The Commission has requested Spain, under EU state aid rules, to abolish a 2002 provision in its corporate tax system that allows Spanish companies to amortise ‘financial goodwill’ deriving from acquisitions of shareholdings in companies in third countries. The Commission also asks for the recovery of any aid granted under this provision since 21 December 2007 where concrete legal obstacles to investment could not be demonstrated.

Amortising goodwill is generally allowed in full mergers and cannot discriminate between national and foreign firms. It consists of the write off, over a period of time, of the ‘excess’ price paid for the acquisition of a business compared with the market value of the assets composing it.

The Spanish provision allowed for the amortisation of the financial goodwill (difference between the cost of the shares and the market value of the target company's assets) in the acquisition of shareholdings in foreign companies. This treatment differed from the general Spanish tax system in that it allows the amortisation of goodwill even where the acquiring and the acquired companies are not combined into a single business entity. The provision was the subject of complaints and questions from Members of the European Parliament.

Spain argued that the measure was needed to offset fiscal and other legal obstacles allegedly faced by acquirers in the non-EU countries. However, the Commission could not identify any such explicit obstacles in the vast majority of the more relevant third countries whose legislation it examined. The Commission's decision concludes that the tax provision also amounts to a clear and unjustified advantage in the case of acquisitions in third countries.

As a consequence, the Commission asks Spain to repeal the provision and to recover any aid granted under the provision since the start of the EU investigation, in 2007, with the exception of the countries where obstacles (e.g. ban on cross-border legal combinations) have been or can be demonstrated (India and China).

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