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October 11, 2021

CJEU issues final decision confirming characterization of the Spanish tax amortization regime for financial goodwill as State aid

Executive summary

On 6 October 2021, the Court of Justice of the European Union (CJEU) issued its judgment on several cases1 concerning the Spanish tax amortization regime for financial goodwill arising in connection with direct foreign shareholding and also dismissed the appeals filed against the prior judgment of the European Union (EU) General Court (EUGC).

The CJEU dismissed the appeals brought against the judgments of the General Court upholding the classification of the Spanish tax rules on the amortization of financial goodwill as State aid incompatible with the internal market.

Detailed discussion


The Spanish financial goodwill2 controversy dates back to 2002, when Spanish rules were amended to allow the tax deductibility of financial goodwill amortization at an annual 5% rate, subject to compliance with certain requirements (i.e., specifically, compliance with the Spanish participation exemption requirements over such stake-holding).

In 2009, the European Commission (the Commission) challenged this regime on the basis of its alleged infringement of the EU internal market freedoms by releasing two decisions, dated 28 October 2009 (with respect to EU acquisitions) and 12 January 2011 (with respect to non-EU acquisitions), and declaring that as a result of the referred regime Spanish entities obtained an unlawful advantage (i.e., State aid) when acquiring foreign businesses, as compared to non-Spanish EU entities in the same position.

However, both decisions also stated that due to legitimate expectations of Spanish entities, transactions performed prior to 21 December 2007 would continue to be entitled to the benefits of such a regime going forward.

The legitimate expectations relied on the fact that through the answers given to certain questions posed in the European Parliament in 2005 and 2006, the Commission provided with precise assurance that the measure did not constitute unlawful State aid.

The 2009 and 2011 Commission decisions were appealed before the EUGC which, in 2014, annulled them relying on the failure of the Commission to link the selective nature of the financial goodwill regime (which is a conditio sine qua non for qualifying as a prohibited State aid).

Consequently, some appellants (i.e., non-Spanish EU entities) challenged the EUGC judgment before the CJEU in 2016 which reviewed and, in turn, annulled the EUGC judgment referring the cases back again to the EUGC since upon nullifying the Commission decisions the EUGC erred in law by concluding that the Commission had not demonstrated that the measure was selective.

Finally, in 2018, the EUGC re-issued (as mandated by the CJEU) its renewed decisions3 on the qualification of State aid of the Spanish financial goodwill regime, confirming the Commission’s initial stance and disallowing such regime. The EUGC confirmed that the legitimate expectations applied to beneficiaries which claimed the goodwill amortization on acquisitions that took place before 21 December 2007.

A third decision was issued by the Commission in 2014, relating to acquisitions performed through holding companies (so-called, indirect acquisitions); this decision has also been challenged (on relevant additional grounds than the other two decisions, since this third decision does not acknowledge any legitimate expectations period) and is yet, as of the date of this Alert, to be seen how this would evolve in the near future.

The 2021 CJEU judgments

In these judgments, the CJEU examines the error in law allegedly incurred by the second round of EUGC judgments confirming the original Commission decisions on the characterization of the Spanish financial goodwill amortization regime as an undue State aid.

In particular, the CJEU examines the selectivity requirement for any particular arrangement to be qualified as State aid contrary to EU law.

In order to classify a national tax measure as selective, the Commission must follow a three-step method:

  1. The common or normal tax system applicable in the Member State must be identified.
  2. The tax measure must be a derogation of that reference system, differentiating between undertakings which, in the light of the objective pursued by the common or normal tax system, are in a comparable factual and legal situation.
  3. Whether that differentiation is justified since it flows from the nature or general structure of the system of which the measure forms part must be ascertained.

Hence, the CJEU, responding to the appellants’ assertions, confirmed the EUGC’s previous and innovative approach on the selectivity concept, stating that a tax measure may be selective even if there are no restrictions to the application of such measure, just because it introduces a difference in treatment between the companies which have decided to undertake a certain transaction (for instance, the acquisition of a foreign target) instead of another transaction (such as the acquisition of a Spanish target).

It must be noted that the CJEU appreciated the error in law in the EUGC judgment with regards to the determination of the reference system and its objective as per step 2 above. However, this error in law does not lead to the annulment of the EUGC judgment since other legal grounds of greater importance support the decision.


This CJEU’s judgment confirms the EUGC’s prior judgment on the Spanish financial goodwill amortization regime characterization as State aid.

Even though these judgments seem to settle the long-debated controversy, several questions remain unanswered on the matter. For instance, how the recovery of the unlawful State aid will be performed, or, especially, how these decisions impact the existing controversy on the financial goodwill amortization derived from indirect acquisitions.

Also, the decisions endorse a broad and innovative interpretation of the concept of selectivity of tax measures in the context of State aid, which may give the Commission more leeway as it will not have to identify a specific category of beneficiaries to claim that a given tax measure qualifies as unlawful State aid.


For additional information with respect to this Alert, please contact the following:

Ernst & Young Abogados, Madrid

Ernst & Young LLP (United States), Spanish Tax Desk, New York



  1. Judgments in Case C-50/19 P Sigma Alimentos Exterior v Commission, in Joined Cases C-51/19 P World Duty Free Group v Commission and C-64/19 P Spain v Commission, in Case C-52/19 P Banco Santander v Commission, in Joined Cases C-53/19 P Banco Santander and Santusa v Commission and C-65/19 P Spain v Commission and in Cases C-54/19 P Axa Mediterranean v Commission and C-55/19 P Prosegur Compañía de Seguridad v Commission.
  2. Difference between the price paid for the acquisition of a company and the fair market value (FMV) of its assets minus its liabilities.
  3. See EY Global Tax Alert, The European Union General Court issues decision on Spanish tax amortization of financial goodwill for foreign shareholding acquisitions, dated 20 November 2018.

The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ernst & Young LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Ernst & Young LLP or other tax professional prior to taking any action based upon this information. Ernst & Young LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.


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