In the post hereby, I am going to summarize the main amendments introduced, by the enactment of the Law 27/2014, in the new Spanish transfer pricing regulation which, according to the Spanish Tax Reform carried out in November 2014, came into force in January 2015.
The main amendments in the Law are the following:
- Existence of tax relation:
* The ownership (expressed in %) should be at least 25% to be consider a company as related. Prior this amend, it was 5%.
* It is excluded as tax relation the board members and administrators, but only the consideration receipt due to in the exercise of the functions attributed.
* It is no longer consider as related a company and the partners or holders of another company, if both companies belong to the same group.
* Neither are consider tax related a non-resident company in Spain and it´s Permanent Establishments in Spain.
* Two companies belonging to the same cooperative group are not considered as tax related anymore.
- Valuation method:
* The hierarchy of the methods has been removed.
* It is possible to apply other valuation methods which are consistent with the arm´s length principle, only when the five methods given could not be applied.
- Documentation requirements:
* A simplified documentation requirement is set up, available for related entities whose yearly earnings is less than 45mill€. The content of this documentation would be determined by royal decree.
* The obligation of documenting gets broaden related to the transmission of shares, which are negotiated in financial markets of tax heavens.
* The obligation of documenting gets broaden related to real estate transactions, and not only in sellings.
* The obligation of documenting is compulsory to joint ventures.
- Amendments in the secondary adjustment:
* It is legally ruled in the law, and not in the royal decree
* It is possible to choose the “patrimony restitution” between related parties in order to avoid the adjustment.
- Amendments in the disciplinary regime:
* The disciplinary penalties are less burdensome, by getting reduced in case of lack of data or joint data from 1500€/15.000€ respectively to 1.000/10.000€respectively.
* The penalties due to inaccuracy of the documentation have been removed.
- Market value tightness:
* If the declared value of a transaction is replaced by the Administration affecting in relation to the Corporate Income Tax, it doesn’t affect other taxes, like Non-Residents Income Tax nor Individual Income Tax.
In a following post, I would write about the main amedments introduced in the new Corporate Tax Statutes, by the Royal Decree 635/2015.