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Transfer Pricing in the STA 2021 General Tax Control Plan

18 March 2021

Publication of the 2021 Annual Tax and Customs Control Plan in early February has confirmed that the Spanish Tax Agency is looking more and more closely, in their investigations and checks for tax fraud, at issues associated with related-party transactions and transfer pricing in multi-national groups, large corporations and medium-sized companies.

New challenges for business and tax administrations

The special economic and financial conditions due to the coronavirus pandemic and the State’s response to its effects pose significant challenges for both companies and tax administrations, from a practical standpoint, in applying the arm’s length principle.

The Spanish Tax Agency, to tackle said challenges, from 2021 and in studies regarding transfer pricing for 2020 (the year of the outbreak and spread of the Covid-19 pandemic) and following years, if applicable, will take into account the guidelines recently passed for the Inclusive Framework on BEPS on the application of the OECD Transfer Pricing Guidelines, with regard to several specific issues arising from or exacerbated by the Covid-19 pandemic, as well as their consistency with the general pricing policy of companies or business groups

Specifically, the issues covered in the recent OECD guidelines, as a practical example of how the arm’s length principle should be applied to related-party transactions impacted by the Covid-19 crisis, are as follows::

(i) Comparability analysis;

(ii) Losses and the allocation of Covid-19 specific costs;

(iii) Government assistance programmes; and (iv) advance pricing agreements (“APAs”).

Furthermore, for 2021, STA has announced a specific campaign to verify proper compliance with obligations to report related-party transactions on form 232. It is important to note that the information reported on this form must be consistent with the transfer-pricing dossier. Likewise, failure to report operations and/or reporting inaccurate data on the 232 form is a serious tax violation, punishable with a fine of up to 2% of the value of the operations not reported or inaccurately reported.

Other priority focuses announced, regarding related-party transactions, are:

a) checking deduction of financial expenses, particularly when funding comes from abroad (within a multinational group) and payment of interest and dividends.
b) carrying out multilateral controls in the European Union to check intragroup payments for intangible goods.
c) searching for unreported income from services provided, intangibles transferred without output tax or undue reduction of income from said assets.

All the above confirms that Spanish companies with related-party transactions must properly document transfer pricing, which must be in line with the company’s transfer-pricing policy, taking into account that studies from 2020, and for other years affected by the situation caused by the coronavirus, the OECD Guidance on the transfer pricing implications of the COVID-19 pandemic will apply.

As a final note, we should point out that, in recent years, the Spanish Tax Agency has been looking much more closely at issues related to transfer pricing and related-party transaction, as per the guidance from the Organisation for Economic Co-operation and Development (OECD).


Elena Ramírez                                Mario Quílez                                   Mario Pires
Tax Partner                                       Transfer Pric. Manager                      Transfer Pric. Consultant.


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