ECJ Annuls General Court Judgment Regarding Spanish Tax Scheme – Selectivity

On 21 December 2016, the European Court of Justice ("ECJ") issued a judgment on appeal in the joined cases C-20/15 P, Commission v World Duty Free Group and C-21/15 P, Commission v Banco Santander SA and Santusa Holding SL. The ECJ struck down the General Court's judgments annulling a Commission decision relating to a Spanish tax scheme. In what can be considered a landmark judgment, the ECJ analysed the scope of the criterion of selectivity applicable to the assessment of state aid under Article 107(1) TFEU.

The Spanish law on corporation tax provided that undertakings which are resident in Spain for tax purposes and acquire a shareholding of at least 5% in a foreign company could deduct, through amortisation, the goodwill resulting from that shareholding from the basis of assessment for the corporation tax for which the undertaking is liable. By contrast, resident undertakings making the acquisition of such a shareholding in undertakings taxable in Spain could not