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 the company LA REHOS, S.L., is based on the value of the relationship between LA REHOS, S.L. and the third parties from which it obtains the income for the services rendered by Mr. Primitivo with the necessary corrections to obtain the equivalence: those derived from the expenses and costs related to the activity of Mr. Primitivo incurred by or residing in the entity LA REHOS, S. L. and those that originated in the expenses or costs related to the services provided by Mr. Primitivo to ... Read more

“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 that need financing, resorting to third-party financing when the group itself is not able to finance itself. This achieves greater efficiency in the use of the group’s funds, as well as improving their profitability and reducing the administrative and general financial costs of the entities participating in the agreement. The tax authorities issued an assessment in which the interest rates on deposits and withdraws had been aligned and determined based on a group credit rating. A complaint was filed with the TEAC by XZ SA ... Read more

Where accurate delineation of the actual transactions determines that a cash pool leader is carrying on activities other than coordination or agency functions, the pricing of such transactions would follow the approaches included in other parts of this guidance, as appropriate ... Read more

In general, a cash pool leader performs no more than a co-ordination or agency function with the master account being a centralised point for a series of book entries to meet the pre-determined target balances for the pool members. Given such a low level of functionality, the cash pool leader’s remuneration as a service provider will generally be similarly limited ... Read more

“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 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 that need financing, resorting to third-party financing when the group itself is not able to finance itself. This achieves greater efficiency in the use of the group’s funds, as well as improving their profitability and reducing the administrative and general financial costs of the entities participating in the agreement. The tax authorities issued ... Read more

A & W AG, a company based in Germany, had maintained a permanent establishment in Austria which provided “distribution and support of software” services. No profits had been attributed to the Austrian permanent establishment. An assessment was issued where profits for FY 1998 to 2002 had been determined by the tax authorities using the cost plus method with a mark up of 9.5% to 7.5% for the years 1998 to 2002. A & W AG appealed against the tax assessments and argued that a mark up of 2% would be more appropriate. The Administrative Court of Appeal remanded the case to the Unabhängiger Finanzsenat. Judgement of the UFS The UFS decided predominantly in favour of A & W AG. The tax office explained that, based on empirical values ​​and relevant literature, mark up rates of between 5% and 15% should be regarded as customary. The mere reference to these empirical values ​​did not convince the UFS, since the facts to ... Read more

A & W AG, a company based in Germany, had maintained a permanent establishment in Austria which provided “distribution and support of software” services. No profits had been attributed to the Austrian permanent establishment. An assessment was issued where profits for FY 1998 to 2002 had been determined by the tax authorities using the cost plus method with a mark up of 9.5% to 7.5% for the years 1998 to 2002. A & W AG appealed against the tax assessments and argued that a mark up of 2% would be more appropriate. Judgement of the Court The Administrative Court of Appeal found the mark up determined by the tax authorities to be incomprehensible. The tax authority would have had to justify the mark-ups, for example by submitting specific empirical values ​​from comparable companies. The case was remanded to the court of first instance, where in a decision of April 28, 2010 ( RV/3837-W/09 ), a cost mark-up of 2% was ... Read more