Worldwide transfer pricing reference guide 2014

Spain
Taxing authority and tax law
Taxing authority: State Agency of Tax Administration (AEAT) and General Directorate of Taxation (DGT).
Tax law: Spanish Consolidated Corporate Income Tax Law (CCITL), Article 16.
Relevant regulations and rulings
On 18 November 2008, by Royal Decree, the Spanish Government approved and published regulations that specify transfer pricing
documentation requirements (Royal Decree 1793/2008) applicable to persons or entities participating in related party transactions.
Transfer pricing documentation requirements have been in effect in Spain since 2006 (following Law 36/2006, applicable to tax
periods beginning 1 December 2006). This includes a shift in the burden of proof to the taxpayer and a change in the penalty regime.
However, the law did not include a detailed description of what the documentation should contain, except to say that it had to reflect the
arm’s length principle and that the arm’s length test should be based on one of the methods specified in the law (i.e., CUP, Cost Plus,
Resale Price, TNMM and Profit Split).
Regarding transfer pricing penalties, the Royal Decree-Law 6/2010 (approved on 9 April 2010) introduces amendments modifying
the penalty amounts for companies that meet certain criteria. The Royal Decree 897/2010 (approved on 9 July 2010) and the Royal
Decree-Law 13/2010 (approved on 3 December 2010) introduce certain amendments consisting of exemptions to transfer pricing
documentation requirements.
OECD guidelines treatment
Spanish transfer pricing legislation explicitly endorses the application of the OECD Guidelines and those of the European Union Joint
Transfer Pricing Forum (EUJTPF).
Priorities/pricing methods
The law establishes that, in order to determine the market value, one of the following methods should be applied: CUP, Cost Plus or
Resale Price. These methods are on the same preferential level in the valuation method hierarchy.
Given the complexity of certain transactions or the availability of information relating to the transactions, the above methods may not be
applicable, and TNMM or Profit Split may be used.
In practice, TNMM is commonly applied in case of both audits and APAs.
Transfer pricing penalties
Failure to comply with the documentation requirements specified in the new regulations may result in major penalties. These penalties
can result from not maintaining proper documentation and/or from not applying the arm’s length principle (market value).
When the assessment does not produce a tax adjustment, the penalty will be EUR1,500 per fact, or EUR15,000 per group of omitted,
inaccurate, or false facts.
When the tax authorities adjust the pricing of a transaction, the penalty may be up to 15% of the gross adjustment.
There will be no penalties where the obligation to document has been complied with, even if the tax authorities reassess the value of
transactions.
In addition to the above, the new regulations also include the applicability of “secondary adjustments” (i.e., in those transactions where
both values will have, for the related parties, a tax treatment that corresponds to the nature of the profit realized). The law makes a
clarification for cases where the link is defined in light of the relationship between the shareholder and the entity, the difference shall
(in proportion to the entity’s degree of participation) be considered as:
• Dividends, whenever such difference is in favor of the shareholder
• Contributions by the shareholder to the entity’s equity, whenever the difference is in favor of the entity
The above sanctions are compatible with aggravating circumstances such as resisting, obstructing, excusing or negating the tax
authorities’ actions.
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