Post by Bouzas on Mar 13, 2009 8:49:52 GMT 4
Spain: New documentation obligations in related-party transactions
In October the Spanish government approved the long-awaited regulations for the development of the new Spanish transfer pricing rules.
Royal Decree 1793/2008 of November 3, amending the corporate income tax regulations, consists of the detailed implementation of the main new provisions introduced by the law on measures to prevent tax fraud into Spanish transfer pricing legislation, contained mainly in article 16 of Legislative Royal Decree 4/2004, of March 5, approving the revised corporate income tax law (the TRLIS). This article establishes as a general rule that related persons or entities must keep available for the tax authorities specific documentation as may be established by regulations.
The Royal Decree implements this statutory requirement by drawing on the principles contained in the EU's code of conduct on transfer pricing documentation, and requires the taxpayer to produce, at the tax authorities' request, documentation which, in turn, is divided into two parts:
I) Documentation relating to the group to which the taxpayer belongs
* a general description of the group's organisational, legal and operational structure, as well as any material change to it;
* the identification of the various entities which form part of the group and perform related-party transactions as far as they affect, directly or indirectly, the transactions performed by the taxpayer;
* a general description of the nature, amounts and flows of related-party transactions between the group entities as far as they affect, directly or indirectly, the transactions performed by the taxpayer;
* a general description of the functions performed and the risks assumed by the various group entities as far as they directly or indirectly affect the transactions performed by the taxpayer, including changes compared to the preceding tax or assessment period;
* a list of the ownership of patents, trademarks, trade names and other intangibles as far as they affect, directly or indirectly, the transactions performed by the taxpayer, as well as the amount of consideration derived from their use;
* a description of the group's transfer pricing policy, including the pricing method(s) used by the group, that explains the arm's-length nature of the group's transfer prices;
* a list of the cost contribution agreements and agreements for services between group entities, as far as they affect, directly or indirectly, the transactions performed by the taxpayer;
* a list of the advance pricing arrangements or mutual agreement procedures concluded or in progress in relation to the group entities as far as they affect, directly or indirectly, the transactions performed by the taxpayer;
* the group's notes to financial statements or, failing this, an equivalent annual report.
II) Documentation on the taxpayer itself
* a general description of the group's organisational, legal and operational structure, as well as any material change to it;
* first and last names or full corporate or business name, tax domicile and taxpayer identification number of the taxpayer and of the persons or entities with whom the transaction is performed, as well as a detailed description of the nature, characteristics and amount of the transaction.
* a comparability analysis as described in part 1 above;
* an explanation of the selection of the transfer pricing method;
* the methods used to allocate services provided jointly to various related persons or entities, as well as the relevant agreements, if any, and cost contribution arrangements;
* any other information used by the taxpayer to price its related-party transactions, as well as any side agreements entered into with other members.
Documentation will not be required in relation to the following related-party transactions:
* Transactions between entities belonging to the same consolidated tax group which has elected to apply the special consolidated tax regime.
* Transactions between economic interest groupings (EIGs), unincorporated joint ventures or regional industrial development companies and their members, provided that they are registered on the special register at the ministry of economy and finance.
* Transactions carried out in the context of public offerings or tender offers.
Additionally, the regulations establish that the documentation must refer to the tax period or assessment period in which the taxpayer has performed the related-party transactions in question. As regards the length of time during which it will be requirable, the documentation must be kept available for the tax authorities as from the end of the voluntary return or assessment period in question.
Multinational enterprises doing business in Spain have clear guidelines with regard to document requirements; however, there are aspects of the regulation still pending further clarification.
Manuel Ángel Bouzas (manuel.angel.bouzas@garrigues.com)
Madrid & Barcelona
In October the Spanish government approved the long-awaited regulations for the development of the new Spanish transfer pricing rules.
Royal Decree 1793/2008 of November 3, amending the corporate income tax regulations, consists of the detailed implementation of the main new provisions introduced by the law on measures to prevent tax fraud into Spanish transfer pricing legislation, contained mainly in article 16 of Legislative Royal Decree 4/2004, of March 5, approving the revised corporate income tax law (the TRLIS). This article establishes as a general rule that related persons or entities must keep available for the tax authorities specific documentation as may be established by regulations.
The Royal Decree implements this statutory requirement by drawing on the principles contained in the EU's code of conduct on transfer pricing documentation, and requires the taxpayer to produce, at the tax authorities' request, documentation which, in turn, is divided into two parts:
I) Documentation relating to the group to which the taxpayer belongs
* a general description of the group's organisational, legal and operational structure, as well as any material change to it;
* the identification of the various entities which form part of the group and perform related-party transactions as far as they affect, directly or indirectly, the transactions performed by the taxpayer;
* a general description of the nature, amounts and flows of related-party transactions between the group entities as far as they affect, directly or indirectly, the transactions performed by the taxpayer;
* a general description of the functions performed and the risks assumed by the various group entities as far as they directly or indirectly affect the transactions performed by the taxpayer, including changes compared to the preceding tax or assessment period;
* a list of the ownership of patents, trademarks, trade names and other intangibles as far as they affect, directly or indirectly, the transactions performed by the taxpayer, as well as the amount of consideration derived from their use;
* a description of the group's transfer pricing policy, including the pricing method(s) used by the group, that explains the arm's-length nature of the group's transfer prices;
* a list of the cost contribution agreements and agreements for services between group entities, as far as they affect, directly or indirectly, the transactions performed by the taxpayer;
* a list of the advance pricing arrangements or mutual agreement procedures concluded or in progress in relation to the group entities as far as they affect, directly or indirectly, the transactions performed by the taxpayer;
* the group's notes to financial statements or, failing this, an equivalent annual report.
II) Documentation on the taxpayer itself
* a general description of the group's organisational, legal and operational structure, as well as any material change to it;
* first and last names or full corporate or business name, tax domicile and taxpayer identification number of the taxpayer and of the persons or entities with whom the transaction is performed, as well as a detailed description of the nature, characteristics and amount of the transaction.
* a comparability analysis as described in part 1 above;
* an explanation of the selection of the transfer pricing method;
* the methods used to allocate services provided jointly to various related persons or entities, as well as the relevant agreements, if any, and cost contribution arrangements;
* any other information used by the taxpayer to price its related-party transactions, as well as any side agreements entered into with other members.
Documentation will not be required in relation to the following related-party transactions:
* Transactions between entities belonging to the same consolidated tax group which has elected to apply the special consolidated tax regime.
* Transactions between economic interest groupings (EIGs), unincorporated joint ventures or regional industrial development companies and their members, provided that they are registered on the special register at the ministry of economy and finance.
* Transactions carried out in the context of public offerings or tender offers.
Additionally, the regulations establish that the documentation must refer to the tax period or assessment period in which the taxpayer has performed the related-party transactions in question. As regards the length of time during which it will be requirable, the documentation must be kept available for the tax authorities as from the end of the voluntary return or assessment period in question.
Multinational enterprises doing business in Spain have clear guidelines with regard to document requirements; however, there are aspects of the regulation still pending further clarification.
Manuel Ángel Bouzas (manuel.angel.bouzas@garrigues.com)
Madrid & Barcelona