Direct taxation: The European Commission requests Spain to change its tax provisions related to the exchange of shares
European Commission - IP/09/1019 25/06/2009
Brussels, 25 June 2009
The European Commission has formally requested Spain to change its tax provisions concerning the taxation of capital gains arising from an exchange of shares. The Commission considers some of these provisions to be incompatible with the "Merger" Directive (Council Directive 90/434/EEC) and with the freedom of establishment and the free movement of capital as laid down in Articles 43 and 56 of the EC Treaty and the corresponding articles of the EEA Agreement. The request takes the form of a reasoned opinion (second step of the infringement procedure provided for in Article 226 of the EC Treaty). If there is no satisfactory reaction to the reasoned opinion within two months, the Commission may decide to refer the case to the Court of Justice of the European Communities.
An exchange of shares is an operation whereby a company acquires a participation in another company equal or superior to the majority of the voting rights, against consideration in the form of new shares issued to the other company's shareholders.
The Spanish legislation provides for tax deferral upon realisation of the capital gains arising from an exchange of shares when the acquiring company is based in Spain. On the contrary, in case the majority of contributing shareholders are non-EU residents and the shares allotted to them represent the capital of a company not resident in Spain, the capital gains are normally taxed at the moment of the exchange. Spain justifies such difference in treatment invoking the difficulty to ensure effective taxation at a later stage, when the acquiring company is based outside Spain.
The Commission considers that such rules contravene Council Directive 90/434/EEC (the Merger Directive), Articles 43 and 56 of the EC Treaty and the corresponding articles of the EEA Agreement, as they are likely to dissuade companies from exercising their right of freedom of establishment. Moreover, they would also constitute an obstacle to the free movement of capital, as shareholders are treated less favourably if the company in which they receive shares is located in a Member State other than Spain.
The Commission's case reference number is 2008/4083 (Spain)
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