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Arm's length principle: evolution of DGT doctrine

How the DGT's position on this topic has evolved, and the rulings it rests on.

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How the DGT's position has evolved

Settled doctrine High confidence 35 rulings · 2014–2026

Current position

Remuneration for administrative positions is always considered income from employment. For services provided by a partner to be considered income from economic activities, they must meet the requirements of Article 27.1 of the LIRPF (Personal Income Tax Law), including registration in the special Social Security regime. In transactions with partners, valuation must be carried out at their normal market value.

The DGT's position remains constant in classifying administrators' remuneration as income from employment. The need to comply with strict LIRPF and Social Security requirements has been reiterated so that partners' services are not considered mere employment income. The application of market value in transactions with partners is a recurring criterion.

Turning points

  1. V1323-15

    Establishes that to consider a partner's services as an economic activity, the inclusion in the Second Section of the IAE (Economic Activities Tax) and registration in the special Social Security regime must occur.

Analysis based on 34 of 35 rulings with a stated position. Updated 16 September 2026.

Rulings on this topic

24
V5475-26 14 Aug 2026

15% reduced rate inapplicable due to membership in a corporate group

SG de Impuestos sobre las Personas Jurídicas
entidades de nueva creacióntipo reducidogrupo mercantilactividad económicaentidad patrimonial LIS — Ley 27/2014 del Impuesto sobre Sociedades art. 5.1LIS — Ley 27/2014 del Impuesto sobre Sociedades art. 18
Affects CompanyExpat · Non-residentIndividual
V0905-26 24 Apr 2026

Investors in audiovisual productions can claim tax deduction

SG de Impuestos sobre las Personas Jurídicas
deducción por inversiones en producciones audiovisualesfinanciación de produccionesderechos de propiedad intelectualactividades económicascontrato de financiación LIS — Ley 27/2014 del Impuesto sobre Sociedades art. 18LIS — Ley 27/2014 del Impuesto sobre Sociedades art. 36.1
Affects CompanyExpat · Non-residentIndividual
V1361-21 12 May 2021

Rental taxable base depends on relationship and market value

SG de Impuestos sobre el Consumo
comunidad de bienessujeto pasivobase imponiblevalor normal de mercadovinculación LIVA — Ley 37/1992 del IVA art. 4.unoLIVA — Ley 37/1992 del IVA art. 5
Affects CompanyExpat · Non-residentIndividual
V1692-20 29 May 2020

Partner remuneration for services to the company is income from work

SG de Impuestos sobre la Renta de las Personas Físicas
rendimientos del trabajorendimientos de actividades económicasadministradorvalor normal de mercadosocio LIRPF — Ley 35/2006 del IRPF art. 17.1LIRPF — Ley 35/2006 del IRPF art. 17.2.e)
Affects CompanyExpat · Non-residentIndividual
V1538-20 22 May 2020

Requirements for IRPF exemption for foreign work

SG de Impuestos sobre la Renta de las Personas Físicas
exención por trabajos en el extranjeroservicios intragrupoentidad no residenteestablecimiento permanenteventaja o utilidad LIRPF — Ley 35/2006 del IRPF art. 7.pLIRPF — Ley 35/2006 del IRPF art. 9
Affects CompanyExpat · Non-residentIndividual

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