Transfer Pricing

Transfer Pricing

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  • Dr. Eduardo de Proft Cardoso
    Dr. Eduardo de Proft Cardoso    Group moderator
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    Transfer pricing Documentation requirements in Spain
    Hello Everybody, i´ve just arrived in this group and would like to to contribute with some useful information.

    The recent approval of Royal Decree 1793/2008 (03/11/2008) amending the Rules of the IS (corporate taxation) which develop in detail the main rules introduced by Law 36/2006 on measures for the prevention of tax fraud, has resulted in major changes to the regulations in force to date (see Article 16 of the revised Law on Corporate Income Tax (TRLIS).

    This is the first time Spain introduce requirements related specifically to the maintenance of a Masterfile, countryfile.

    As you should already know, in Spain the taxpayer is under the obligation to demonstrate that the prices it has applied conform to arm's length conditions and is required to keep adequate documentation of its transfer prices.
    Well, let´s start to take a look at the most important issues addressed by the Royal Decree 1793/2008 on transfer pricing, which are summarized below:

    - Determination of the fair market value and requirements for documentation of transactions with related parties or companies resident in tax havens and joint assessment of prior dealings between persons or entities.

    - Regulates the documentation that the taxpayer must present (countryfile and master file), upon request by the tax administration, related to the taxpayer itself and documentation relating to the group of which it forms part, in order to determine the fair market value of operations between related persons or entities

    - It identifies the necessary guidelines for the analysis of comparability for the purposes of establishing fair market value which should be agreed between independent entities or persons under arm´s length conditions.

    - It also governs the obligations of those documents required to transactions with related party conducted in countries or territories considered tax havens. The documentation requirements shall be due from the 3 months following the entry into force of the Royal Decree, in February 19, 2009.

    - Regulates procedural issues related to verification of the fair market value of the transactions between related parties.

    - Regulates the so-called secondary adjustment.
    -Regulates the requirements for deductibility of the cost-sharing agreements entered into by related parties.

    - It regulates the procedure for the assessment of Advanced Price Agreements between related parties and the procedure for agreement on other operations related to foreign tax administrations. In this sense, a fairly detailed description is given of the procedure in relation to APAs and the resolution thereof (both unilateral APAs and bi- or multi-lateral APAs) being envisaged. It stipulates the possibility for an extension to the term of validity of an APA already approved (always when such application is filed within the six-month period preceding the expiry date of validity).

    - Clarification that the basis of income or deduction on account if the obligation to withhold or account access has its origin in the secondary adjustment, is the difference between the fair market value and the value agreed upon.

    In the next years, those who know the voracity of the Spanish tax authorities must be prepared to deal with tax inspections, since the penalties for failure certainly will be applied.


    Best regards,

    Eduardo de Proft Cardoso
    Lawyer/ Tax consultant
    Canary Islands, Spain
    • 03 Feb 2009, 1:38 pm
  • Marc Rahmel
    Marc Rahmel
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    Re: Transfer pricing Documentation requirements in Spain
    Hi Eduardo,
    do you have any documents or references for the spanish documentation requirements available which you could post here somehow (some PDF, links, etc.) in english language of course?
    Thanks in Advance for any support
    Marc
    • 05 Feb 2009, 3:52 pm
  • Dr. Eduardo de Proft Cardoso
    Dr. Eduardo de Proft Cardoso    Group moderator
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    Re^2: Transfer pricing Documentation requirements in Spain
    Dear Marc,

    Oficial information in english is very hard my friend. You will probably find more information outside Spain.
    The new legislation is in line with the EU JTPF global documentation requirements.

    http://www.dlapiper.com/files/Publication/eb442ee6-99dd-4427...

    http://www.ahgt.es/archivos/AHGT_transfer_pricing.pdf

    http://www.internationaltaxreview.com/?ISS=25227&PUBID=3...

    and so on...

    But, an in depth analysis about the new legislation I don´t know where to find, i´m trying to write an article to publish within IBFD, but I actually don´t have enough time to work on this….

    The royal decree with measures for the prevention of tax fraud I refer in the text (Spanish):
    http://www.aeat.es/AEAT/Contenidos_Comunes/La_Agencia_Tribut...

    The Law 36/2006 (Spanish)
    http://www.aeat.es/AEAT/Contenidos_Comunes/La_Agencia_Tribut...

    Best regards,

    Eduardo de Proft Cardoso
    This post was modified on 05 Feb 2009 at 07:30 pm.
    • 05 Feb 2009, 7:29 pm
  • Marc Rahmel
    Marc Rahmel
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    Re^3: Transfer pricing Documentation requirements in Spain
    Dear Eduardo,
    thank you so much. I will go through it and hope to find some relevant information.
    This was very kind !!
    Thanks a lot again and Regards
    Marc
    • 05 Feb 2009, 10:45 pm
  • Bruno Domínguez Alonso
    Bruno Domínguez Alonso
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    Re^4: Transfer pricing Documentation requirements in Spain
    You may also find additional information on this issues in this post:

    https://www.xing.com/app/forum?op=showarticles;id=18444339;a...
    • 16 Feb 2009, 8:14 pm