The EU's competition watchdog ordered Spain Wednesday to abolish a tax clause that allows Spanish companies to write off the costs of buying into businesses abroad above their market price. The watchdog, the European Commission, also demanded that Spain recover any unlawful aid granted for European buyouts under the clause since December 21, 2007. It said it would continue to probe acquisitions outside the EU. In a statement, the commission said 'the scheme distorts competition within the (EU) single market because it confers an unjustified advantage to Spanish companies especially in the context of competitive takeover bids.' EU Competition Commissioner Neelie Kroes said: 'This tax provision gives a discriminatory advantage to Spanish companies when acquiring shares in other European companies.' 'To preserve a level playing field in the single market, Spain must put an end to this measure and recover unlawful aid given,' she added. The commission, which polices competition for the 27-nation EU, launched its investigation two years ago following questions from members of the European parliament and complaints that the scheme was unlawful. Some of the allegations centred around takeover bids by Spanish companies, including of O2 by Telefonica, Scottish Power by Iberdrola, and bids by Sacyr, Albertis and Cintra for the concession of highways in France, it said. The tax clause allows Spanish firms to 'amortise the financial goodwill' from purchases of a significant slice of foreign companies for 20 years following the acquisition. The commission said this creates an economic advantage because the costs of buying part of any enterprise will ultimately be lower than its market value, over the long-term, and therefore constitutes state aid for foreign purchases. 