Skip to main content

Will Your Transfer Pricing Documentation Stand Up to Spain’s Tax Authorities?

8th March 2022

It’s official, multinational companies—you’re on notice in Spain. Now’s the time to review your transfer pricing documentation and make sure it complies with Spain’s unique requirementsa master file, local file, a country-by-country report, plus a specific transfer pricing return that should be attached to your corporate tax return. You’ll also want to review your transfer pricing policies and value-creation structures to make sure you’re telling a consistent story. Why? Spain’s 2022 Annual Tax and Customs Control Plan, which was approved on January 31, revealed that the EU country will focus on identifying companies engaged in base erosion and profit shifting, and tax authorities will be using a host of available information to do it. A new transfer pricing risk system will help identify companies that engage in high-risk behavior, and Spanish tax authorities plan to engage in more audits, as a result. If your company is audited, expect a thorough review of your transfer pricing documentation, particularly your functional analysis (tax authorities will expect a robust picture of who’s contributing functions and assets, and who’s assuming risks). Like many tax authorities, Spain will pay special attention to transactions involving intangibles, intragroup services, business restructurings, and of course, companies reporting losses. Financial transactions will also be scrutinized, as will transfer pricing methods, and transactions involving tax havens. Like we said, multinationals—you’ve been warned.