On 28 July 2016, the opinion of Advocate General (AG) Wathelet of the Court of Justice of the European Union (CJEU) was published concerning the 2009 and 2011 decisions of the European Commission that Spain's goodwill amortization rules violated EU State aid rules. The rules in question allow a Spanish taxpayer to amortize goodwill resulting from an acquired shareholding in a foreign company if the shareholding is at least 5% and is held for at least one year. However, such amortization is not allowed for similar acquisitions of a Spanish company. The European Commission considered this a selective advantage that constituted illegal State aid.

The Commission decisions were appealed and subsequently annulled by the General Court of the European Union (ECG) in November 2014. The annulment was based primarily on the ECG's interpretation of what can be considered a selective advantage under the conditions set out in the Treaty on the Functioning of the European Union (TFEU), which was more limited than the European Commission's interpretation. The European Commission appealed to the CJEU and requested that the judgments of the ECG be set aside.

In the opinion, the AG found that the ECG interpretation of selectivity was too limited and that the Spanish goodwill rules do in fact provide a selective advantage. In particular, the AG found that:

• Once a tax measure derogates from the 'normal' or reference tax regime and benefits undertakings performing the transactions in question to the detriment of others that perform similar transactions, that measure is by definition discriminatory or selective;
• The fact that the conditions attached to the transactions covered by the derogatory tax measure are relatively easy to fulfill and available to a large number of undertakings does not call into question its selective nature, but only the degree of selectivity;
• The fact that the text of Article 107 TFEU speaks only of measures 'favoring certain undertakings or the production of certain goods' does not exclude economic transactions that are favored by such measures, since the act of favoring certain transactions also serves to favor certain undertakings;
• The selectivity criterion provided for in Article 107(1) TFEU does not require the identification of a category of undertakings with specific characteristics on account of which they are the only ones favored by the tax measure at issue; and
• The measure at issue is selective because it benefits undertakings performing cross-border transactions but not undertakings performing the same transactions at the national level.

Based on the above, the AG recommends that the judgments (annulments) be set aside and the cases be referred back to the ECG.

Click the following link for the full text of the AG opinion.