Spain: Goodwill amortization rules challenged | KPMG | GLOBAL
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Spain: Goodwill amortization rules challenged; foreign vs. domestic company acquisitions

Spain: Goodwill amortization rules challenged

The Court of Justice of the European Union (CJEU) today issued a judgment finding that the EU General Court erred when it set aside decisions of the European Commission concerning a Spanish tax rule that allows amortization of goodwill resulting from a shareholding in a foreign corporation, but not when the goodwill results from the acquisition of a company established in Spain.


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As explained in a release from the CJEU [PDF 117 KB] Spanish law provides that when an undertaking (that is taxable in Spain) acquires at least a 5% shareholding in a “foreign company” and holds that shareholding without interruption for at least one year, the goodwill resulting from that shareholding may be deducted through amortization from the basis of assessment for corporation tax. To qualify as a “foreign company,” a company must be subject to tax that is similar to Spanish taxation, and the company’s income must be derived mainly from business activities conducted abroad.  However, Spanish tax law does not allow goodwill resulting from the acquisition by a company taxable in Spain of a shareholding in a company established in Spain to be entered separately in the accounts for tax purposes. Spanish tax law allows goodwill to be amortized when there is a business combination.

The EC opened a state aid investigation, and concluded that the Spanish tax regime was incompatible with EU rules. Actions were then brought before the General Court which annulled the EC decisions. The EC appealed to the CJEU, requesting that the General Court judgments be set aside. Today, the CJEU set aside those judgments and referred the cases back to the General Court. The CJEU found that the General Court had erred when: (1) it found the EC had failed to identify a category of undertakings that was exclusively favored by the tax measure; and (2) it failed to determine whether the EC had established that the measure was discriminatory.


Read a December 2016 report prepared by KPMG’s EU Tax Centre

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