EU: EU Sues Spain Over Failure to Implement Merger Tax Rules

Today, the European Commission decided to refer Spain to the Court of Justice of the European Union for failure to ensure correct implementation of the Merger Directive on the common system of taxation applicable to Member States (Directive 2009/133/EC). The objective of the Merger Directive is to remove fiscal obstacles to cross-border reorganisations involving companies situated in two or more Member States.

The Directive harmonizes rules on taxation that concern mergers, divisions, transfers of assets and exchanges of shares among companies across the internal market and EU Member States.

The Commission sent a letter of formal notice on 25 January 2019, followed by a reasoned opinion on 28 November 2019 to Spain. In its formal replies, and in subsequent exchanges with national authorities, Spain has maintained that its tax legislation is in line with the Merger Directive. The Commission considers that efforts by the Spanish authorities, to date have been insufficient and is therefore referring Spain to the Court of Justice of the European Union.

Background

The Merger Directive establishes a comprehensive framework for fair and consistent taxation practices and streamlines corporate restructuring processes thus bolstering competitiveness and stimulating economic growth across the EU.

Currently, Spanish law sets restrictive conditions for total divisions of companies that are not provided for in the Merger Directive: after the total division of a company, shareholders of the divided company have to maintain the same proportion of shares in each of the companies which received the assets from the divided company, that they formerly had in the divided company. If this condition is not met, the Spanish rules require that the assets and liabilities transferred are branches of activity and therefore do not benefit from the tax regime.

These conditions are not required by EU law and are therefore a violation of the Merger Directive.

An improper implementation of the Merger Directive by a Member State introduces a distortion that disrupts the internal market and contributes to legal uncertainty for companies.

27 February 2024

AFRICA: South Africa Regulators to Unveil Document Categorizing Stablecoins as a ‘Particular Type of Crypto Asset’

In 2024, the Intergovernmental Fintech Working Group, a consortium of South African regulators that unveiled a position paper on crypto assets in 2021, is expected to “publish additions to include

Read More
19 December 2024

HONG KONG: Hong Kong vows to finish crypto asset reporting framework by 2026

On December 13, Mohammed Azharuddin Chhipa residing in Springfield, was convicted by a federal jury on multiple counts associated with the Islamic State of Iraq and al-Sham, a foreign terrorist organization.

Read More
8 August 2024

US: Trump election win to spell chaos for ESG strategies

Investors will have to prepare for a complete overhaul of economic, social and governance (ESG) rules by the US government in the case of Donald Trump winning the election. That’s according to Panmure

Read More
19 February 2024

EU: Apple likely to face €500 million fine for breaking EU law

Apple is likely to face a fine of around half a billion euros early next month according to five people with direct knowledge of an on-going investigation. These five sources reported these details

Read More