Judgment — ECLI:EU:C:2008:161
Date: 2008-03-13
Language of the case: Spanish
Court formation: Third Chamber
Based on: Treaty establishing the European Economic Community (1957)
Subject matter: Freedom to provide services
Concepts: The various services;General
Procedure: Action for failure to fulfil obligations
Origin: Spain

Action brought on 2 June 2006 - Commission of the European Communities v Kingdom of Spain (Case C-248/06) Language of the case: Spanish Parties Applicant: Commission of the European Communities (represented by: R. Lyal and L. Escobar Guerrero, acting as Agents) Defendant: Kingdom of Spain Form of order sought declare that, by maintaining in force rules for the deduction of costs in respect of research and development and technological innovation carried out abroad which is more onerous than the rules applicable to costs incurred in Spain, as amended by Article 35 of the Law on corporation tax, approved by Royal Legislative Decree 4/2004 of 5 March, the Kingdom of Spain has failed to fulfil its obligations under Articles 43 and 49 of the EC Treaty on freedom of establishment and freedom to provide services, and the corresponding articles in the Agreement on the European Economic Area; order the Kingdom of Spain to pay the costs. Pleas in law and main arguments Infringement of freedom of establishment (Articles 43 and 48 EC and Article 31 EEA): the territorial restriction, which consists of the fact that only expenses incurred in respect of R& D and IT activities actually carried out in Spain may benefit from the deduction of the corporation tax allowance, is a factor which restricts the freedom of establishment of Spanish companies which invest in R&D and IT outside Spain, benefiting companies making the same investment in Spain, in particular, undertakings which have their main office in another Member State and which operate in Spain via a secondary establishment. Infringement of the freedom to provide services (Articles 49 EC and 36 EEA): the costs of R&D and IT activities subcontracted outside Spain are not eligible for the deduction of the corporation tax allowance. That limitation constitutes an obstacle to the freedom to provide services, provided for in the EC Treaty. ____________