The European Commission has opened a formal investigation under EU State aid rules into the Spanish corporate tax scheme for amortisation of financial goodwill. Pursuant to Spanish tax law, the financial goodwill resulting from the acquisition of a significant participation in a foreign company may be amortised over 20 years following the acquisition. Such amortisation allows a Spanish company to deduct from its tax base the difference between the acquisition costs of the shares and the market value of the underlying assets of the acquired participation. The scheme allows amortisation even when the acquiring and acquired companies are not combined in a single business. In addition, the scheme only applies to acquired shareholdings in a foreign company of at least 5 per cent. The Commission is concerned that the scheme could distort competition as it attracts international holding activities to locate in Spain, while seemingly excluding the creation of domestic groups from its scope.