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Related-party transactions are operations undertaken between non-independent parties and that therefore can be concluded at prices different from market prices; the value is understood as that which would have been agreed by independent persons or entities under conditions of free competition.

The importance of their tax control lies in the fact that the profits or losses of the non-independent companies may be recorded not in the company where they really should be, but rather in the company that, for purely fiscal reasons, the taxpayer wants them to be.

Notwithstanding the above, R.D. 897/2010, which modifies the Corporate Income Tax Regulations in terms of documentation requirements for related-party transactions, has exempted the following transactions from documentation:

  • those undertaken by persons or entities whose net turnover in the period is less than 8 million EUR (for fiscal years beginning as of 01/01/2011, the figure will be 10 million EUR), provided that the total number of related-party transactions in that period is less than or equal to €100,000 of market value; even so, the transactions undertaken by related persons or entities that reside in a country or territory regulatorily qualified as a tax haven must be documented in all cases, except for a few exceptions.
  • Those undertaken by EIGs and joint ventures with their members or with other entities of the same tax consolidation group.
  • Those undertaken between credit institutions integrated via an institutional protection scheme (S.I.P.) approved by the Bank of Spain.
  • Those undertaken with the same person or entity whose total payback is less than or equal to €250,000 of market value; however, the following transactions (specific transactions) should be documented in all cases: (i) those undertaken with persons or entities residing in tax havens, with the same caveat as in the previous case; (ii) those undertaken by personal income taxpayers on engaging in economic activities to which the objective assessment method is applicable with certain related companies; (iii) the transfer of business or securities or representative shares of the stake in equity capital not admitted for trading on regulated stock markets; (iv) the transfer of properties or operations over assets considered as intangibles.

The required documentation should be prepared taking into account the complexity and volume of transactions, such that the Administration can verify that the applied appraisal adheres to the provisions of article 16 of the Corporate Income Tax Act. The Regulation distinguishes between the documentation of the taxable entity (known in practice as Country File) and the documentation of the group of which it forms part (know in practice as Master File).

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