Focus of 2020 General Tax Control Plan on Related-party Transactions and Transfer Pricing
With publication of the 2020 Annual Tax and Customs Control Plan and the Tax Agency’s Strategic Plan for 2020-2023 in late January, it is clear that the Spanish Tax Agency is looking more closely, in their investigations and checks for tax fraud, at issues associated with related-party transactions and transfer pricing.
In this regard, the 2020 Annual Tax and Customs Control Plan shows that, for internal tax control, a series of specific actions will be undertaken regarding related-party transactions, according to the guidelines mentioned below:
1. Putting in place a new automated risk-analysis system for transfer pricing based on all the information currently available to the Tax Agency on related-party transactions, making effective use of the information available from inspections as a result of the BEPS project, both in the OECD and the European Union, including automatic exchange of information on some income, what are known as unilateral arrangements with Tax Agencies, and information from the Country-by-Country Report, under Action 13 of the aforementioned BEPS Project.
All of the above is due to greater awareness the Tax Agency has of national and international business groups and the sectors they operate in, which will allow them to better analyse the risks with indicators, indices and models, and to identify patterns of high-risk tax behaviours.
2. Special attention will be paid to compliance with obligations to provide documentation and information on transfer pricing, notwithstanding substantial analysis to assess the functions, assets and risks in said documents.
3. The areas that will receive special attention in 2020, in terms of transfer pricing, are:
3.1. Corporate restructuring.
3.2. Assessment of intra-group transfers of assets (specifically non-tangible).
3.3. Deduction of line-items that have a significant impact on the gross tax base, such as payment of royalties for transfer of non-tangible assets or intra-group services.
3.4. Posting repeated losses.
4. Priority attention will be paid to failure to declare income from services provided without output tax.
5. Preferential attention will be paid to fiscally related transactions of a financial nature (loans, inter-company accounts, etc.).
With the above, it is clear that the Spanish Tax Agency, from 2020, will be more closely monitoring related-party transactions and requiring documentation of transfer pricing.
If you have any specific questions or comments on the latest changes in Transfer Pricing or want more information on how they can affect your business, don’t hesitate to contact us.
Fiscal Department Partner
Transfer Pricing Manager
Transfer Pricing Consultant