In recent years, we have witnessed a notable increase in the investigation and verification of transfer pricing issues by the Spanish tax authorities. We review the most common controversies in this area, outlining potential recommendations.
In recent years, the Spanish tax authorities have significantly increased their scrutiny of taxpayers on issues related to transfer pricing, this being a priority area of action in successive annual tax and customs control plans (access the 2025 plan). The subjectivity of the matter, together with the lack of specific guidance in the legal framework and the absence of consensus and clear interpretative criteria, are factors that contribute to this.
It is enough to point out the increase in litigation to corroborate this trend. According to data from Jurimetría, Spanish courts have issued 334 judgments on transfer pricing issues in the last 10 years (more than 70% in the last 5 years), with a ruling in favor of the claims of the State Administration in 58.5% of cases.
Besides, statistics published by the OECD reveal that 260 new mutual agreement procedures were initiated in Spain to correct international double taxation derived from tax regularizations in transfer pricing in 2024, compared to the scarce 59 cases initiated in 2016 (the first year of the statistical series).
Beyond reviewing the proper compliance with the formal obligations established by the regulation (annual declaration of related-party transactions in Tax Form 232 and specific documentation required), the tax authorities are intensifying the evaluation of taxpayers’ related-party transactions, generating important friction points in different areas.
One of them is debt financial operations. In these cases, it is essential to be in the position to prove both the nature of the transaction as such (with the consequent risk that, failing that, it may be disregarded and considered as an equity contribution instead, thus rejecting the tax deductibility of the financial charge), and the application of a market-based interest rate.
In this area, it has proven crucial to demonstrate the reasonableness of the conditions agreed for the lender and for the borrower, considering their available alternatives, the solvency and repayment capacity of the debt in market terms and the fulfillment of the contractual obligations agreed by the parties.
With regard to the interest rate, the tax authorities show a clear preference for accuracy over sample size in the search for comparable transactions, as opposed to other “build-up” methodologies, based on adjusting on a larger universe of less similar products. As an example, the TEAC, in a resolution of 20 October 2025, considers that it is more reliable to limit the search to debt instruments denominated in the same currency, than to extend it to other currencies to subsequently make adjustments related to country risk and exchange rate risk.
Also within the financial field, a particularly complex case that generates an increasingly frequent debate with the tax authorities are the cash pooling systems. In these cases, the debate focuses on the use of this mechanism for the management of cash balances (since its objective is the efficient management of the group’s position in the short term), as well as on the definition of a remuneration framework consistent with the functional analysis of the parties.
In relation to this last issue, the Supreme Court judgment of 15 July 2025 has established case law indicating that, unless there is solid evidence that proves the cash pool leader delivers strategic value to the system (with the consequent reasonable attribution of the main operating risks), the interest rates applied to the debit and credit balances must be equivalent and based on the cost of the debt in the short term that would be obtained considering the credit risk of the group as a whole.
Another particularly controversial area is companies with recurring losses. The challenge in these cases is to discern to what extent these losses respond to market factors or whether, on the contrary, they are explained by an inadequate valuation of the related-party transactions.
This, in turn, is closely linked to the attribution of a limited risk functional profile to the entity. In this type of entities, the tax authorities are paying special attention to the analysis of the functions and risks assumed by the parties to a transaction, the validity of external comparables (benchmarking), considering the robustness and adequacy of the selection and rejection criteria, as well as to the consistency and coherence of the criteria used in the preparation of segmented financial statements when the entity under analysis conducts several activities.
When the results of the activity are outside the interquartile arm’s length range derived from benchmarking, regularization is more than likely. The question, at this stage, is selecting the most appropriate point of rank. Tax authorities usually consider the median of the range as a reference point to calculate the valuation adjustment. However, the Spanish courts maintain a less restrictive criterion, considering the closest point of the range except in those cases in which the Administration proves the persistence of comparability defects. This criterion is upheld, for example, in the TEAC resolution of 20 October 2025 mentioned above, as well as in the judgment of the National High Court of 31 March 2023, among others.
Restructurings are also a central point in the tax authorities’ scrutiny of corporate groups. In these cases, the debate focuses on the reasons that promote the reorganization; who has made the decision to execute it and who benefits from this restructuring; whether it is appropriate to establish a compensatory payment for change in circumstances or a price for the transfer of assets and liabilities and how it should be measured; and the coherence of the situation before and after the restructuring, considering the changes that have actually occurred in the business.
Another focus of debate is intra-group services. In these cases, it is essential to have evidence demonstrating the reality and utility of the service, as well as its valuation in accordance with the arm’s length principle, which normally involves the implementation of cost-based methodologies that exclude non-remunerable activities (such as, for example, shareholder activities, duplicate services or incidental benefits) and allow the provider to obtain a profitability consistent with the nature of the services rendered. Proving the reasonableness of the mechanisms for configuring and distributing the cost base, as well as the market adequacy of the profit margin obtained is an equally critical issue.
In relation to the provision of intragroup services, global mobility is creating significant challenges for taxpayers. For example, the creation of so-called hubs or specialized centers to centralize certain activities that, in many cases, imply transferring resources from other companies , are posing challenges such as the potential creation of permanent establishments, or the transfer of goodwill related to these relocated activities.
The use of intangibles is another aspect commonly analyzed in tax audits. To be able to demonstrate the existence, legal form and usefulness of the intangible, to determine to whom its ownership belongs (for which it is essential to develop an adequate DEMPE analysis - an acronym used to identify the Development, Enhance, Maintenance, Protection and Exploitation of the intangible-), or to determine a reasonable remuneration methodology consistent with the high uncertainty inherent to these assets (incorporating, for example, price adjustment mechanisms), are elements of vital importance in these cases.
Another focus to consider, equally important, are the relations between the shareholder-natural person and his or her company. In these cases, the debate is currently centered on the valuation of the activities carried out by the shareholder, the coherence between the profit margin that remains in the company and its substance, the market valuation of the use of company’s assets by the shareholder, or the classification as a related-party transaction or not of the representation functions that the shareholder-natural person may exercise on behalf of his or her company as member of the governing body of another company.
These and other areas of verification make it advisable to establish a working method that allows the definition of transfer pricing policies that provide coherence between form and economic substance; and to prepare the documentation adequately and consistently (i.e., agreements in place, annual accounts, transfer pricing documentation, informative statements, etc.). In an increasingly volatile and uncertain environment, the defense should not be improvised, but built on the basis of a methodology and comprehensive documentation that could resist the scrutiny of the tax authorities.
