SpainSpain

Legal ReferenceCorporate Income Tax Act, Art.18.1 (Ley 27/2014, 27 November 2014)

Legal ReferencePreamble of the Corporate Income Tax Act, part III.1,e)

The OECD TPG are recognized by the Preamble of the Corporate Income Tax Act as a source of interpretation of the internal legislation and as far as the Guidelines do not conflict with the domestic regulations.

Legal ReferenceCorporate Income Tax Act, Art.18, paragraph 2

a) An entity and the owners of its equity provided that the shareholder owns, at least, 25% of the entity. In that case, the definition also applies to the spouse, ascendants or descendants of a natural person shareholder. b) An entity and the members of its Board of Directors (BoD) or Administrators. The definition also applies to the spouse, ascendants or descendants of the member of the BoD or Administrator. The compensation of the member of the BoD or Administrator is out of the scope of the definition. c) Two entities of the same group. d) An entity and the members of the Board of Directors or Administrators of another entity of the same group. e) Two entities when one of them owns, indirectly, at least, 25% of the capital of the other. f) Two entities when the same natural person (or the spouse, ascendants or descendants) or the same entity owns, directly or indirectly, at least 25% of the capital of both of them.

Legal ReferenceCorporate Income Tax Act Art.18, paragraph 4

The most appropriate method rule applies regarding the five recognized methods. Other methods (not specified) and valuation techniques may be used only when none of the five recognized methods can be applied, as long as they are in accordance with ALP.

• CUP (provided)
• Resale Price (provided)
• Cost Plus (provided)
• TNMM (provided)
• Profit Split (provided)
• Other (provided)

Legal ReferenceCorporate Income Tax Act Art.18, paragraph 4

The most appropriate method rule applies regarding the five recognized methods. Other methods (not specified) and valuation techniques may be used only when none of the five recognized methods can be applied, as long as they are in accordance with ALP.

• Hierarchy of methods (not selected)
• Most appropriate method (selected)
• Other (if so, please explain) (not selected)

Spain’s domestic legislation does not contain specific guidance on commodity transactions. The TPG apply as a source of interpretation.

Legal ReferenceCorporate Income Tax Regulations, Art. 17 (Real Decreto 634/2015, de 10 de julio)

The internal regulations (please, see Reference to article 17 of the Corporate Income Tax Regulations) follow the process outlined in Chapter III of the TPG.

Based on several court decisions, the use of secret comparables is not allowed for transfer pricing assessment purposes.

Legal ReferenceCorporate Income Tax Regulations, Art. 17.7; Note on different issues regarding the arm’s length range

The internal regulations (Please, see Reference to art. 17.7 of the Corporate Income Tax Regulations) allow for the use of an arm´s length range and statistical measures in specific circumstances, but there is not a requirement to do so. The Spanish Tax Administration has published in its website a note addressed to tax auditors with further elaboration on this topic (please, see the Reference).

Legal ReferenceCorporate Income Tax Regulations, Art. 17.4

Comparability adjustments are not necessarily required under internal regulations, but, in some cases, they may be necessary to account for differences between the situations being compared.

Spain’s domestic legislation does not contain specific guidance on intangible transactions. As a source of interpretation, the TPG are used.

Legal ReferenceCorporate Income Tax Act, Art.18, paragraph 5

Article 18, paragraph 5 refers to specific requirements applicable to intra-group services transactions, e.g., the benefit test, rational allocation of centralised services or the methods to be applied.

The simplified approach for low value-adding intra-group services has not been implemented. As a source of interpretation, the work of the EU Joint Transfer Pricing Forum on low-value adding intra-group services and the OECD TPG may be used (e.g., in order to understand what a low value-adding service is).

Spain’s domestic legislation does not contain specific guidance on financial transactions. As a source of interpretation, the TPG are used.

Legal ReferenceCorporate Income Tax Act, Arts. 15.h), 15 bis and 16

- General limitation to the deductibility of financial expenses. CTA, Art. 16 includes a general limitation on the deduction of financial expenses according to Art. 4 of the Council Directive (EU) 2016/1164, of July 12, 2016 (ATAD 1) and it is consistent with standards set up on Action 4 final report of the OECD/G20 BEPS project. - Specific limitation to the deductibility of financial expenses in cases of leveraged intra-group sales of shares. CTA, Art. 15, letter h), establishes the non-deductible of financial expenses generated within a commercial group to carry out certain operations between entities belonging to the same group (i.e: acquisition of intragroup shares), unless the taxpayer proves the transaction is reasonable from an economic perspective. - No deductibility of financial expenses in the case of hybrid instruments or entities. CTA, Art. 15 bis contains anti-hybrid rules fulfilling transposition of Council Directive (EU) 2016/1164, of July 12, 2016, laying down rules against tax avoidance practices that directly affect the functioning of the internal market as amended by Council Directive (EU) 2017/952, of May 29, 2017 regarding hybrid mismatches with third countries. Provisions to neutralize hybrid mismatches contained in the aforementioned article are consistent with standards set up on Action 2 final report of the OECD/G20 BEPS project. - For leveraged buy-outs there is a specific limitation to the deductibility of financial expenses of 30% of the operating profit of the acquiring entity, excluding the profit of an acquired entity that is merged with the acquirer or is part of the tax consolidation group within the following four years.

Legal ReferenceCorporate Income Tax Act, Art.18, paragraph 7; Corporate Income Tax Regulations, Art. 18

Article 18, paragraph 7 refers to specific requirements applicable to cost contribution agreements, e.g., the value of contributions should be properly related to the expected benefits, the members should participate in the intangibles, assets or services obtained through the CCA, the agreement should include provisions related to balancing payments, changes in the membership, withdrawal or termination.

Legal ReferenceCorporate Income Tax Act, Art.18, paragraph 3; Corporate Income Tax Regulations, Arts. 13 to 16; Ministerial Order approving the specific tax return for related transactions; Ministerial Order approving the CbC specific tax return

• Master file consistent with Annex I to Chapter V of the TPG (selected)
• Local file consistent with Annex II to Chapter V of the TPG (selected)
• Country-by-country report consistent with Annex III to Chapter V of the TPG (selected)
• Specific transfer pricing returns (separate or annexed to the tax return) (selected)
• Other (specify): (not selected)

Legal ReferenceCorporate Income Tax Act, Art.18, paragraph 3; Corporate Income Tax Regulations, Arts. 13 to 16; Ministerial Order approving the specific tax return for related transactions; Ministerial Order approving the CbC specific tax return

The Master file and the Local file corresponding to a year should be at the disposal of the Tax Administration on the last day for submitting the tax return for that year. This information is provided to the Tax Administration only in case of a specific request to the taxpayer. The CbC report corresponding to a year should be submitted to the Tax Administration no later than 12 months after the last day of the corresponding fiscal year. Spain requires a specific transfer pricing information return. It contains basic information for risk assessment, including the type and amount of the controlled transactions, the methods used, etc. The information has to be filed in the month following the 10 months after the end of the tax year period.

Legal ReferenceCorporate Income Tax Act, Art.18, paragraph 13

The internal legislation (Please, see Reference to article 18.13 of the Corporate Income Tax)) provides for documentation-related penalties in some circumstances. In particular, the legislation provides a legal ground for penalties when the taxpayer does not provide the documentation to the Tax administration or the documentation is incomplete or false. In these cases, the penalty is calculated in a different way depending whether or not there is a tax adjustment on the transfer prices of the entity. In addition, in case the transfer prices of an entity are adjusted by the Tax administration, there can also be a penalty if the transfer prices that are declared in the tax return are different from those of the documentation.

Legal ReferenceCorporate Income Tax Act, Art.18, paragraph 13; Corporate Income Tax Regulations, Arts. 13, 15 and 16; Ministerial Order approving the specific tax return for related transactions

All groups with a turnover of or above 45 million a year should present the Master and Local File if it is required by the Tax Administration. Together with this general obligation, the Spanish legislation includes simplification regimes that apply to entities with a lower turnover. On the other hand, some operations are always excluded from the specific documentation that has to be provided. In particular, there are two simplification regimes that apply to following taxpayers: - Medium taxpayers (groups with income not exceeding EUR 45 million a year) do not need to provide the Master File and have just to provide the Local File with a simplified content. - Small taxpayers (groups with income not exceeding EUR 10 million a year) are also exempt from the obligation of providing the Master File and just have to fill a standard form approved by the Ministry of Finance. However, these two simplification measures do not apply regarding some specific transactions that have always to be documented: e.g. transfer of business, some transfers of shares transfer of real estate or transfer of intangibles. In any case, and regarding both the general and the simplified documentation regime, following transactions do not need to be documented: transactions with the same related party below EUR 250 000 or intra-group transactions if a tax consolidated regime is applied. Concerning the specific transfer pricing information return that is in place in Spain, it includes some exceptions that refer to transactions with the same related party when these are below EUR 250.000 or to specific transactions if the amount of each of them is under EUR 100.000. However, in certain cases, also these transactions have to be reported (if the transactions of the same type that are priced with the same method amount for more than the 50% of the total turnover of the taxpayer).

Legal ReferenceCorporate Income Tax Act, Art. 18 paragraph 9 (APAs); Chapter VII Corporate Income Tax Regulations, (APAs); Non Residents Income tax Act, 1st Additional disposition (MAPS); MAP on Direct Tax Matters Regulations (Real Decreto 1794/2008, 3 November); OECD Spain’s Dispute Resolution Profile; Spain’s guidance on Mutual Agreement Procedures

The possibility to request an APA was established in 1995, under Law 43/1995, of 27 December on Corporations Tax and remains present in the current Corporate Income Tax Law. The period of coverage may roll-back to the years immediately preceding the period in which the APA is signed if the domestic time limit has not expired and there has not been a firm tax assessment related to these years. The related persons or enterprises may make a request before the controlled transactions take place. There are domestic rules for MAP that refer to the procedure and the different phases of MAPS, taking into consideration the legal basis for MAP requests (see Reference to MAP on Direct Tax Matters Regulations). Detailed information is available at the OECD MAP profile of Spain and the MAP Guidance published in the Spanish Tax Administration’s website.

• Rulings (not selected)
• Enhanced engagement or cooperative compliance programmes (selected)
• Advance Pricing Agreements (APA) (selected)
• Unilateral APAs (selected)
• Bilateral APAs (selected)
• Multilateral APAs (selected)
• International Compliance Assurance Programme (ICAP) (selected)
• Mutual Agreement Procedures (selected)
• Other (please specify): (not selected)

Legal ReferenceCorporate Income Tax Act, Art.18, paragraph 6

In Spain, transfer pricing rules apply to certain transactions between some individuals and companies. There is a safe harbour for services provided by professional shareholders (e.g., lawyers, doctors) to their related entities when certain specific circumstances are met. The safe harbour is looking for simplicity in common low complex transactions between professionals and their entities, while avoiding that profits are accumulated in excess in those entities. (CTA, Art 18.6).

The domestic legislation is silent regarding year-end adjustments. In relevant circumstances, they may be allowed.

Legal ReferenceCorporate Income Tax Act, Art.18, paragraph 11; Corporate Income Tax Regulations, Art. 20

The domestic regulations provide relief if the taxpayer repatriates the funds.

91 treaties that are applied to 93 countries follow Article 7 as it read before 2010. 1 treaty follows Article 7 as it reads after 2010.

• Article 7 as it read before 2010. (selected)
• Article 7 as it reads after 2010. (selected)
• Other (please provide additional details) (not selected)

2010 Approach of Article 7 is applied only when it is included in the relevant tax treaty. So far it has been included in one Tax treaty. The rest of the treaties follow the 2008 OECD MTC Article 7 and relevant commentaries.

Legal ReferenceNon Residents Income Tax Act, Articles 16, 18.

The domestic rules for the attribution of profits to permanent establishments apply only when there is no bilateral Tax treaty in effect. Its main features are: - The tax base is determined according to the rules of the Corporate Income Tax. - Internal and related transactions are priced according to its market value. - Regarding expenses, there are several limitations to the deductibility of internal payments like royalties, interests (unless those from PE’s of Banks), commissions, technical assistance or payments for the use of assets and rights. - A part of the direction and general administrative expenses that correspond to the PE can be deducted. These rules are interpreted in accordance with the non-discrimination principle (article 24.3 of the Tax Treaties and, regarding EU legislation, article 18 of the Treaty on the Functioning of the European Union (TFEU)) and with the freedom of establishment within the EU (article 49 of TFEU)).