Antitrust

1 2 8 SPANISH AMORTIZATION RULES ON GOODWILL IN FOREIGN COMPANIES The general Spanish tax regime only allowed for the amortization of goodwill for tax purposes in the event of mergers. The Spanish government subsequently introduced a measure that enabled companies resident in Spain for tax purposes to treat as tax deductible the amortization of financial goodwill arising from the acquisition of shareholdings of at least 5% in a foreign company. At issue was whether the measure was selective in nature. The European Courts have struggled to arrive at a coherent approach to selectivity in tax cases and have applied different methods for determining selectivity. The General Court had originally applied a 'general availability' test and considered that the measure was not selective because it did not exclude any category of undertakings in the national territory because it was aimed at a category of economic transactions (even if not all national undertakings would benefit from the measure). However, the Court of Justice of the European Union (CJEU) ruled that the assessment of selectivity in this case must be based on a three-step analysis: first is to determine the 'normal' tax regime as a reference framework. Second, determine whether the measure derogates from the normal tax regime insofar as it differentiates between economic operators that are in a comparable factual and legal situation in light of the objectives pursued by the tax regime. Third, establish if the tax differentiation is justified by the nature and logic of the tax regime. STATE AID 24 T H E C J E U R U L E D T H A T T H E A S S E S S M E N T O F S E L E C T I V I T Y I N T H I S C A S E M U S T B E B A S E D O N A T H R E E - S T E P A N A LY S I S The Increasing Link Drawn by Regulators Between State Aid & Taxation Systems

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