CJEU - Recent Developments in Direct Taxation 2021

S. 741. Banco de Santander (C-274/14)

1.1. Spanish Legal Framework

Under Spanish Corporate Tax Law, the amortization of goodwill for tax purposes is possible only in business combinations. However, pursuant to a tax measure introduced in 2001, the Spanish law on Corporate Tax allowed companies that acquired shareholdings in non-resident companies (which complied with certain requirements) to deduct from their taxable income the amortization of financial goodwill generated in the purchase over a minimum of 20 years (annual amortization of 1/20th).

The shareholding in the non-resident company must be at least 5 % and held without interruption for at least one year. According to Spanish Law, to be classified as a foreign company, the company must be subject to a tax identical to the corporate tax applicable in Spain, and its income must derive mainly from business activities carried out abroad.

The “financial” goodwill was the difference between the purchase price of the shareholding and its theoretical accounting value on the date of purchase, which had not been attributed to the non-resident entity’s property and rights, pursuant to the criteria laid down in Article 46 of the Commercial Code...