The General Court of the European Union, in five judgments on September 27 th ,
2023, related to cases T-826/14, T-12/15, T-158/15 and T-258/15 (consolidated), T-
252/15 and T-257/15 (consolidated), T-253/15 and T-256/15 and T-260/15
(consolidated), annuls Commission Decision (EU) 2015/314 of October 15 th , 2014,
concerning state aid granted by Spain in the context of the financial goodwill tax
amortization scheme for the acquisition of foreign holdings.
Furthermore, it states that the Commission has not demonstrated that the legislator
or the Spanish courts had excluded indirect acquisitions from the scope of
article 12.5 of the previous Consolidated Text of Corporate Tax Act before the adoption of the new administrative interpretation. Additionally, the General Court emphasizes that, although the initial decisions should be understood
as applicable to both direct and indirect acquisitions of holdings, particularly in light
of aArticle 21 of the Consolidated Text of Corporate Tax ActTreaty on the Law of IS,
which expressly mentions indirect holdings, it remains the exclusive responsibility of
the Spanish courts to determine whether, under Spanish law, such an operation can
be subject to the regime established in article 12.5 of the Consolidated Text of
Corporate Tax Act, especially taking into account the
provisions of article 15 of the Corporate Tax Regulation, as it is the
task of the Spanish courts and, ultimately, the Supreme Court or, where appropriate,
the legislator of this State, to determine the true scope of article 12.5 of the
Consolidated Text of Corporate Tax Act.
The General Court holds that the contested Decision, in addition to infringing the
principle of legal certainty, also breached the legitimate expectation of the Spanish
authorities and companies, as the Commission implied that the scheme in question
did not constitute State aid without providing details. Therefore, the Court decided to
annul the Decision in its entirety and determined that the Commission committed a
legal error by denying legitimate expectation to the beneficiaries of the aid scheme
regarding indirect acquisitions.
In 2002, Spain implemented a new system related to corporate tax. This system
allowed companies that had acquired stakes in non-resident companies to deduct
the book value of the financial goodwill derived from that acquisition from their
taxable base. In response to questions from several Members of the European
Parliament in early 2006, the Commission indicated that this system was not subject
to EU rules on State aid. However, following a complaint, the Commission’s services
found that the inability to deduct these acquisitions in a holding company
unreasonably limited the number of potential beneficiaries of the scheme established
in article 12.5 of the Consolidated Text of Corporate Tax Act.
The Spanish authorities informed the Commission that, according to the
administrative criteria in force at that time, the financial goodwill derived from direct
acquisitions could only be deducted under the scheme established in that provision.
In a first decision, the Commission declared that this scheme was incompatible with
the internal market when applied to acquisitions in companies located outside the
European Union and ordered Spain to recover the aid granted.
In a second decision, the Commission allowed the scheme to continue to apply in
the following cases: first, for acquisitions made before the publication in the Official
Journal of the European Union (OJEU) on December 21 st , 2007, of the decision to
initiate a formal investigation procedure; second, for acquisitions requiring the
authorization of a regulatory authority and for which an irrevocable commitment had
been made before December 21 st , 2007; third, for majority share acquisitions made
before the publication in the OJEU on May 21 st , 2011, of the second decision, in
foreign companies established in China, India, and other third countries where
explicit legal obstacles to cross-border combinations of companies were
demonstrated or could be demonstrated; and fourth, for acquisitions in foreign
companies established in China, India, and other third countries where explicit legal
obstacles to cross-border combinations of companies were demonstrated or could
be demonstrated, and for which an irrevocable commitment had been made before
May 21 st , 2011. In summary, aid granted under article 12.5 of the Consolidated Text
of Corporate Tax Act that met any of these conditions was not subject to the obligation of recovery.
On April 12 th , 2012, Spanish authorities informed the Commission that Ruling DGT
V0608/2012, dated March 21, 2012, represented a change in approach to this
matter, aiming to expand the scope of article 12.5 of the Consolidated Text of
Corporate Tax Act to include indirect acquisitions. This meant that the
measure would apply not only to the financial goodwill resulting from direct
acquisitions of shares in non-resident companies but also to the financial goodwill
resulting from indirect acquisitions of shares in non-resident
According to the Commission, the new administrative interpretation could not be
considered an “existing aid” but represented a “new form of aid.” As a result, the
Commission concluded that this new administrative interpretation, which extended
the application of article 12.5 of the Consolidated Text of Corporate Tax Act to include indirect acquisitions of shares in non-resident companies through the direct acquisition of shares in non-resident holding companies, and
which was unlawfully implemented by the Kingdom of Spain, violating the provisions
of article 108.3 of the Treaty on the Functioning of the European Union
(TFEU), was incompatible with the internal market. Therefore, the Commission
required Spain to terminate this aid scheme and recover aid granted under it, except
for individual aid that complied with the conditions of a de minimis regulation or
Spain argues, supported by the General Court of the European Union (GCEU), that
the Commission made an error in classifying the new administrative interpretation as
a “new” in the challenged Decision. According to Spain, this new interpretation
did not modify the regime established in article 12.5 of the Consolidated Text
of Corporate Tax Act since that regime applied to indirect share acquisitions from its adoption. In a Rule of Law state, companies are not obliged to adopt the same interpretation of the law as the tax authority and can apply the rule
differently, based on the text of the law. If necessary, they can challenge the tax
authorits actions that amend their statements based on disputed tax consultations.
The determination of the scope of legal provisions lies with the legislator or, in cases
of doubt or controversy, with the judicial authorities, rather than the tax authority.
The Commission has not demonstrated that the Spanish legislator or the judicial
authorities had excluded indirect acquisitions from the scope of article 12.5 of
the Consolidated Text of Corporate Tax Act before the adoption of the
new administrative interpretation.
The General Court notes that following the adoption of the new administrative
interpretation, the judgment of the Spanish Supreme Court on February 6 th , 2014, in
case number 125/2011, established that it was not possible to create goodwill in a
company without tangible activity and that the company in question, which was a
mere holding company without tangible activity, could not generate financial
goodwill. This judgment was appealed to the Supreme Court due to the lack of clarity
in the application of article 12.5 of the Consolidated Text of Corporate Tax
The General Court considers that the Commission did not have the authority to
adopt the Decision of October 15 th , 2014, because its initial Decisions already
covered both direct and indirect acquisitions. Ordering the recovery of all aid granted
under the regime in question regarding indirect acquisitions amounts to revoking
legal decisions that it could not revoke or withdraw since it has not been
demonstrated that these decisions were based on incorrect information.
Furthermore, these legal decisions granted Spain, under certain conditions and due
to legitimate expectations, a subjective right to implement the aid scheme in
question, which was later declared incompatible. They also granted beneficiary
companies of the scheme the subjective right not to have to repay certain illegal aid.
By withdrawing these rights in its Decision of October 15 th , 2014, regarding indirect
acquisitions, the Commission violated the principles of legal certainty and protection
of legitimate expectations.
The General Court decides to completely annul the contested Decision. Although the
initial Decisions can be interpreted as applicable to both direct and indirect
acquisitions, it is the exclusive responsibility of the Spanish courts to determine
whether, according to Spanish law, this type of operation can benefit from the regime
established in article 12.5 of the Consolidated Text of Corporate Tax Act . This must be done considering article 15 of the Corporate Tax
Regulation, and it is for the Spanish courts, the Supreme Court, and the legislator of
Spain to determine the true interpretation of this article.
Regarding the violation of legitimate expectations, the principle of estoppel (or
estoppel by conduct), and legal certainty, the General Court considers that, in
addition to undermining legal certainty, the contested Decision also breaches the
legitimate expectations that Spanish authorities and companies had concerning the
initial Decisions and their application to indirect acquisitions. The Commission
implied, through its public statements, that this regime did not constitute State aid
without providing additional details. Therefore, the General Court concludes that the
Commission made a legal error by denying the recognition of legitimate expectations
to the beneficiaries of the aid scheme in question regarding their indirect
acquisitions. Consequently, the contested Decision is annulled in its entirety.
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