With the Spanish Constitutional Court sentence, it is made clear that the transfer pricing documentation requirements are substantiated in the current regulations, providing certainty to taxpayers on what is the best course of action to follow.
In PBS, we want to emphasize our clients that complying with such documentation and valuation requirements is a must, in order to avoid the application of the penalties regime.
Spain, as well as the rest of OECD countries, tries to prevent the alteration of prices agreed between related parties, when it is focused on tax – avoidance.
For this reason, the Spanish tax regulations set forth specific valuation methods in related-party transactions as well as documentation requirements.
Failure to comply with these mandatory requirements is subject to severe tax penalties.
The Spanish Supreme Court had questioned this penalty system, on the basis that it is not contained in the Law but in lower hierarchic regulations and that it is not proportionate to the unlawful conduct committed.
On July 11, the Spanish Constitutional Court did not estimate the Spanish Supreme Court allegations since it considered that none of them were substantiated in view of the regulations in force.
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