What Is Transfer Pricing in Spain?
Transfer pricing (precios de transferencia) refers to the consideration agreed in economic transactions between related parties or associated persons — for example:
- A foreign parent company and its Spanish subsidiary
- A shareholder (holding ≥25%) and their Spanish company
- Sister companies within the same group
- A director and the company they manage
The central principle is the arm’s length standard (principio de libre concurrencia), codified in Art. 18 of Ley 27/2014 del Impuesto sobre Sociedades (LIS). It requires that agreed prices correspond to those that independent third parties would have agreed under comparable conditions. Spanish law is fully aligned with the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations.
Transactions Covered
All economic transactions between related parties fall within the regime:
| Transaction type | Examples |
|---|---|
| Goods | Sales of products within the group |
| Services | Management fees, IT services, accounting |
| Intangibles | Licences, brand rights, patents, software licences |
| Financing | Intercompany loans, cash pooling |
| Asset transfers | Sales of shareholdings, real estate, IP |
Documentation Requirements
| Trigger | Obligation |
|---|---|
| Related-party transactions > €250,000/year (per counterpart) | Master File + Local File |
| Consolidated turnover > €750M/year | + Country-by-Country Report (Modelo 231) |
| All related-party transactions | Declaration in the corporate tax return (Modelo 200, Schedule) |
The Master File contains information on the group structure, value chain, and internal allocation of functions and risks. The Local File documents each specific transaction: nature, parties, methodology applied, benchmarking analysis, and results achieved.
Valuation Methods
Primary methods (Art. 18(4) LIS, preferred):
- CUP (Comparable Uncontrolled Price): comparison with market prices in comparable arm’s length transactions
- Resale Price Method (RPM): resale price to third party less market gross margin
- Cost Plus Method (CPM): supplier cost plus market profit mark-up
Supplementary methods (subsidiary): 4. TNMM (Transactional Net Margin Method): net margin of the controlled transaction compared to net margin ranges of comparable companies 5. Profit Split: total profit allocated on an economically justifiable basis
Practical Example
A UK holding company charges its Spanish operating subsidiary (S.L.) an annual fee of €1.5M for the right to use a software platform.
AEAT review steps:
- Functional and risk analysis: Does the Spanish S.L. actually bear development risk, or is the UK holding the functional owner of the IP? If the S.L. is merely a “routine service provider” without significant risks, a high royalty rate is difficult to justify.
- Method selection: For a licence on established IP, the CUP method (comparison with market licence rates) is preferred where comparable licence transactions exist.
- Benchmarking: The agreed rate (€1.5M) must fall within the interquartile range of comparable licence agreements.
- Documentation: Local File with full transaction description and benchmarking analysis.
Advance Pricing Agreements (APV — Acuerdo Previo de Valoración)
An APV is a binding agreement with the AEAT that fixes in advance the applicable method and the accepted market price for future related-party transactions, with validity of up to 4 years. APVs are recommended for material, recurring, and complex transactions — royalties, intercompany financing of large amounts — as they provide full legal certainty and eliminate audit exposure on those transactions.
Related Concepts
- Corporate Income Tax Spain (Impuesto sobre Sociedades) — the tax whose base the AEAT adjusts through transfer pricing corrections
- Double Tax Treaty — bilateral basis for mutual agreement procedures and corresponding adjustments
- Permanent Establishment — relevant connection point in cross-border group structures
- Tax Haven / Low-Tax Jurisdiction — heightened documentation and audit obligations for transactions with these jurisdictions