>> Go back to Euro Tax Flash homepage
On July 28, 2016 Advocate General (AG) Wathelet of the Court of Justice of the European Union (CJEU) issued his opinion in the joined cases Commission v World Duty Free Group (C-20/15 P) and Commission v Banco Santander and Santusa (C-21/15 P). These cases concern the Spanish provisions allowing companies which are tax resident in Spain to amortize the goodwill resulting from the acquisition of certain shareholdings in foreign companies. The AG concluded, contrary to the General Court’s decision, that this measure is selective and therefore should be regarded as State aid incompatible with the common market.
The measure at issue allows undertakings taxable in Spain to amortize for tax purposes the financial goodwill resulting from the acquisition of a shareholding in a “foreign company” equal to at least 5% of that company’s capital, when such shareholding is retained for at least one year. The tax advantage resulting from this measure is however not granted to comparable undertakings acquiring shareholdings in a company established in Spain.
According to the AG, a tax measure is by definition selective when it derogates from the general tax system and benefits certain undertakings to the detriment of others, which are in a comparable situation. In the case at hand, the fact that the Spanish rules derogated from the general tax system was not contested. The AG noted that the fact that such a measure is available to a large number of taxpayers, or that the conditions to benefit from it are easy to fulfill, does not call into question its selective nature but only the degree of selectivity.
The case represents an opportunity for the CJEU to comment on and further clarify the scope of application of the selectivity criterion, which remains one of the most controversial issues in the area of State aid. The CJEU will have to determine whether selectivity arises merely from the derogation from a normal tax regime, as argued by the AG, or whether it upholds the General Court’s decision that a category of undertakings which are exclusively favoured by the aid must also be identified in all cases.
Should you have any queries, please do not hesitate to contact your local KPMG tax advisor.
© 2021 Copyright owned by one or more of the KPMG International entities. KPMG International entities provide no services to clients. All rights reserved.
KPMG refers to the global organization or to one or more of the member firms of KPMG International Limited (“KPMG International”), each of which is a separate legal entity. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. For more detail about our structure please visit https://home.kpmg/governance.
Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.