STORIES

23 September, 2014

Related-party Transactions Under the Spanish Tax Reform



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The draft text reforming the current Corporate Tax Law that was made public on August 06, 2014, includes significant changes to the transfer pricing rules.

We draw you attention today to those affecting documentation requirements, what is to be considered as a related-party, as well as the methodology to determine the arm’s length value, which we summarize below.

What is a related-party transaction: 

The relationship between stockholders and companies shall be qualified as tax-related when the interest is equal to or exceeds 25 %, as opposed to the current 5%, (1% when it refers to quoted companies). 

Although the draft text maintains the qualification of a tax-related transaction to that existing between directors and a legal entity, it excludes from this consideration remunerations received for exercise of their role.

Documentation requirements:

Entities (or groups) with a turnover below 45 million Euro will benefit from simplified documentation requirements.

Methods to determine the market value:

In order to determine the market value, the currently existing hierarchy of methods shall no longer apply.

Taxpayers shall also be entitled to apply methods not specifically foreseen in the regulations, providing the arm’s length rule is met.

Once the final Text is approved and comes into force, it will be highly convenient to analyse the concrete impact of these measures on the transfer pricing policy applied by each taxpayer

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