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EU court rules Spanish foreign holding tax scheme was illegal aid

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BRUSSELS (Reuters) – A European Union court ruled on Thursday that a Spanish scheme to give a tax advantage to companies investing in foreign businesses was illegal state aid that had to be repaid.

Spain introduced a law in 2001 that allowed goodwill to be deducted from tax in the form of an amortisation for holdings in foreign companies of at least five percent if held for one year.

The European Commission determined in decisions in 2009 and 2011 that this amounted to illegal state aid, prompting a legal challenge from Spanish companies, including Banco Santander <SAN.MC>, Autogrill Espana and Santusa Holding.

The General Court of the European Union initially upheld the companies’ challenge, but then the EU’s top court, the European Court of Justice ruled that the General Court needed to reconsider its verdict.

In that verdict, issued on Thursday, the court said that tax measures could still be considered selective even if they applied to all Spanish companies. In this case, it said, they granted an advantage to companies who held foreign shareholdings over those with holdings in other Spanish companies, which did not get preferential tax treatment.

(Reporting by Philip Blenkinsop)

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