International Tax Review is part of the Delinian Group, Delinian Limited, 8 Bouverie Street, London, EC4Y 8AX, Registered in England & Wales, Company number 00954730
Copyright © Delinian Limited and its affiliated companies 2023

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Spain: Tax authorities disregard third-party’s remuneration by using secret comparables



Mario Ortega

Alberto Ameneiro

On October 3 2013, the Spanish Central Economic-Administrative Tribunal (TEAC) handed down its decision on the withholding tax assessment issued by the Spanish tax authorities to a Spanish bottler/distributor on presumed royalty payments made under a concentrates procurement agreement with a third-party US producer of soft drinks. The most remarkable aspect in this decision is that the TEAC confirmed the tax authorities' power to reassess, at least partially, the attribution and characterisation of a consideration – business versus royalty income – paid pursuant to a contract between independent parties, based on general anti-abuse rules, presuming that the price paid by the distributor remunerated not only the purchase of goods to produce the concentrates but also the right to use the trademarks in this respect.

To determine the portion of the consideration that should be attributable to the use of trademarks, the tax authorities applied the methodologies contained in the OECD Transfer Pricing Guidelines for valuing intra-group transactions, even though the assessed transaction was carried out between unrelated parties.

In this regard, the valuation analysis made by the tax inspector relied on information requested from two companies which performed the activity of processing and packing soft drinks and juice for unrelated entities, and relating to the cost of raw beverage bases and the profitability obtained by those companies, without properly identifying them (claiming confidentiality of the companies whose data were considered).

However, in the decision, the TEAC rejected that last circumstance (not the use itself of secret comparables, but the lack of disclosure to the taxpayer) and overturned the valuation made and the tax assessment issued by the tax examiners.

In this decision, the TEAC seems to imply that it would have accepted the use of secret comparables if the taxpayer had been given enough information to challenge the process followed to select the comparables and their reliability, even where they were primarily chosen by the tax inspectors from a secret file or through a procedure unavailable to the taxpayer.

Thus, in view of this TEAC decision, the tax authorities' use of information which is not strictly public, this is to say, unavailable to any taxpayer performing a transfer pricing analysis to justify the arm's-length nature of its policies, seems to be permitted in Spain, provided that its main features are disclosed in the course of the assessment so that the taxpayer is able to know (and oppose) them before the issuance of the final tax assessment.

Moreover, in light of the above, multinational enterprises should review their supply chain structures, mainly when intangible assets are involved (both commercial and marketing), and irrespective of whether or not the transactions are carried out with related parties, to ascertain that all their transactions are correctly identified, valued, and treated for tax purposes.

Mario Ortega ( and Alberto Ameneiro (
Garrigues Taxand

Tel: +345 145 200

more across site & bottom lb ros

More from across our site

The Indian company, which is contesting the bill, has a family connection to UK Prime Minister Rishi Sunak – whose government has just been hit by a tax scandal.
Developments included calls for tax reform in Malaysia and the US, concerns about the level of the VAT threshold in the UK, Ukraine’s preparations for EU accession, and more.
A steady stream of countries has announced steps towards implementing pillar two, but Korea has got there first. Ralph Cunningham finds out what tax executives should do next.
The BEPS Monitoring Group has found a rare point of agreement with business bodies advocating an EU-wide one-stop-shop for compliance under BEFIT.
Former PwC partner Peter-John Collins has been banned from serving as a tax agent in Australia, while Brazil reports its best-ever year of tax collection on record.
Industry groups are concerned about the shift away from the ALP towards formulary apportionment as part of a common consolidated corporate tax base across the EU.
The former tax official in Italy will take up her post in April.
With marked economic disruption matched by a frenetic rate of regulatory upheaval, ITR partnered with Asia’s leading legal minds to navigate the continent’s growing complexity.
Lawmakers seem more reticent than ever to make ambitious tax proposals since the disastrous ‘mini-budget’ last September, but the country needs serious change.
The panel, the only one dedicated to tax at the World Economic Forum, comprised government ministers and other officials.