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Spain Referred To ECJ For 'Discriminatory' Taxes

by Ulrika Lomas, Tax-News.com, Brussels

04 December 2014


The European Commission has referred Spain to the European Court of Justice (ECJ) for the "discriminatory" tax treatment of investments in certain foreign bonds and non-resident companies.

The Commission said that under current Spanish law, the tax treatment of foreign-sourced dividends (that is, dividends distributed by a non-resident company to a Spanish company) is more burdensome than that applied to domestic-sourced dividends (dividends distributed to companies registered in Spain). As a result, a Spanish company that invests in a non-resident company must fulfill more conditions if it wants to benefit from the tax advantage. The Commission added that, in some cases, the tax advantage foreseen for domestic-sourced dividends is not available for foreign-sourced dividends.

The Commission sent a reasoned opinion to Spain in June 2013, asking it to amend these rules. The Commission considers that they infringe the right of establishment, and the freedom to provide services, the cross-border supply of goods, and the free movement of capital, as set out in European Union (EU) treaties. The Commission has decided to bring the matter before the Court of Justice because no reforms have been introduced.

In addition, in a separate case raised in February 2013, the Commission asked Spain to amend the inheritance and gift tax legislation of the Territorios Históricos de Alava y Bizkaia. According to the Commission, public debt issued by the local administrations (la Comunidad Autónoma del País Vasco, the Diputaciones Forales or the Entidades Locales Territoriales de los tres Territorios Históricos) benefits from a preferential inheritance tax treatment compared with that applied to similar titles issued in other EU and European Economic Area (EEA) states. The Commission believes that this difference in tax treatment discriminates against investments in public debt issued by other EU or EEA states.

The Commission said that it had decided to refer Spain to the ECJ on this matter also, because only the Territorio Histórico de Alava has amended its legislation.

TAGS: inheritance tax | tax | investment | European Commission | tax incentives | law | legislation | tax rates | gift tax | Spain | dividends | tax reform | European Union (EU) | services | Europe

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