are the values applied in international commercial transactions between natural or legal persons that have a link in the field of taxation and that are carried out for the transfer of both tangible goods and services or rights. Take note of how they affect your business.
The valuation of related transactions has acquired an enormous dimension in recent times and should be a mechanism that pursues the objective of what is known as ‘tax neutrality’.
have to be regulated to avoid being carried out at prices that offer greater advantages for the companies that carry them out,which try to transfer the tax burdens from one country to another that is more favorable to them.
the Article 18 of Royal Decree Law 27/2014, of 27 November,of the Corporate Income Tax establishes that “transactions carried out between related persons or entities shall be valued at their market value. Market value shall be understood to mean that which would have been agreed by independent persons or entities under conditions that respect the principle of free competition.”
The importance of international tax planning
In recent decades, globalization has become a trend that has completely changed the world economic order.
International business structures have acquired an extraterritorial dimension and that is why international tax planning is becoming increasingly important.
Within the international planning strategy that these companies have to put in place -which must be at the same level as the marketing or financial plan-, the study of taxation should be a point to pay close attention to.
That is where the valuation of transfer pricing must take on a special dimension.
If the companies that set these amounts are administratively related or at ownership levels, they will have it very easy to agree on non-competitive prices that, difficultly, could occur between companies without any link.
This situation could generate artificial benefits,to call them in some way, for any of the companies involved in these related commercial operations.
For this reason, these companies are obliged to provide the relevant documentation on the application of the transfer prices previously agreed for their transactions to the competent bodies, in order to facilitate their verification.
Falling into non-compliance with these obligations can be subject to tax penalties and unleash important consequences in relation to the fees that these companies have to pay to the treasury, in the sense that they can be significantly increased.
Documents required for companies with related transactions
The obligation to document related transactions is introduced initially by RDL 6/2010 of April 9, which modifies the Corporate TaxLaw, and by RD 897/2010 of July 9, which modifies the Regulations of said Tax.
The documentation obligations that these entities have, according to the Corporate Tax Regulations, will depend on their turnover or the group of companies to which they belong. They are as follows:
Data such as invoicing, taxes paid, resident companies, number of employees, own funds or activities carried out by the corresponding companies must be provided.
Group to which the taxpayer belongs
Those operations that the Organization for Economic Cooperation and Development (OECD) understands as key must be duly documented, with information regarding the structure and organization of the group, the activities and its intangible assets, as well as its financial activity and tax situation.
Data such as the taxpayer’s management structure, its main competitors and business strategy, its financial and economic information, etc. must be reflected.
Taxpayer-specific documentation with simplified content
The nature and amount of all related transactions, the data identifying the entities carrying out those transactions, the valuation method used and the comparable values obtained from that method should be detailed.
Taxpayer-specific documentation with standardized document
Small companies do not have to include the comparable values mentioned above and it is sufficient that they submit a document standardized by the Ministry of Finance or of simplified content.
The possibility of transferring the profit of an operation to a company established in a country with lower tax pressure and greater advantages that multinationals have in their hands it could break the rules of the market economy,since, thanks to it, they would obtain better results than other companies that developed the same activity.
In addition, it would reduce tax collection in the country in which, in reality, these benefits were generated.
The transfer pricing system should therefore be established within the natural framework of supply and demand.
Companies with an international structure must define their tax planning according to criteria of responsibility and transparency. Firstly, to avoid the above-mentioned sanctions; and, secondly, to respect the rules of the game and prevent economic imbalances of world order from occurring.
In any case, we remind you that last August a new order was published in the BOE with the modifications in model 232. In this post,you can find all the news of this statement.
And if you have any questions, you can always consult our AYCE Laborytax advisors.