In the case of Nex Tyres SL v. Administración, the Spanish National Court emphasized key transfer pricing principles—method selection, proper justification of adjustments, and compliance with OECD standards. The court confirmed the Spanish tax authority’s decision to use the transactional net margin method (TNMM) over the comparable uncontrolled price (CUP) method, arguing on the lack of evidence to support CUP’s validity. The court also annulled an adjustment based on the median profit margin, asserting that tax authorities must identify comparability defects before applying the median, aligning with OECD guidelines.
This ruling is important, because it guides carefully the process of method selection for the multinational enterprises and addresses the requirement for the companies to justify their transfer pricing methods. This is important because in this way companies ensure compliance with economic realities and provide clear documentation to avoid audit risks. The ruling also states that tax authorities can’t automatically apply the median without proper analysis of comparability.
To read more on the Ruling Nex Tyres SL v. Administración, click here.
On December 4, 2024 the Spanish General Directorate of Taxes opened a public consultation on the new draft decree that aims to adopt regulatory changes ensuring a 15% global minimum tax for multinational enterprises (MNEs) and large groups in the EU. These changes are proposed in compliance with the EU Directive 2022/2523 and the OECD’s Pillar Two framework. The draft targets MNEs and groups with a consolidated net turnover of at least €750 million in two of the last four fiscal years. It outlines rules for calculating a complementary tax based on the income inclusion and undertaxed profits rules, details jurisdictional effective tax rate (ETR) calculations, and specifies reporting requirements for entities in Spain. Provisions for insurance entities and alignment with anti-money laundering regulations are also included. Stakeholders have until December 26 to submit comments.
To read more on the Draft Decree, click here.
In a narrow 20-17 vote, a Spanish parliamentary committee approved a bill introducing a 15% global minimum tax rate for multinational corporations earning over €750 million ($792 million) annually. This aligns with the OECD’s global tax reform efforts and could become law by year-end if opposition parties maintain their support. The vote follows extended negotiations and delays as the governing coalition attempted to gather backing for broader tax reforms, including ending corporate tax exemptions and making temporary windfall taxes on banks permanent. While these measures were largely rejected, the committee approved raising income tax on savings above €300,000 and reinstating corporate tax deduction limits overturned by the constitutional court. Spain, facing EU scrutiny for missing a directive deadline, now prepares for a final plenary vote on Thursday.
To read about the specifics of the Bill, click here.