Invest in Spain: Recent tax developments with impact in M&A transactions

Until very recently, Spain's corporate income tax framework was regarded by international investors as exceptionally friendly compared to other European jurisdictions, as it allowed to deduct financial expenses almost without limitation, new investments could benefit from accelerated tax depreciation, and accounting losses could offset taxable income without restrictions.

However, not surprisingly, in the last two years several tax amendments have been introduced with the excuse to align Spain's corporate income tax system with other European countries, and mainly to increase tax collection. On the other hand, the Spanish Tax Authorities and Spanish Courts have clarified the interpretation of some relevant tax provisions, in many cases in favour of taxpayers.

In this note we summarize the main tax developments that, in our view, could have an impact in the tax structuring of M&A transactions in Spain in 2014. We also anticipate some possible tax changes that foreign investors should be aware of.

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