Transfer Pricing 2021 Comparisons

Last Updated April 09, 2021

Contributed By Baker McKenzie

Law and Practice


Baker McKenzie is represented in 46 countries and has a leading global transfer pricing practice, providing clients with world-class service in all facets of transfer pricing. Supported by more than 240 advisers, lawyers and economists, its transfer pricing team advises global companies on transfer pricing matters including design/planning, financial modelling, implementation, documentation, audit defence and litigation. The firm has extensive experience in competent authority procedures and has successfully accompanied and advised its clients in numerous sizeable and high-profile advance pricing agreements and mutual agreement procedures. Its economists specialise in transfer pricing and work in close co-operation with transfer pricing lawyers, providing economic modelling that takes into account specific transfer pricing requirements. As a law firm, Baker McKenzie's advice is legally privileged subject to local laws and regulations; its lawyers can litigate against tax authorities if disputes arise.

The rules governing transfer pricing in Spain are included in Article 18 of the Spanish Corporate Income Tax Act 27/2014 and have also been developed in Articles 13 et seq of the Royal Decree 634/2015 on Corporate Income Tax Regulations. Spanish tax authorities also follow the principles established in the OECD Guidelines.

The transfer pricing regime was introduced in 2006 through amendments to the former Corporate Income Tax Act 36/2006. At this point, the taxpayer became responsible for demonstrating that related-party transactions were carried out at fair market value. In addition, the obligation to prepare contemporaneous transfer pricing documentation justifying the arm's-length nature of related-party transactions was also introduced.

In 2009, both the Corporate Income Tax Act 36/2006 and the Corporate Income Tax Regulations were amended by the introduction of a specific penalty regime for a lack of transfer pricing documentation. In practice, Spanish taxpayers started preparing transfer pricing documentation as a result of this specific penalty regime, which was applicable for fiscal years ending as of 19 February 2009.

New measures, which came into effect on 1 January 2015, were introduced through the current Corporate Income Tax Act and Corporate Income Tax Regulations, including certain provisions to align Spanish practice with the OECD's approach to base erosion and profit shifting (BEPS) (eg, broader requirements for group and taxpayer documentation or the obligation for country-by-country reporting).

Transfer pricing rules apply to any type of transaction between related parties.

Definition of Related Party

As summarised below, Article 18 of the Corporate Income Tax Act includes a definition of "related party" for transfer pricing purposes.

  • A company and its shareholders when they hold at least a 25% stake.
  • A company and its directors (except for the remuneration obtained in the exercise of their duties).
  • A company and the spouses, lineal ascendants and lineal descendants of its shareholders or directors.
  • Two companies forming part of a group of companies – a group exists when one company has or could have control over another under the criteria established in Article 42 of the Spanish Commerce Code, and such control exists in the following circumstances:
    1. one company owns more than 50% stake of the other or the majority of the voting rights;
    2. one company has entitlement to appoint or to dismiss the majority of the corporate directors of the other; or
    3. if the majority of the corporate directors of the other are the same as the ones of the parent company.
  • A company and the directors of another company, provided that both companies belong to the same group.
  • Two companies, when one of them indirectly holds an interest – either share capital or equity – of at least 25% in the other.
  • Two companies in which the same shareholders or partners, or their spouses or lineal descendants or ascendants, hold in both companies, directly or indirectly, at least 25% of either the share capital or the equity.
  • A company resident in a Spanish territory and its permanent establishment abroad.

Transactions under Scope

The following transactions between related parties are exempt from documentation obligations:

  • transactions carried out within a tax group for Spanish corporate income tax purposes;
  • transactions between economic interest groupings (AIEs) and unincorporated joint ventures (UTEs), with some exceptions;
  • transactions carried out in the context of public offerings (OPAs) or tender offers (OPVs); and
  • when the total amount of transactions with the same related party during the fiscal year falls below EUR250,000.

However, transactions carried out with companies resident in tax havens must be documented in any case.

Spanish legislation lists five different transfer pricing methods than can be used by taxpayers:

  • comparable uncontrolled price method;
  • cost-plus method;
  • resale price method;
  • profit split method; and
  • transactional net margin method.

The use of methods other than those listed in 3.1 Transfer Pricing Methods, and valuation techniques is allowed, provided that they respect the arm's-length principle (eg, discounted cash flow method).

Spanish regulations do not foresee a hierarchy of methods.

Spanish regulations do not specifically require the use of ranges or statistical measures. However, in practice, the Spanish tax authorities follow the OECD approach and use the interquartile range of values. They mostly tend to consider the median as the point of reference of the range.

The use of comparability adjustments is allowed in Spain in order to eliminate significant differences between comparable transactions.

There are no specific rules in Spain relating to the transfer pricing of intangibles. The Spanish tax authorities mostly follow the approach laid out in the 2017 OECD Guidelines.

Please see 4.1 Notable Rules.

There are specific rules in Spain regarding cost sharing arrangements:

  • the parties involved in the cost sharing agreement should have access to the property of the assets/intangibles resulting thereof;
  • the contribution of each participant should be linked to the benefit that is expected to be obtained;
  • the agreement should include the change of circumstances (ie, participants) and the corresponding compensations and adjustments; and
  • the agreement should identify the companies involved, the activities/projects carried out, the term, the allocation criteria of contributions and benefits, and any other relevant aspects regarding the separation or adhesion of the members.

There is no legal provision on year-end adjustments and retroactive adjustments in the Spanish transfer pricing rules.

However, in practice, it is quite common for multinational groups of companies to apply transfer pricing adjustments before and after the year-end – mostly before closing the books (that is to say, before the end of March in those cases in which the fiscal year corresponds with the calendar year) and, therefore, before filing tax returns.

However, a tax ruling from 2010 sets out that any adjustment should be recorded in the annual accounts of the relevant entities (ie, the taxpayer cannot just reflect the adjustment in the corporate income tax return). 

Spain is a signatory to a broad network of double tax treaties and tax information exchange agreements.

Spain is also a signatory to the OECD Multilateral Instrument, in order to enable the modification of bilateral treaties, when applicable. However, Spain has not yet ratified the Multilateral Instrument.

Spain has an advance pricing agreement (APA) programme available in order for taxpayers to discuss transfer pricing policies, which have been applied in related-party transactions, with the tax authorities.

The APA programme is administered by the Oficina Nacional de Fiscalidad Internacional (ONFI), based in Madrid.

In Spain, the ONFI is in charge of negotiating both the APA process and the mutual agreement procedures. Although, in practice, the relevant persons involved correspond to different teams, there is a considerable degree of co-ordination between them.

There are no limits on which taxpayers or transactions are eligible for an APA.

There is no specific deadline for filing an APA application.

Normally, the APA has effect for the next four fiscal years following the date of its approval. However, the taxpayer can file an APA covering the past four years, which are covered by the statute of limitations period.

Taxpayers do not have to pay a fee for entering into an APA procedure.

Please see 7.5 APA Application Deadlines.

APAs can have retroactive effect. Please see 7.5 APA Application Deadlines.

Documentation Requirements

Taxpayers are obliged to prepare documentation (although the thresholds explained in 8.2 Taxpayer Obligations under the OECD Transfer Pricing Guidelines apply). The documentation must be prepared contemporaneously and must be available upon the request of the Spanish tax authorities as of 25 July of the following year (the date on which the corporate income tax return is filed for companies with a fiscal year which ends on December 31st). In Spain, the content of the master file and the local file mainly follows the 2017 OECD Transfer Pricing Guidelines.


The Spanish transfer pricing regime includes penalties that are very much linked to non-compliance with the documentation requirements. If taxpayers do not comply with such documentation obligations, specific transfer pricing penalties can be imposed by the Spanish tax authorities.

If there is no transfer pricing adjustment carried out by the Spanish tax authorities on the value of the transaction, a penalty of up to EUR1,000 for each non-documented "single relevant piece of data" or EUR10,000 for each non-documented "group of relevant data" is imposed. However, the amount of this penalty should not exceed the lesser of 10% of the amount of the transactions carried out by the company in a given year, or 1% of the turnover of the company.

If there is a transfer pricing adjustment, a penalty of 15% of the adjustment will be imposed if any of the following facts are demonstrated:

  • lack of transfer pricing documentation or the submitted documentation is incomplete or contains false data; or
  • a mismatch between the market value detailed in the transfer pricing documentation and the value declared in the corporate income tax return, the personal income tax return or the non-resident's income tax return

Please note that the regulations specifically define what is considered a "group of relevant data" for transfer pricing purposes.

Spanish legislation requires a taxpayer to prepare all of the files and reports contemplated by the OECD Transfer Pricing Guidelines (ie, master file, local file and country-by-country report). However, there are some particularities, which are described below.

Master File and Local File

Only taxpayers belonging to a group with a turnover of at least EUR45 million must prepare a complete master file and a local file.

Taxpayers belonging to a group with a turnover below EUR45 million are exempt from preparing the master file but are obliged to prepare a simplified local file, including a comparability analysis.

Taxpayers that are small-sized entities (where the turnover of the group is below EUR10 million) can prepare an even more simplified local file through a template provided by the tax authorities (named a Formulario de Operaciones Vinculadas), which does not include a comparability analysis and should be filed as an appendix to the corporate income tax return.

However, some listed transactions are not eligible for such simplified documentation. Examples of these include:

  • transactions carried out between certain individuals acting as entrepreneurs, to which the applicable method is the objective estimation, with entities in which these individuals – either themselves or together with their partners, ascendants or descendants – individually or jointly have more than 25% of the share capital of the company;
  • transfers of business;
  • transfers of shares either in non-listed entities or in stock-listed entities located in tax havens;
  • transfers of real estate assets; and
  • transactions involving intangible assets.

Country-by-Country Reporting

This is only applicable to Spanish taxpayers that form part of a group of companies with a worldwide consolidated group net turnover in the preceding fiscal year of at least EUR750 million.

Spanish transfer pricing rules follow the OECD Guidelines, including the arm's-length principle, according to which transactions with related parties must be valued using the same conditions that would be agreed upon between non-related parties under the same or similar market conditions.

The arm's-length principle has been agreed as the international transfer pricing standard by OECD member countries. As a result of this, and of Spain's application of OECD standards, this principle applies to Spanish-related transactions.

Generally, Spanish rules do not depart from the arm's-length principle. However, for professional services, Article 18(6) of the Corporate Income Tax Act allows the taxpayer to treat the agreed value of the transaction as meeting the market value in cases of services rendered by (individual) professional partners to a related entity, provided that the following conditions are met;

  • more than 75% of the revenue of the entity derives from professional activities and it contains adequate human and material resources to carry out the professional activity;
  • remuneration of professional partners is not lower than 75% of profits before deducting such remuneration; and
  • individual remuneration of the professional partners is determined in accordance with their contribution and it is not lower than 150% of the average salary of employees with similar functions.

In order to introduce modifications to the transfer pricing documentation requirements, Spain implemented regulations based on BEPS Actions 13. Accordingly, broader master file and local file requirements should be prepared by taxpayers. Country-by-country reporting based on the OECD's recommended template is also required.

Spanish legislation is aligned with the measures published in the BEPS Action Plan. For instance, some of these measures include hybrid instruments, limitations on the deductibility of financial expenses and controlled foreign corporation (CFC) rules.

In the context of international co-operation and exchange of information, Spain is committed to fighting tax fraud and implementing multilateral control mechanisms through co-ordinated proceedings with other countries in order to avoid base erosion and profit shifting.

Spain permits one entity to bear the risk of another entity's operation by guaranteeing the other entity a return. There are no general regulations preventing this. However, the tax authorities place a special interest on the review of limited risk entities in transfer pricing audits.

The UN Practical Manual on Transfer Pricing does not have any significant impact on Spain's transfer pricing practice. Spanish law only refers to the OECD Guidelines and the European Union Joint Transfer Pricing Forum as the main sources of practical and interpretative assistance regarding transfer pricing.

Documentation Obligation Exemption for Small-Sized Entitles

Spain has certain rules that could be regarded as equivalent to transfer pricing safe harbours, which are provisions of a law or regulations that specify that certain acts do not violate a rule. Simplified documentation requirements of the local file for small-sized entities are an example of these safe harbours. Entities with a turnover of less than EUR10 million are released from preparing a master file and must prepare a simplified local file, which does not need to include a comparability analysis and can be prepared using a template (Formulario de Operaciones Vinculadas, or FOV) provided by the tax administration. The FOV should be filed as an appendix to the CIT return. See 8.2 Taxpayer Obligations under the OECD Transfer Pricing Guidelines for further details.

Professional Services and Other Simplifications to Transfer Pricing Rules

Other examples of safe harbours include the rules for professional services (see 9.2 Arm's-Length Principle for more details). Other simplifications of the transfer pricing rules could be categorised as safe harbours, including cases where transactions are not subject to documentation obligations. These include:

  • transactions carried out between entities forming part of the same tax consolidation group;
  • transactions carried out in the context of public offers for sale or public takeover bids for securities; and
  • transactions carried out with the same person or related entity, provided that the amount of the consideration for the set of transactions does not exceed EUR250,000.

As regards low value services, Spain does not have any specific regulations and follows the OECD and EU Transfer Pricing Joint Forum criteria.

There is also no regulation allowing exceptions to the penalty regime for transactions deemed immaterial.

Spain does not have specific rules governing savings that arise from operating in the country.

There are not any notable rules or practices in Spain applicable in the transfer pricing context, which are unique to Spain, except in the case of transactions with residents in a tax haven territory that must be valued at arm's length irrespective of whether or not they are related parties.

Tax Authority Adjustments

On a separate note, the tax authorities may adjust the price or compensations agreed by related parties and include in their taxable base in Spain the profits or taxable income that would have accrued if the conditions that the related parties agreed are considered not to be at arm’s length. Transfer pricing rules also establish the possibility of a second-tier adjustment when the relationship between parties is defined as a shareholder-company relationship, which could lead the adjustment to be in the form of equity remuneration if made to a shareholder and as a contribution to equity if made to the company. These rules, previously set in the Regulations, were introduced in the Corporate Income Tax Act in 2015. It should be noted, however, that this second-tier adjustment can be avoided if, at the end of the tax audit, the taxpayers involved agree to recognise and repair the effect of the adjustment.

Cost-Sharing Agreements

Additionally, Spanish rules regulating cost-sharing agreements for goods or services signed between related persons or entities, involve the following requirements:

  • the participating persons or entities that sign the agreement must access the property or other right that has similar economic consequences on the assets or rights that, if applicable, are the object of acquisition, production or development as a result of the agreement;
  • the contribution of each participating person or entity must take into account the profit or advantage forecast that each of them expects to obtain from the agreement in accordance with criteria of rationality; and
  • the agreement must contemplate the variation of their circumstances or participating persons or entities, establishing the compensatory payments and adjustments deemed necessary.

There are no co-ordination requirements between transfer pricing and customs valuation. The Spanish Corporate Income Tax Act Law 27/2014 establishes that the market value used for Corporate Income Tax purposes will not produce effects with respect to other taxes, unless expressly provided otherwise. This legal provision also establishes that the value in terms of any tax will not produce effects regarding the arm's-length value of related operations.

Where a tax audit procedure leads to a transfer pricing adjustment, the concerned taxpayers may appeal the final tax assessment by means of an ordinary appeal filed against the tax administration. In this regard, the taxpayer may file a petition for the review of the issue before a tax tribunal (Tribunal Económico-Administrativo), which is an independent unit of the tax administration. The petition must be filed within 30 calendar days from the date of notification of the assessment.

Once the administrative appeal procedure has been completed, the rulings of the tax tribunals may always be appealed before an ordinary judicial court (Tribunal Contencioso-Administrativo). This application for judicial review must be filed within two months from the date of notification of the tax tribunal's decision. The court's judgment may be appealed before the Supreme Court by means of a specific appeal (Recurso de casación), depending on the amounts involved and in those cases where the Supreme Court considers that there is a general interest.

One of the main problems/difficulties in transfer pricing matters revolves around the complexity of determining market value. For this purpose, the weighting of comparability factors, the choice of the valuation method, the selection of comparables, as well as the application of comparability adjustments, etc, makes conflict resolution tremendously casuistic, which, at least to date, has resulted in the absence of pronouncements that have allowed the consolidation of a clear doctrine on these aspects.

The Spanish Supreme Court (Tribunal Supremo) has recently issued several judgments including its reasoning regarding the interpretative value of the OECD Guidelines. It has concluded that the OECD Guidelines are merely recommendations that bind the tax administration, but not the courts. An area that has traditionally been a source of conflict in transfer pricing matters is that of intra-group services, although in this area the cause of dispute has not generally been the valuation of the transaction, but rather how to prove of the reality of the benefits obtained by the relevant party.

There have also been a significant number of resolutions and judgments in the field of financing operations that have been quite casuistic and even contradictory as to qualification issues, and which have brought into play the application of anti-abuse regulations. Some relevant court cases are briefly described below.

Adjustments to Transactional Net Margin Method Transfer Pricing

In a Supreme Court judgment dated 6 March 2019, Spain's National Court of Justice issued an important judgment regarding transfer pricing adjustments made by the tax auditors when taxpayers applied the transactional net margin method (TNMM). This judgment concluded that an adjustment to the median should only be made if comparability defects exist. If this is not the case, the court held that the adjustment should be made to the lowest value of the arm's-length range (lower quartile) if the tax auditors have not proved any comparability defects in the benchmarking provided by the taxpayers.

Different Penalty Regimes Applicable to Related-Party Transactions

On 15 October 2018, the Spanish Supreme Court issued a judgment covering the different penalty regimes that are applicable to related-party transaction disputes. The Supreme Court clarified that where the taxpayer has no transfer pricing documentation obligations, the specific transfer pricing penalty regime will not apply, but the general tax penalty regime may apply. The obligation of the taxpayer to comply with the arm's-length principle is relevant even when no documentation obligation exists.

The Status of the OECD Guidelines

In a Supreme Court judgment dated 19 October 2016, issued in the Zeraim case, the appellant company denounced the infringement of the OECD Guidelines, to the extent that secret comparables had been used in determining the market value of certain related transactions consisting of acquisitions of raw materials from its Dutch parent company by the Spanish recurring company. The court stated that it is not possible to substantiate a plea in breach of the OECD Guidelines, given the lack of its legal nature. The court also pointed out that in previous judgments (eg, one dated 18 July 2012, issued by the Spanish Supreme Court in the BICC case), it had already concluded that such guidelines are considered to be merely recommendations to states, which are given an interpretative value.

Valuing Private Businesses

The Supreme Court stated, in a judgment dated 27 September 2013 regarding the transfer of non-listed businesses or shares, that the underlying book value of the company can be considered its market value despite its limitations, bearing in mind that this value does not consider the existence of tacit capital gains or losses but that these could be considered if they were proved.

There are no restrictions in Spain regarding outbound payments on uncontrolled transactions.

There are no restrictions in the country regarding outbound payments on controlled transactions.

Spain does not have rules regarding the effects of other countries' legal restrictions that are relevant from a transfer pricing perspective.

As a result of taxpayers' concerns about providing a large volume of confidential information, the Spanish tax administration prohibits the publication of information on APAs or transfer pricing audit outcomes submitted by taxpayers.

Certain court rulings in Spain prohibit the use of information or data about the taxpayer by the tax authorities, also known as secret comparables, in order to prevent competitors accessing that information.

The COVID-19 pandemic has affected the Spanish transfer pricing landscape similarly to other OECD member countries. The strict measures implemented by the government, which are essential to prevent the spread of the virus, may lead to great economic uncertainty. Spanish companies may face situations of reduced profitability, revenues and cash flows. This can undoubtedly have a direct impact on transfer pricing and how entities within the same group transact with each other. Although Spain has not implemented any guidelines that refer to this unprecedented situation, the country follows OECD specifications in this matter. These particular indications focus on how the arm's-length principle and the OECD TPG apply to issues that may arise or be exacerbated in the context of the COVID-19 pandemic.

The stagnation of economic activity due to COVID-19 has led the government to relax payment obligations through the renegotiation of leasing contracts for premises in some of the most affected sectors, such as the hotel and restaurant industry. The applications of the tenants, who claim force majeure, refer to rental income deductions or allowances and the establishment of accrual grace periods.

It is important to note that these renegotiations have tax implications, even though the Corporate Income Tax Act does not regulate these types of negotiations. Thus, the tax implications will depend on the accounting rules, which state that incentives should be distributed over the lease term on a straight-line basis over the remaining term of the leasing contract.

During the strictest part of the lockdown, tax audits stalled. However, the tax administration has gradually resumed its activities. In addition, tax audits by videoconference have been implemented for the first time and seem to have a great advantage in terms of saving time on long or unnecessary journeys to the taxpayer's offices.

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Law and Practice in Spain


Baker McKenzie is represented in 46 countries and has a leading global transfer pricing practice, providing clients with world-class service in all facets of transfer pricing. Supported by more than 240 advisers, lawyers and economists, its transfer pricing team advises global companies on transfer pricing matters including design/planning, financial modelling, implementation, documentation, audit defence and litigation. The firm has extensive experience in competent authority procedures and has successfully accompanied and advised its clients in numerous sizeable and high-profile advance pricing agreements and mutual agreement procedures. Its economists specialise in transfer pricing and work in close co-operation with transfer pricing lawyers, providing economic modelling that takes into account specific transfer pricing requirements. As a law firm, Baker McKenzie's advice is legally privileged subject to local laws and regulations; its lawyers can litigate against tax authorities if disputes arise.