The Spanish tax authorities challenged, in a binding report, the tax deductibility of financial expenses derived from debt used to fund a share premium distribution.The challenge was based on the application of the General Anti-Abuse Rule (GAAR), on the grounds that by using several “intermediary” entities and carrying out a series of consecutive intra-group transactions, the taxpayer achieved an anticipated distribution of future profits and generated financial expenses which reduced the tax burden in Spain. Cases that are substantially equal to the one in the report and successfully challenged by the STA based on GAAR could potentially entail penalties.Executive summary...