that the contested measure is related
to acquisitions of shareholdings. This type of investment
does not necessarily generate significant turnover, which
implies, for example, that holding companies may be
included as SMEs in the data concerned. Therefore, for
the data to be considered relevant, it would be necessary
(150) Finally, the Commission would like to state that the
to take into account additional indicators, such as the
selective advantage is granted to companies which are
total balance sheet figures, as well as whether the bene
Spanish taxpayers, and not to the activities of Spanish
ficiaries can consolidate their tax base with other Spanish
taxpayers outside the EU. The tax base which is eroded is
taxpayers. Thirdly, the data also appear unrepresentative
the one which derives from taxable economic activity in
because they contain no indication of the level of share
Spain. Hence, the advantage is granted directly to the
holdings acquired (control or only minority share
activity of the beneficiary which is carried out in Spain,
holdings) by the beneficiaries. Finally, the data received
and not in the permanent establishment outside the EU.
do not provide any indication making it possible to
Therefore, in the light of this fact, the Commission
determine whether the conditions of the 2003 SME
considers that it cannot be argued, in the case at hand,
Recommendation of the Commission ( 114 ) are fulfilled.
that the advantage cannot distort competition or trade
Therefore the Commission considers that its demon
between Member States because the contested measure
stration that the contested aid measure is selective due
applies to non-EU countries. Even though the advantage
to the very characteristics of the legislation in question is
is granted in line with objective conditions relating to
not undermined by the partial and unrepresentative data
transactions with non-EU countries, this does not alter
provided by the Spanish authorities.
the fact that the effect of the measure results in an
erosion of the tax base deriving from an economic
activity carried out in the internal market.
(154) Nonetheless, even if the arguments presented by the
Spanish authorities had been complemented by addi
tional evidence, this would not remove the selective
nature of the contested measure as only certain under
takings benefit from the measure, also in line with the
judgment of the Court of Justice in Case C-501/00 Spain
(151) Therefore the Commission concludes that the contested
v Commission (
measure is liable to affect trade between Member States

115 ). Indeed, as regards the Spanish
authorities’ classification of the measure as a general
and distort competition, mainly in the internal market,
measure (
by potentially improving the operating conditions of the

116 ) because it is open to any undertakings
beneficiaries directly engaged in economic activities
which are taxable in Spain.
( 113 ) See paragraph 12.
( 114 ) OJ L 124, 20.5.2003, p. 36.
( 115 ) See footnote 36.
( 112 ) See judgment in Case C-222/04, cited in footnote 108.
( 116 ) See in particular paragraphs 43 and 56.

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L 135/26
EN
Official Journal of the European Union
21.5.2011
resident in Spain, it is worth recalling this judgment of
the contested measure does not have a similar objective.
the Court. That case also concerned an exception to
Moreover, unlike the present case, the Spanish measure
Spanish corporate tax, more specifically a measure
covered by Commission Decision N 480/07 did not
entitled ‘deduction for export activities’. The Spanish
make any distinction between national and international
authorities contended before the Court that the scheme
transactions.
was open to any undertaking resident in Spain for tax
purposes. However, the Court considered that the tax
deduction could ‘benefit only one category of under
taking, namely undertakings which have export activities
and make certain investments referred to by the
(157) Finally, as regards the derogation from the corporate
contested measures’ ( 117 ). The Commission considers
tax system resulting from the implementation of
that also in the present case, the contested measure is
Directives ( 122 ) such as the Parent-Subsidiary Directive
intended to promote the export of capital out of Spain in
or the Cross-border Interest and Royalty Payments
order to strengthen the position of Spanish companies
Directive, the Commission considers that the situation
abroad, thereby improving the competitiveness of the
resulting from implementation of these Directives is
beneficiaries of the scheme.
fully consistent with the reasoning developed in this
Decision. Following harmonisation within the European
Union, cross-border operations within the European
Union and within each Member State should be
considered to be in a comparable legal and factual
(155) In this respect it is noteworthy that, according to the
situation. In addition, the Commission would like to
Court of Justice, ‘in order to justify the contested
underline the fact that the Court of Justice stated
measures with respect to the nature or the structure of
that ( 123 ): ‘as Community law stands at present, direct
the tax system of which those measures form part, it is
taxation falls within the competence of the Member
not sufficient to state that they are intended to promote
States, although it is settled case law that they must
international trade. It is true that such a purpose is an
exercise that competence consistently with Community
economic objective but it has not been shown that that
law (see, in particular, Case C-391/97 Gschwind [1999]
purpose corresponds to the overall logic of the tax
ECR I-5451, paragraph 20) and therefore avoid taking, in
system. … The fact that the contested measures pursue
that context, any measures capable of constituting State
a commercial or industry policy objective, such as the
aid incompatible with the common market.’
promotion of international trade by supporting foreign
investment, is thus not sufficient to take them outside the
classification of “aid” within the meaning of Article 4(c)
CS.’ ( 118 ). In the present case, the Spanish authorities have
simply declared that the contested measure is intended to
D.3. Reaction to the comments on Article 65(1)(a) TFEU
promote international trade and the consolidation of
companies, without proving that such a measure i