SPAIN Law and Practice Contributed by: Carolina del Campo, Joan Hortalà, Jaime Collado and Pablo Álvarez, Cuatrecasas
15. Foreign Payment Restrictions 15.1 Restrictions on Outbound Payments Relating to Uncontrolled Transactions Dealings with noncooperative jurisdictions can encounter deductibility limits and heightened docu - mentation standards even for uncontrolled transac - tions, per RIS special rules. Taxpayers must evidence valid economic reasons and market aligned pricing. Spain’s earnings stripping rule limits the deductibility of net financial expenses to the higher of: • EUR1 million per year; or • 30% of tax EBITDA (operating profit, as defined in the Corporate Income Tax Law). Any net interest disallowed by this cap can be carried forward without time limit, while unused capacity (the headroom between 30% of tax EBITDA and the year’s net financial expenses) can generally be carried for - ward for five years. The limit applies at the level of the tax consolidation group, if one exists. Additional anti- avoidance rules can restrict deductions where intra- group debt is used to acquire shareholdings within the group absent valid economic reasons. This interest limitation regime operates in parallel with TP: even if interest is within the 30% cap, the rate and terms must still be arm’s length. Conversely, an arm’s length rate may still face partial disallowance if the 30% cap is exceeded. 15.2 Restrictions on Outbound Payments Relating to Controlled Transactions The same heightened standards apply to related party transactions with noncooperative jurisdictions; TP documentation (master file and local file), CbC reporting and Model 232 disclosures interact with these rules. 15.3 Effects of Other Countries’ Legal Restrictions Spain does not apply a general safe harbour simply because another country restricts payments. Foreign legal constraints may be considered factually in delin - eation and risk allocation but do not replace Spain’s domestic TP analysis.
separate rules and authorities. Nevertheless, internal consistency of factual narratives and documentation (functions, risks and pricing policies) reduces contro - versy risk across regimes. 13. Controversy Process 13.1 Options and Requirements in Transfer Pricing Controversies Following an audit, taxpayers may pursue adminis - trative reconsideration and then bring an economic administrative claim (TEAR/TEAC). TEAC has clari - fied that simultaneous inspections across all parties to a related party transaction are possible under gen - eral inspection rules, and that bilateral recognition should be given where an adjustment is made first by one party. Judicial review follows in the conten - tious administrative courts. Suspension without pre- payment is available upon providing suitable guaran - tees, per general tax procedure norms. MAP remains available to relieve double taxation under treaties and the EU Arbitration Convention; the MAP Regulation is consolidated in RD 1794/2008 (as amended by, for example, RD 399/2021). 14. Judicial Precedent 14.1 Judicial Precedent on Transfer Pricing While court decisions exist, Spain’s most detailed guidance often arises from TEAC criteria and regional economic administrative courts, which address the selection of methods, comparables quality, cash pool - ing and correlative adjustments. These are influential
in risk assessment and audit defence. 14.2 Significant Court Rulings Recent TEAC decisions have:
• clarified cash pooling benchmarking, emphasising group credit risk and the administrative/treasury nature of pool leaders; and • reaffirmed the comparability principles and bilateral consequences of primary adjustments (including recognition of the expense of the counterparty where appropriate).
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