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Tax valuation of operations between related companies in Spain

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Transfer pricing: Nullity of the tax administration's valuation modifications applied to operations with related parties for not following established procedures


In the sentence of the Tribunal Supremo dated 10/12/2009, it is established that article 16 of corporate tax law takes precedence over article 15 of the same law. Both rules establish that operations carried out by a company must adjust to market prices. However, whereas article 15 establishes general criteria to value certain operations from a tax point of view, article 16 regulates the valuation of these operations in detail when these take place between associated corporations. In the event of having the latter rule applied, the new evaluation will have to follow a very complex procedure, yet it does entail greater guarantees for affected companies, as linked transactions involve more than one company.

The court judgement favoured the company that opposed the administration’s decision and declared void the procedure followed by the administration, as it did not have the correct legal base nor did it comply with the procedural formalities established in corporate tax regulations when applying article 16. The sentence did not question the valuing methods followed, it only declared void the procedure followed by the administration.

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