Tax

Category Archive Tax

Transfer pricing agreements

Transfer prices agreements with the Spanish Tax Office

As I explained in another post, transfer pricing is the price agreed between related parties for goods and services. This price can be cause for review by the Tax Agency. These prices should be those which would have been agreed between two independent companies that operate in the same market.

To avoid conflicts between related companies and the tax authorities, the company can reach preliminary transfer prices agreements with the tax authorities on valuation of related party transactions. These agreements can be both national and international.

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Transfer pricing for goods and services in Spain

Transfer pricing for goods and services in Spain

What is transfer pricing

Transfer pricing is the total value given to a transaction between two related companies.

It may happen that two related companies agree on prices, for certain products or services, different to those those which would had been agreed between two companies that have no relationship between them.

By doing this the linked companies, to their convenience, transfer between them a loss or a profit making one of the two companies pay less tax.

The problem is more evident in multinational companies that can transfer income to their own enterprises in areas of lower taxation.

For this reason the tax authorities of the different countries require that transactions between related companies are conducted according to the market price. The market price is the one that would be agreed between two unrelated companies.

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