The General Court of the European Union (TGUE) has endorsed the tax aid offered by Spain to multinationals that decided to acquire foreign companies, a regime promoted by the former Minister of Finance, Cristóbal Montoro in 2012, to promote the internationalization of Spanish companies. A measure that the European Commission had considered illegal.
The case dates back to the early 2000s, when the government of the Popular Party of José María Aznar decided to apply a tax regime that favored the internationalization of Spanish companies and that allowed the acquisition of foreign companies to apply a Tax deduction. In 2006, when asked by members of the European Parliament, the European Commission responded that the measure was not state aid. It was a time when important acquisitions of Spanish companies were endorsed, such as Telefónica from the British O2.
However, three years later, after a complaint from a private operator, Brussels investigated and considered that it was an illegal tax regime and demanded that Spain on two occasions (2009 and 2011) recover this aid, although it allowed it to be could apply in “certain cases” and circumstances.
After the setback in Brussels, and with a new PP government, the then Minister of Finance, Cristóbal Montoro, decided in 2012 to recover the regime, applying a new interpretation. In it, the regime allowed companies to deduct from the corporate tax base the financial goodwill derived from the indirect acquisition of foreign companies. The measure did not convince either and the European Commission declared it illegal in 2014 and asked Spain to recover the aid.
The decision was then appealed by several companies, including Banco Santander, Ferrovial, Sociedad General de Aguas de Barcelona, ??Abertis and Telefonica, who considered that the Commission erred in classifying the new interpretation as “new aid” and that it violated the principle of security. and the principle of protection of legitimate expectations.
Thus, the General Court agrees with the companies because it considers that the Commission “was not empowered” to adopt the decision, because when it previously ruled on the measure it already covered both direct and indirect acquisitions. According to the ruling, the Commission “could not revoke or withdraw its initial decisions.”
“These are legal decisions that conferred on Spain, under certain conditions and due to the existence of legitimate expectations, a subjective right to implement the aid regime in question, which had however been declared incompatible. Additionally, they conferred on the beneficiary companies of said regime the subjective right not to have to return certain illegal aid.”
That is to say, Spain could have a tax regime under certain conditions and cases, since the Commission had allowed it to do so, but even so, Brussels decided that all aid should be returned without exception and this is what the European justice system considers, which is not I should have done. For all these reasons, it considers the measure legal. The ruling can still be appealed to the Court of Justice of the EU.
