SPAIN Law and Practice Contributed by: Raúl Salas and Elena Ferrer-Sama, RocaJunyent
bilateral adjustment to the counterparty in the transac - tion – if it is a Spanish company. Whenever a MAP is filed, any domestic transfer pric - ing claim is suspended (in exchange for a warranty covering tax and interests) until its final resolution. If the solution offered at the end of the MAP procedure is accepted, the claim will be withdrawn. Otherwise, if the MAP resolution is not accepted, the domestic transfer pricing claim can be successfully continued until its final resolution. 5.2 Local Branches and Local Subsidiaries There are no significant differences between the taxa - tion of local branches (PEs) and local subsidiaries of non-local corporations. However, the following items in the tax regime applicable to a local branch of a foreign corporation should be considered: • application of the rules for related-parties’ transac - tions to operations carried out by the PE with the head office; • deductibility of the management and general administrative expenses charged by the head office to the PE if these are included in the accounting statements of the PE and charged on a regular basis in accordance with rational principles; and • payments made to the head office for royalties, interest, commissions and technical assistance services – or for the use or transfer of goods or rights – are generally not deductible. 5.3 Capital Gains of Non-Residents Non-residents’ capital gains on the sale of stock in local corporations are normally considered as ordi - nary income, taxable at the rate of 19% during the tax period in which they arise. However, domestic law provides several exemptions, including on capital gains obtained without a PE in Spain by a resident in another member state of the EU or European Economic Area (EEA) Agreement if there is an effective exchange of tax information. The exemption does not apply to capital gains arising from the sale of stocks in the following cases:
• when the assets of that entity are mainly – directly or indirectly – real estate situated in Spanish terri - tory; • when individuals have directly or indirectly held at least 25% of the capital or assets of the entity at any time during the 12 months prior to the sale; and • when the sale does not satisfy the requirements for the application of the exemption under Article 21 of the CIT Law in the case of non-resident entities (see 6.3 Dividends From Foreign Subsidiaries ). Nevertheless, according to the DTAs, taxation of these gains normally corresponds exclusively to the state of residence, and they are exempt in Spain. However, when it comes to stocks or shares in real estate enti - ties, many DTAs contain exceptions that allow taxation in the state where the real estate is located. Therefore, in order to determine the taxation of non-residents’ capital gains on the sale of shares, it is necessary to analyse the applicable DTAs. 5.4 Tax Implications of Change of Control The change of control resulting from the disposal of an indirect holding should not generate taxable income under the CIT Act. In this respect, Spanish law pro - vides anti-abuse rules that seek to eliminate the tax impact of losses arising from the disposal of share - holdings in the event of a change of control of some companies. See also 5.3 Capital Gains of Non-Res- idents with regard to the taxation of non-residents’ capital gains on the sale of stock in a Spanish entity. 5.5 Formula-Based Income Attribution In general terms, Spanish tax law follows the criteria set out in the OECD Guidelines. Therefore, apart from the arm’s length principle, no specific formulas are used to determine the income of foreign-owned local affiliates selling goods or providing services. 5.6 Deductibility of Intra-Group Management and Administrative Charges There are no specific rules for determining the pro - portion of common expenses that a non-local affiliate must re-invoice to the local affiliates. Consequently, the calculation of the expenses chargeable to the local affiliates must be made on an arm’s length basis and according to a reasonable criterion.
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