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.

19 January 2024

INTERNATIONAL TAX: European prosecutors probe VAT fraud in six countries

The European Public Prosecutor’s Office (EPPO) carried out 25 searches and other investigative measures in six countries on January 17, in an action targeting a suspected 19 million euro VAT fraud,

Read More
31 May 2024

EU: EU proposes strict new taxes on large technology companies

The European Commission has unveiled radical measures to better tax technology companies with large operations in its member states. The first proposal would allow countries inside the EU to effectively

Read More
22 April 2024

US: Apple Defends Tax Practices, Calls for Corporate Tax Reform

Near the top of the business headlines is the battle that Congress has started to wage with Apple Inc. (NASDAQ: AAPL) over the taxes it pays. By some measures, the company barely pays taxes at all.

Read More
22 January 2024

CAYMAN ISLANDS: Cayman Finance applauds EU recognition of the strength of Cayman Islands AML regime and decision to remove jurisdiction from list of high-risk countries

Press Release from Cayman Finance, Monday 22 January, 2024. Cayman Finance is applauding the European Union’s recognition of the effectiveness of the Cayman Islands’ AML/CFT regimes and decision

Read More