BRUSSELS, Oct 28 (Reuters) - The European Commission on Wednesday ordered Spain to abolish a tax provision that allows Spanish companies to write off any excess price paid when acquiring a stake in a foreign firm.
The scheme distorts competition within the European single market by giving an unjustified advantage to Spanish companies especially in competitive takeover bids, the executive arm of the 27-nation European Union said in a statement.
"To preserve a level playing field in the single market, Spain must put an end to this measure and recover unlawful aid given since December 2007," EU Competition Commissioner Neelie Kroes said.
"The Commission is still waiting for additional information from Spain on acquisitions outside the EU, where differentiated treatments may be justified," Kroes said.
The Spanish income tax code allows a Spanish company to amortise the financial goodwill resulting from the acquisition of a significant shareholding in a foreign company during the 20 years following the acquisition.
The EU executive launched an investigation in 2007 following complaints that the scheme had damaging effects in a number of takeover bids by Spanish companies including those of O2 by Telefonica, and Scottish Power by Iberdrola.
"The scheme ... provides selective advantages to Spanish companies engaged in acquiring non-Spanish European companies as compared to Spanish companies acquiring shares in other Spanish companies," the EU executive said. (Reporting by Bate Felix, editing by Dale Hudson)