European Commission Warns Spain And Finland To Amend Their Discriminative Tax Policies

; posted on
March 12th, 2019

The European Commission published its Infringement Package for March 2019, which includes the infringement in the taxation area. In response to that, the European Commission sent a letter to Spain to eliminate discrimination on capital gains taxation and to Finland to bring its rules on tax deductibility of group contributions in line with EU law.

Spain: Discrimination on Capital Gains Taxation

The European Commission (EC) decided to send a letter of formal notice to Spain concerning the capital gains tax upon the transfer of shares for tax residents in EFTA states (i.e. Norway, Iceland, and Liechtenstein).

Under Spanish legislation, Spanish and EU tax residents benefit from an exemption from capital gains taxation on the transfer of shares (under conditions), while taxpayers residing in Norway, Iceland and Liechtenstein cannot benefit from that exemption.

The EC considers that the mentioned tax treatment is discriminatory as it restricts the freedom of establishment as well as the free movement of capital (article 63 of the Treaty on the Functioning of the EU (TFEU) and article 40 of the EEA Agreement), and therefore requests Spain to ensure equal treatment for taxpayers resident in Norway, Iceland and Liechtenstein.

Finland: Tax Deductibility of Group Contributions

Under its current legislation, Finland does not allow the deduction for tax purposes of contributions made to affiliated companies in other EU/EEA Member States to the extent that these cover definitive losses incurred by the latter. Meanwhile, to this extent, the group contributions arise between affiliated domestic companies the tax deduction is allowed.

Therefore, the European Commission requests Finland to amend its legislation on the tax deductibility of group contributions as it is contrary to the freedom of establishment (Article 49 of TFEU and Article 31 of the EEA Agreement). If Finland does not act within the next two months, the Commission may send a reasoned opinion to the Finnish authorities.

Source: European Parliament

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