Spain: Transfer Pricing Audit Focus 2022

published on 12 July 2022 | reading time approx. 2 minutes

The Spanish Tax Administration has published in its annual tax and customs control plan for 2022 and highlighted in different forums what shall be the key points of the transfer pricing audits in 2022.

In this regard, the audits shall focus on the following points:

Taxpayers with recurring losses;
The provision of services (focusing on cases for which these are not being charged or are undervalued);
Assignments of intangible assets (paying particular attention to those with no compensation or to the inappropriate reduction of income from such assets);
The erosion of tax bases caused by the establishment of structures abroad in which profits that should be taxed in Spain are directed; and
Financial transactions.

The areas where the Tax Administration considers that there may be a transfer pricing tax risk are as follows:

Business restructurings;
The valuation of intra-group transfers or assignments of different assets, particularly intangible assets; and
The deduction of items that may erode the tax base significantly, such as royalty payments arising from the assignment of intangibles or payments for intra-group services or the existence of recurring losses.

In addition, from 2022 onwards, the tax administration has adopted a new strategy known as the 360° strategy. This strategy interlinks the different procedures that may affect a Taxpayer's related-party transactions, from the Taxpayer's risk analysis and the initiation of an audit (in case a risk should be identified) to the Mutual Agreement Procedure, in case of transfer pricing adjustment, and, if applicable, should these conclusions lead to an APA (Advance Pricing Agreement).

For the application of this 360º strategy, the Tax Administration has a new automated transfer pricing risks analysis system, which compiles all available information on related-party transactions, both national and international, and which allows the identification of high fiscal risk behaviour patterns through the construction of indicators, indices and models.

Finally, it is important to highlight that, during 2022, the Tax Authority foresees the continuation of its policy of promoting Advance Transfer Pricing Agreements to provide certainty in international legal-tax relations.