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Spain – Transfer Pricing (2025)

Spain incorporates the arm’s length principle into domestic law: the Corporate Income Tax Act explicitly references the principle in Article 18.1 (Ley 27/2014, 27 November 2014). The preamble of the Corporate Income Tax Act (part III.1,e) recognizes the OECD Transfer Pricing Guidelines (TPG) as a source for interpreting domestic legislation, provided the Guidelines do not conflict with Spanish rules. Consequently, while domestic law prevails, the OECD TPG have formal interpretative status and guide technical application.

The domestic definition of related parties for transfer pricing is set out in Corporate Income Tax Act, Art. 18, paragraph 2. That provision covers, inter alia: (a) an entity and holders of its equity when a shareholder owns at least 25% of the entity, extending to the shareholder’s spouse, ascendants or descendants where the shareholder is a natural person; (b) an entity and members of its Board of Directors or administrators, extending to the spouse, ascendants or descendants of those members, except that the remuneration of the board member or administrator may be outside the scope of the definition; (c) two entities belonging to the same group; (d) an entity and members of the Board or administrators of another entity of the same group; (e) two entities when one indirectly owns at least 25% of the other; and (f) two entities when the same natural person (or spouse, ascendants or descendants) or the same entity owns directly or indirectly at least 25% of the capital of both. These 25% thresholds define control and relatedness for TP purposes.

Arm’s length principle and the role of the OECD Guidelines

Spain applies the arm’s length principle and formally recognizes the OECD TPG as a source of interpretation in the preamble of the Corporate Income Tax Act. The TPG therefore serve to interpret and operationalize the domestic requirements, subject to the supremacy of Spanish statutory provisions.

As noted, the statutory definition in Art. 18.2 enumerates multiple scenarios establishing related-party status, with a recurring 25% ownership threshold and extension to specified family relationships (spouse, ascendants, descendants). Permanent Establishments (PEs) are addressed through the Non Residents Income Tax Act when treaty rules do not apply; domestic treatment of PEs follows the tax base and valuation principles of the Corporate Income Tax regime and includes limitations on deductibility for certain internal payments.

Methods and application criteria (hierarchy if any)

Corporate Income Tax Act, Art. 18, paragraph 4 recognizes the five conventional transfer pricing methods: CUP, Resale Price, Cost Plus, Transactional Net Margin Method (TNMM) and Profit Split. Spain applies the “most appropriate method” criterion rather than a strict hierarchy. The Act allows other methods or valuation techniques only when none of the five recognised methods can be applied and provided the outcome is consistent with the arm’s length principle.

Comparability and ranges (preference of comparables, adjustments, ranges)

Spanish regulations adopt the comparability analysis set out in Chapter III of the OECD TPG (Reglamento del Impuesto sobre Sociedades, Art. 17). There is no statutory preference for domestic comparables over foreign comparables. The use of “secret comparables” is not permitted for transfer pricing assessment purposes according to Spanish court decisions. The internal regulations (Art. 17.7 of the Corporate Income Tax Regulations) permit the use of arm’s length ranges and statistical measures in specific circumstances, but do not mandate a particular statistical approach. Comparability adjustments are not universally required (Art. 17.4): they may be necessary in some cases to account for differences between the compared situations but are not an automatic requirement.

Documentation and reporting (Master, Local, CbC, thresholds, language, deadlines, forms)

Spain requires taxpayers to prepare transfer pricing documentation: a Master File consistent with Annex I to Chapter V of the TPG, a Local File consistent with Annex II, and a Country-by-Country (CbC) Report consistent with Annex III, along with specific transfer pricing information returns (Corporate Income Tax Act, Art. 18 paragraph 3; Corporate Income Tax Regulations, Arts. 13–16; Ministerial Orders approving the specific tax return for related transactions and the CbC specific tax return).

Timing and submission rules require that the Master File and Local File for a given year be available to the Tax Administration by the last day for filing the tax return for that year; they are supplied only upon specific request. The CbC report must be submitted no later than 12 months after the last day of the fiscal year to which it relates. Spain also requires a specialised transfer pricing information return that contains risk-assessment data such as the nature and amount of controlled transactions and the methods used; that return must be filed “in the month following the 10 months after the end of the tax year period” (the applicable ministerial order should be consulted to determine exact filing dates for a particular fiscal year).

Documentation-related penalties and exemptions: Corporate Income Tax Act, Art. 18, paragraph 13 and the Regulations set out sanctions where documentation is not provided, is incomplete or is false; penalties are calculated differently depending on whether there are tax adjustments. Exemptions and simplifications are available: groups with turnover equal to or above EUR 45 million must present Master and Local Files if requested by the Tax Administration; medium groups (turnover not exceeding EUR 45 million) need not provide a Master File and may present a simplified Local File; small groups (turnover not exceeding EUR 10 million) are exempt from the Master File and must complete a standard form approved by the Ministry of Finance. Certain operations must be documented in any case (e.g., transfers of business, specific share transfers, transfers of real estate or intangibles). Transactions with the same related party below EUR 250,000 or intra-group transactions within a tax consolidation regime are generally excluded from the documentation obligation. The specific transfer pricing information return also contemplates exceptions for operations below EUR 250,000 with the same related party or individual transactions under EUR 100,000 unless transactions of the same type priced with the same method account for more than 50% of the taxpayer’s turnover.

Safe harbours / exemptions / materiality

Spain provides a limited safe harbour for services rendered by professional shareholders (for example, lawyers, doctors) to their related entities under specific conditions, aimed at simplifying treatment in low-complexity situations and preventing excessive profit accumulation in entities. This measure is established in Corporate Income Tax Act, Art. 18, paragraph 6. There is no general safe harbour for baseline marketing and distribution under the Annex of Chapter IV of the TPG, and the simplified streamlined approach for such activities has not been implemented domestically.

APAs and MAP; procedures and timing if provided

Advance Pricing Agreements (APAs) are available in Spain: the statutory basis for APAs is in Corporate Income Tax Act, Art. 18, paragraph 9, and the procedure is detailed in Chapter VII of the Corporate Income Tax Regulations. The APA framework dates back to Law 43/1995 and remains in the current law. APAs can be applied prospectively and, where domestic time limits have not expired and there is no definitive assessment, may include a roll-back to preceding years. Requests may be filed before the controlled transactions take place. Spain also operates Mutual Agreement Procedures (MAP) governed by domestic rules (Non Residents Income Tax Act, 1st Additional disposition; MAP on Direct Tax Matters Regulations, Real Decreto 1794/2008, of 3 November) and participates in international cooperative programs including the International Compliance Assurance Programme (ICAP).

Sanctions and other considerations (secondary adjustments, re-characterization, year-end adjustments, PEs)

Secondary adjustments are provided for under Corporate Income Tax Act, Art. 18, paragraph 11 and Corporate Income Tax Regulations, Art. 20; relief may be available if the taxpayer repatriates the funds. Spain does not permit unilateral corresponding downward adjustments in the absence of a mutual agreement procedure. The domestic law is silent on mandatory year-end adjustments; however, year-end adjustments are allowed in relevant circumstances when they reflect economic reality. Concerning re-characterisation risks and secondary effects, adjustments made by the Tax Administration can trigger additional compliance consequences in Spain, including potential penalties related to documentation discrepancies.

Attribution of profits to permanent establishments

With respect to tax treaties, the bulk of Spain’s network contains Article 7 as it read before 2010: 91 treaties (applied to 93 countries) use the pre-2010 text, and one treaty includes the post-2010 version. Spain applies the Authorized OECD Approach (AOA) where applicable, and the 2010 approach is applied only when it is expressly incorporated into the particular treaty. Where no treaty is in effect, domestic rules in the Non Residents Income Tax Act (Arts. 16 and 18) determine PE taxation: the tax base is determined according to Corporate Income Tax rules, internal and related transactions are priced at market value, certain internal payments (royalties, interest except in some PE cases, commissions, technical assistance and payments for use of assets and rights) face deductibility limitations, and an appropriate share of head office direction and general administrative expenses attributable to the PE is deductible. These provisions are interpreted consistent with non-discrimination principles and, within the EU, with freedom of establishment.

Other relevant rules: intangibles, financial transactions and CCAs

The domestic transfer pricing framework does not contain specific detailed guidance on intangibles or hard-to-value intangibles (HTVI), nor on financial transactions; in these areas the profile states: “No se proporciona guía doméstica específica en el perfil” and practice refers to the OECD TPG for interpretation and technical guidance. Outside the TP-specific rules, Spain has other provisions relevant to financial transactions: Corporate Income Tax Act, Arts. 15.h), 15 bis and 16 implement limits on interest deductibility consistent with BEPS Action 4 and the EU ATAD 1, include a specific limitation on deductibility for certain leveraged intra-group share-sale structures (Art. 15.h), and neutralise hybrid mismatches under Art. 15 bis in line with Action 2. There is also a specific limitation applicable to leveraged buy-outs capping deductibility at 30% of the operating profit of the acquiring entity with certain exclusions for acquired-entity profits within a four-year window.

Cost contribution arrangements (CCAs) are permitted. Corporate Income Tax Act, Art. 18, paragraph 7 and the Corporate Income Tax Regulations, Art. 18 set conditions such as that contributions reflect expected benefits, members must participate in resulting intangibles/assets/services, and agreements should address balancing payments and membership changes, withdrawal and termination.

Conclusion

Spain’s transfer pricing regime rests on a solid statutory base that explicitly endorses the arm’s length principle (Corporate Income Tax Act, Art. 18) and recognises the OECD TPG as interpretative guidance. The law prescribes the five standard methods while privileging the most appropriate method approach, defines related parties with a 25% control threshold, sets comprehensive documentation requirements including Master File, Local File and CbC with simplification thresholds at EUR 45 million and EUR 10 million, and provides structured dispute resolution mechanisms (APAs, MAPs, ICAP). For specialised topics such as intangibles, HTVI, commodities and financial transactions, the domestic legislation does not furnish detailed TP technical rules in the profile and the OECD TPG are relied upon for interpretation.

References

Country profiles and further material from the OECD are available at https://www.oecd.org/en/topics/sub-issues/transfer-pricing/transfer-pricing-country-profiles.html

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