Countries: Spain

Spain vs LA REHOS, S.L., July 2022, Supreme Court, Case No 7268/2021, ATS 10616/2022 – ECLI:EN:TS:2022:10616A

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The issue presented before the Spanish Supreme Court is if and how the arm’s length principle apply to the salary of the owner of a consultancy company for personal services provided to an independent company, i.e. if the price agreed for provision of these services to an independent party is a CUP in relation to the salary of the owner. “In order to determine the market value of the services provided by Mr. Primitivo to […]

Spain vs “XZ SA”, March 2022, TEAC, Case No Rec. 4377-2018

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“XZ SA” is a Spanish parent of a tax consolidation group which is part of a multinational group. The Spanish group participates in the group’s cash pooling system, both as a borrower and as a provider of funds. The objective of cash pooling agreements is to manage the cash positions of the participating entities, optimising the group’s financial results by channelling the excess liquidity of the group companies that generate it to the group companies […]

Spain vs Dasher Spain S.A., January 2022, Supreme Court, Case No ATS 601/2022 – ECLI:EN:TS:2022:601A

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An appeal before the Supreme Court was allowed to determine whether or not the Spanish State Tax Administration Agency is obliged to notify the Provincial Treasury of the Basque Historical Territories of a transfer pricing valuation adjustments issued to an entity taxed in accordance with the regulations of the Basque Historical Territories. Click here for English translation Click here for other translation

Spain vs Narcea Producciones y Promociones S.L., January 2022, Tribunal Superior, Case No STSJ M 122/2022 – ECLI:ES:TSJM:2022:122

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Narcea Producciones y Promociones, S.L. (Narcea S.L.) had as shareholders Mr. Emiliano and Mrs. Filomena and their son, Mr. Ismael, a professional footballer, who had an employment relationship with the football club Hércules CF SAD of Alicante. Narcea S.L. purportedly managed the economic rights, the representation fees and the image and TV rights of Mr. Ismael. In relation to the image and TV rights of Mr. Ismael, the tax authorities considered that there had been […]

Spain vs MAHOU (SAN MIGUEL) S.A., December 2021, Audiencia Nacional, Case No SAN 5537/2021 – ECLI:ES:AN:2021:5537

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The Mahou (SAN MIGUEL) S.A Group is active in brewing and sale of beers. Penibética de cervezas y bebidas SL and Andaluza de cervezas y bebidas SL are wholly owned by Cervezas Alhambra SL, which again is owned by MAHOU (SAN MIGUEL) S.A. The main activity of Cervezas Alhambra SL is the distribution and marketing under its own brands of the beer produced by its subsidiaries; that of Penibética de Cervezas y Bebidas SL is […]

Spain vs “Benchmark SA”, November 2021, TEAC, Case No Rec. 4881/2019

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The tax authorities excluded some of the entities selected by the taxpayer in a benchmark study, as it considered that they did not meet the necessary comparability requirements, and also included some of the excluded entities, as it considered that they were comparable. These modifications to the benchmark resulted in a variation of the arm’s length range, with the margin earned by the taxpayer falling outside the range. The taxpayer argued that the recalculation of […]

Spain vs Varian Medical Systems Iberica S.L., October 2021, Audiencia Nacional, Case No SAN 4241/2021 – ECLI:ES:AN:2021:4241

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Varian Medical Systems Iberica S.L. is the Spanish subsidiary of the multinational company Varian Medical Systems and carries out two types of activities – distribution and after-sales services. The products sold was purchased from related entities: Varian Medical Systems Inc., Varian Medical Systems UK Ltd., Varian Medical Systems International AG and Varian Medical Systems HAAN GmbH. The remuneration of Varian Medical Systems Iberica S.L. had been determined by application of the net margin method for […]

Spain vs Comeresa Prensa S.L.U., September 2021, Audiencia Nacional, Case No SAN 3857/2021 – ECLI:ES:AN:2021:3857

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VOCENTO, S.A. is the parent company of a multinational publishing group. The registered office of VOCENTO, S.A. is in Bizkaia and it is subject to the regulations of this Territory regarding Corporate Income Tax. COMERESA PRENSA, S.L.U. is a wholly-owned subsidiary of VOCENTO and holds most of the shares in regional press publishing companies held by the Group of which VOCENTO, S.A. is the parent company, with the exception of the publishing companies with registered […]

Spain vs SGL Carbon Holding, September 2021, Tribunal Supremo, Case No 1151/2021 ECLI:EN:TS:2021:3572

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A Spanish subsidiary – SGL Carbon Holding SL – had significant financial expenses derived from an intra-group loan granted by the parent company for the acquisition of shares in companies of the same group. The taxpayer argued that the intra-group acquisition and debt helped to redistribute the funds of the Group and that Spanish subsidiary was less leveraged than the Group as a whole. The Spanish tax authorities found the transactions lacked any business rationale […]

Spain vs XZ SA, May 2021, TEAC, Case No Rec. 2545/2019

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Following an audit the tax administration had adjusted the margin obtained by the taxpayer to the median, as it was below the interquartile range of the benchmark analysis. An appeal was filed by the taxpayer with the TEAC. Judgement of the TEAC The TEAC upheld the taxpayer’s appeal and annulled the decision of the tax authorities. Excerpt “… In the present case, the inspectorate has accepted the comparability study of the company without noting any […]

Spain vs EPSON IBÉRICA S.A.U., March 2021, Supreme Court, Case No 390:2021

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The SEIKO EPSON CORPORATION is a multinational group of Japanese origin active in among others areas, production and sale of computer products. The group is present in Spain, EPSON IBÉRICA, but has its European HQ in the Netherlands, EPSON EUROPE BV. The main shareholder and sole director of EPSON IBÉRICA S.A.U. was initially Mr. Jose Augusto. However, following a capital increase on 24 April 1986, EPSON IBÉRICA SAU became the subsidiary of the EPSON Group […]

Spain vs DIGITEX INFORMÁTICA S.L., February 2021, National Court, Case No 2021:629

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DIGITEX INFORMATICA S.L. had entered into a substantial service contract with an unrelated party in Latin America, Telefonica, according to which the DIGITEX group would provide certain services for Telefonica. The contract originally entered by DIGITEX INFORMATICA S.L. was later transferred to DIGITEX’s Latin American subsidiaries. But after the transfer, cost and amortizations related to the contract were still paid – and deducted for tax purposes – by DIGITEX in Spain. The tax authorities found […]

Spain vs BIOMERIEUX ESPAÑA SA, February 2021, National Court, Case No 2021:416

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BIOMERIEUX ESPAÑA SA is active in the business of clinical and biological analysis, production, distribution, training and technical assistance. Likewise, the provision of computer services and, in particular, the computer management of laboratories. Following an audit the tax authorities found that the controlled prices agreed for the acquisition of instruments and consumables between bioMérieux España and its related entities, bioMérieux SA and bioMérieux Inc, did not provided bioMérieux España with an arm’s length return on […]

Spain vs. VAT PE of Ashland Industries Europe GMBH, November 2020, Supreme Court, Case no 1.500/2020

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A Swiss company, Ashland Industries Europe GmbH, had not declared a presence in Spain for VAT purposes and did not charge VAT for local sales. However, the Swiss company used the resources of its Spanish subsidiary when performing these local sales of goods in Spain. On that basis, the Spanish tax authorities found that the company had a permanent establishment for in Spain for VAT purposes and issued an assessment. An appeal was filed by […]

Spain vs JACOBS DOUWE EGBERTS ES, SLU., November 2020, Tribunal Superior de Justicia, Case No STSJ M 7038/2019 – ECLI:EN:TS:2020:3730

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At issue in this case was whether or not it is possible to regularize transactions between companies by directly applying art. 9.1 of DTA between Spain and French, without resorting to the transfer pricing methods provided for in local Spanish TP legislation. Application of article 9 and taxing according to local tax legislation is often a question of determining the arm’s length price. But sometimes other rules will apply regardless of the value – for […]

Spain vs COLGATE PALMOLIVE ESPAÑA, S.A., September 2020, Supreme Court, Case No 1996/2019 ECLI:ES:TS:2020:3062

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The tax authorities had issued an assessment according to which royalty payments from Colgate Palmolive España S.A (CP España) to Switzerland were not considered exempt from withholding taxes under the Spanish-Swiss DTA since the company in Switzerland was not the Beneficial Owner of the royalty-income. The assessment was set aside by the National Court in a decision issued in November 2018. The Supreme court were to clarify the conformity with the law of the judgement […]

Spain vs Stavelot Comunicación S.L., May 2020, Tribunal Supremo, Case No 446/2020, STS 951/2020 – ECLI:EN:TS:2020:951

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In the case at hand a related-party transactions had been carried out between a person (shareholder) and a related company. The transaction took place in 2007 and 2008 and was exempt from Spanish transfer pricing documentation requirements. The tax authorities issued an assessment where the transfer pricing had been adjusted and a penalty/fine was added to the claim. The taxpayer was of the opinion that the exemption from penalties extended to cases where the controlled […]

Microsoft – Taxes and Transfer Pricing

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Microsoft’s tax affairs have been in the spotlight of tax authorities all over the World during the last decade. Why? The setup used by Microsoft involves shifting profits from sales in the US, Europe and Asia to regional operating centers placed in low tax jurisdictions (Bermuda, Luxembourg, Ireland, Singapore and Puerto Rico). The following text has been provided by Microsoft in a US filing concerning effective tax and global allocation of income: “Our effective tax rate for […]

Spain vs “Lux Hold S.A.”, October 2019, TEAC, Case No 00/02188/2017/00/00

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There is an obligation to withhold tax on dividends paid to a holding company resident in an EU Member State, if the beneficial owner is resident abroad. Although the Parent-Subsidiary Directive 90/435 does not contain a beneficial owner clause, the exemption clause contained in Article 14.1.h) of the TRLIRNR is perfectly in line with EU law. It cannot be rejected as an incorrect transposition nor can it be considered to infringe the Community principles of […]

Spain vs “X Iberica SA”, October 2019, TEAC, Case No Rec. 6537/2017

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“X Iberica SA” is a Spanish subsidiary of a multinational group and also a participant in the group’s cash pooling system, both as a borrower and as a provider of funds. When the group is not able to finance itself, the vehicle called THE X TES US comes into play, which raises these funds from outside the group as a group and on the basis of the group’s credit quality. The objective of cash pooling […]

Spain vs ARW Enterprise Computin Solution SA, September 2019, Tribunal Superior de Justicia, Case No STSJ M 7038/2019 – ECLI: ES:TSJM:2019:7038

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A Spanish subsidiary, ARW Enterprise Computin Solution SA, had deducted intra-group management fees paid according to two service contracts with two french group companies – Distrilogie SA and DCC France Holding SAS. For an expense to be deductible it is required not only that invoice, account, payments have been imputed correctly, but also that the expense have been held for obtaining income and to the direct benefit of the subsidiary. The Spanish tax authorities found, […]

Spain vs SGL Carbon Holding, April 2019, Audiencia Nacional, Case No ES:AN:2019:1885

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A Spanish subsidiary – SGL Carbon Holding SL – had significant financial expenses derived from an intra-group loan granted by the parent company for the acquisition of shares in companies of the same group. The taxpayer argued that the intra-group acquisition and debt helped to redistribute the funds of the Group and that Spanish subsidiary was less leveraged than the Group as a whole. The Spanish tax authorities found the transactions lacked any business rationale […]

Spain vs Acer Computer Ibérica S.A., March 2019, AUDIENCIA NACIONAL, Case No 125:2017, NFJ073359

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Acer Computer Ibérica S.A. (ACI) is part of the multinational ACER group, which manufactures and distributes personal computers and other electronic devices. Acer Europe AG (AEAG), a group entity in Switzerland, centralises the procurement of the subsidiaries established in Europe, the Middle East and Africa, and acts as the regional management centre for that geographical area. ACI is responsible for the wholesale marketing of electronic equipment and material, as well as in the provision of […]

Spain vs Ikea, March 2019, Audiencia Nacional, Case No SAN 1072/2019

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The tax administration had issued an adjustment to the taxable profit of IKEA’s subsidiary in Spain considering that taxable profit in years 2007, 2008, and 2009 had not been determined in accordance with the arm’s length principle. In 2007 taxable profits had been below the interquartile range and in 2008 and 2009 taxable profits had been within the interquartile range but below the median. In all years taxable profits had been adjusted to the median […]

Spain vs COLGATE PALMOLIVE ESPAÑA, S.A., November 2018, Audiencia National, Case No 643/2015 – ECLI:EN:AN:2018:5203

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The tax authorities had issued an assessment according to which royalty payments from Colgate Palmolive España S.A. (CP España) to Switzerland were not considered exempt from withholding taxes under the Spanish-Swiss DTA since the company in Switzerland was not the Beneficial Owner of the royalty-income. Judgement of the National Court The court held in favour of Colgate and set aside the decision of the tax authorities. SP vs Palmolive SAN_1128_2018 ENG NW”>Click here for English […]

Spain vs Representaciones Creta S.L., October 2018, Tribunal Supremo, Case No 1504/2018, STS 3632/2018 – ECLI:ES:TS:2018:3632

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Tax penalties/fines had been issued following a transfer pricing adjustments in regards of controlled transactions exempt from Spanish TP documentation requirements. An appeal was filed by the taxpayer claiming to be excluded from the Spanish penalty regime. The appeal was dismissed by the lower courts. Judgement of the Supreme Court The Supreme Court upheld the decision of the lower courts and dismissed the appeal of the taxpayer. The Court ruled that the specific transfer pricing […]

Spain vs. Zeraim Iberica SA, June 2018, Audiencia Nacional, Case No. ES:AN:2018:2856

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ZERAIM IBERICA SA, a Spanish subsidiary in the Swiss Syngenta Group (that produces seeds and agrochemicals), had first been issued a tax assessment relating to fiscal years 2006 and 2007 and later another assessment for FY 2008 and 2009 related to the arm’s length price of seeds acquired from Zeraim Gedera (Israel) and thus the profitability of the distribution activities in Spain. The company held that new evidence – an advance pricing agreement (APA) between […]

Spain vs ICL ESPAÑA, S.A. (Akzo Nobel), March 2018, Audiencia Nacional, Case No 1307/2018 ECLI:ES:AN:2018:1307

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ICL ESPAÑA, S.A., ICL Packaging Coatings, S.A., were members of the Tax Consolidation Group and obtained extraordinary profits in the financial years 2000, 2001 and 2002. (AKZO NOBEL is the successor of ICL ESPAÑA, as well as of the subsidiary ICL PACKAGING.) On 26 June 2002, ICL ESPAÑA, S.A. acquired from ICL Omicron BV (which was the sole shareholder of ICL ESPAÑA, S.A. and of Elotex AG and Claviag AG) 45.40% of the shares in […]

Spain vs. Microsoft Ibérica S.R.L, February 2018, Audiencia Nacional, Case no 337/2014

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Microsoft Ibérica S.R.L is responsible for distribution and marketing of Microsoft products in Spain. According to an agreement concluded between Microsoft Ibérica and MIOL (Microsoft’s Irish sales and marketing hub) with effect from 1 July 2003, Microsoft Ibérica would received the largest amount of either a commission based on sales invoiced in Spain or a markup on it’s costs. In support of the remuneration according to the agreement, Microsoft had provided a benchmark study. The […]

Spain vs EPSON IBÉRICA S.A.U., Feb 2018, High Court, Case No 314/2016

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EPSON IBÉRICA S.A.U. had deducted the full employee pension costs of a CEO that had worked both for the HQ in the Netherlands and the local Spanish Company. The tax authorities issued an assessment where 90% of the pension costs had been disallowed in regards to the taxable income in Spain. The disallowed percentage of the costs was based on the CEO’s salary allocation between Netherlands (90%) and Spain (10%), cf. the agreement entered between […]

Spain vs COLGATE PALMOLIVE HOLDING SCPA, February 2018, High Court, Case No 568/2014

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According to Colgate Palmolive, following a restructuring, the local group company in Spain was changed from being a “fully fledged distributor” responsible for all areas of the distribution process to being a “limited risk distributor” (it only performs certain functions). A newly established Swiss company, Colgate Palmolive Europe, instead became the principal entrepreneur in Europe. The changed TP setup had a significant impact on the earnings in the Spanish group company. Net margins was reduced […]

Spain vs McDonald’s, March 2017, Spanish Tribunal Supremo, Case no 961-2017

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An adjustments had been made by the tax authorities to a series of loans granted by GOLDEN ARCHES OF SPAIN SA (GAOS), domiciled in Ireland, to RESTAURANTES MC DONALDS, S.A. (RMSA), throughout the period 2000/2004 for amounts ranging between 10,000,000 and 86,650,000 €, at interest rates between 3,450% and 6,020%. The tax administration held that GAOS “has no structure or means to grant the loan and monitor compliance with its conditions … it does not […]

Spain vs. Schwepps (Citresa), February 2017, Spanish Supreme Court, case nr. 293/2017

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The Spanish Tax administration made an income adjustment of Citresa (a Spanish subsidiary of the Schweeps Group) Corporate Income Tax for FY 2003, 2004, 2005 and 2006, resulting in a tax liability of €38.6 millon. Citresa entered into a franchise agreement and a contract manufacturing agreement with Schweppes International Limited (a related party resident in the Netherlands). The transactions between the related parties were not found to be in accordance with the arm’s length principle. In the parent company, […]

Spain vs. ZERAIM IBÉRICA, SA, Oct. 2016, Spanish Supreme Court, Case no 4675-2016

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In this case ZERAIM IBÉRICA SA argues that the OECD Transfer Pricing Guidelines has not been applied propperly, as secret comparables have been used in determining the arm’s length price of controlled transactions between the Spanish company and its Dutch parent company. The court concludes that the “..Guidelines are considered to be merely recommendations to States, which are given an interpretative value.” The appeal filed by the company is dismissed by the court. Click here […]

Spain vs Dell, June 2016, Supreme Court, Case No. 1475/2016

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Dell Spain is part of a multinational group (Dell) that manufactures and sells computers. Dell Ireland, operates as distribution hub for most of Europe. Dell Ireland has appointed related entities to operate as its commissionaires in several countries; Dell Spain and Dell France are part of this commissionaire network. The group operates through a direct sales model and sales to private customers in Spain are conducted by Dell France, through a call centre and a […]

Spain vs. PEUGEOT CITROEN AUTOMOVILES, May 2016, Supreme Court, case nr. 58/2015

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The company had deducted impairment losses recognised on an investment in an Argentinean company (recently acquired from a related entity) arising from the conversion into capital of loans granted to the entity by other group companies, loans which had been acquired by the Spanish taxpayer. The tax administration argued that acquisition of such loans would not have taken place between independent parties due to the economic situation in Argentina at that time. The Supreme Court considered this conclusion […]

Spain vs. branch of ING Direct Bank, July 2015, Spanish High Court, Case No 89/2015 2015:2995

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In the INC bank case the tax administration had characterised part of the interest-bearing debt of a local branch of a Dutch bank, ING DIRECT B.V,  as “free” capital, in “accordance” with EU minimum capitalisation requirements and consequently reduced the deductible interest expenses in the taxabel income of the local branch for FY 2002 and 2003. The adjustment had been based on interpretation of the Commentaries to the OECD Model Convention, article 7, which had […]

Spain vs. Bicc Cables Energía Comunicaciones S.A., July 2012, Supreme Court, Case No. 3779/2009

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In May 1997, BICC CABLES ENERGÍA COMUNICACIONES, S.A. acquired 177 class B shares in BICC USA Inc. (BUSA) for USD 175 million. The par value of each share was one dollar. The acquisition price of the shares was set on the basis of an Arthur Andersen Report which stated that the fair market value of BUSA was USD 423 million. BUSA was the holding company of four investee companies, so the valuation was made in […]

Spain vs. Roche, January 2012, Supreme Court case nr. 1626/2008

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Prior to a business restructuring in 1999, the Spanish subsidiary, Roche Vitaminas S.A., was a full-fledged distributor, involved in manufacturing, importing, and selling the pharmaceutical products in the Spanish and Portuguese markets. In 1999 the Spanish subsidiary and the Swiss parent, Roche Vitamins Europe Ltd., entered into a manufacturing agreement and a distribution agreement. Under the manufacturing agreement, the Spanish subsidiary manufactured products  according to directions and using formulas, know-how, patents, and trademarks from the […]

Spain vs. Borex, February 2011, National Court case nr. 80-2008

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A Spanish subsidiary of a UK Group (Borex), which imported, processed and sold the materials to third parties, was transformed into a a contract manufacturer. The Spanish subsidiary signed two separate contracts with the UK parent – one for warehousing and the provision of services and the other in respect of an sales agency. Under the first contract, the minerals purchased by the parent would be stored and processed by the subsidiary, which would also provide other […]

Spain vs. Refrescos Envasados S.A., November 2009, Supreme Court, Case nr. 3582/2003

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Refrescos Envasados, S.A. – a Coca-Cola subsidiary in Spain – bought soft drink concentrate manufactured by Coca-Cola companies in Ireland and France. According to the tax authorities the prices paid for the concentrate were above market prices. Hence, an assessment was issued where the prices for the concentrate had been lowered resulting in additional taxable profits. In regards to the tax assessment, the tax authorities argued that they were not bound by the valuation carried […]

Spain vs X SL, June 2009, TEAC, Case No Rec. 656/2007

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A holding company of an international Group was established in Spain and in it and in the Group’s operating entity, which was made dependent on it and with which it was fiscally consolidated, intra group loans were requested, for the acquisition of shares in other Group companies, which were mere asset relocations without any economic or business substance, with the sole objective of reducing taxation in Spain: Both in the Spanish holding company and in […]