Companies carrying out tax – related transactions are allowed to enter into an advance pricing agreement with the Spanish tax authorities in relation to the taxpayer’s transfer prices.
These agreements permit taxpayers avoiding future transfer pricing disputes with the Spanish tax authorities, becoming an efficient alternative to the traditional tax audit examination process.
This is why it is so much worth learning about their main features.
✔ Taxpayers’ application
Taxpayers can submit their proposal to the Spanish tax authorities, in relation to the market value settlement, prior to performing the operations it relates to.
In their request, taxpayers have to provide with a description of the method and the analysis followed to determine the market value as well as the documentation related to transfer prices.
Taxpayers can also ask the Spanish tax authorities to submit the proposal to the tax authorities from other countries where tax – related entities reside, with the purpose of establishing an agreement between the different tax authorities and so that the valuation is the same for all tax – related parties.
✔ Tax authorities’ resolution
The Spanish tax authorities have a six – months term to resolve on the application. If no resolution is expressly provided, it is considered as rejected. There is no possibility to appeal the Spanish tax authorities resolution.
Advance pricing agreements (APAs) are valid for a term that may not exceed the four subsequent fiscal years to the one in which it is approved.
Generally speaking, an APA has effects on transactions carried out after its approval. However, an APA can also be rolled back to tax periods for which a tax return has already been filed, providing the right to examine these periods by the Spanish tax authorities is not time – barred.
Planning ahead of time can help your company saving a lot of money and relieve you the headache pain deriving from traditional tax audit processes. They are worth an effort to study their eventual application to your particular case.