Deduction for Export Activities in Spain’s Corporation Tax: Present and Future

Abstract: The European Commission, in its Recommendation of 22 March 2006, considered that the deduction for export activities in Spanish corporation tax constituted a State aid incompatible with the single market under Article 87(1) of the EC Treaty. This pronouncement clearly shows how community legislation as regards State aids emerges as an important constraint on the tax sovereignty of Member States and, more specifically, on the use of taxes for extra–tax purposes. This paper examines the regulation of the deduction for export activities in Spain’s corporation tax before and after the Commission's mentioned Recommendation.