After the quarterly returns filed on 20 October, the finance teams of SME groups, startups and family businesses enter a decisive phase of the year: preparing the documentation for the current year before the final closing. At this stage, one of the areas most closely scrutinised by the Spanish Tax Agency is related-party transactions and the arm’s length principle.
Lending money to a subsidiary, invoicing management fees from a holding company, renting a property to your own company or paying partner-directors are everyday corporate operations. However, carrying out these transactions without setting a market price or keeping the documentation required by law is one of the most frequent causes of tax adjustments and audits in Spain.
At Ruiz & Asociados we review the 2026 legal framework for related-party transactions so that your organisation meets its documentation obligations and avoids unexpected tax adjustments.
🔍 What is a related-party transaction and when does market value apply?
Related-party transactions are any commercial, financial or service transactions between individuals or companies that have a close personal, family or corporate relationship.
Under article 18 of the Corporate Tax Law (LIS), the golden rule is that they must be valued at their normal market value; that is, the value that independent parties would have agreed under free competition.
RELATED PERSONS AND ENTITIES (ART. 18 LIS)
┌────────────────────────────────────────────────────────────────────────┐
│ • Company and its shareholders (≥ 25% shareholding) │
│ • Company and its directors │
│ • Two companies of the same group (Art. 42 Commercial Code) │
│ • Company and spouse/relatives up to 3rd degree of partners/directors │
│ • Resident company and its permanent establishments abroad │
└────────────────────────────────────────────────────────────────────────┘
If the Tax Agency finds that a company has invoiced below or above market price to shift profits to an entity with a more favourable tax rate or with accumulated losses, it will correct the declared value and apply the corresponding primary and secondary adjustments.
📜 Documentation obligations: Master File, Local File and Form 232
Spanish rules require companies to prove that their transactions have been carried out at market prices. How much documentation is needed depends on the amount of the transaction and the group’s turnover:
1. Taxpayer-specific documentation (Local File)
This is the file that justifies each transaction in detail: description of the activity, comparability analysis, valuation methods used and breakdown of the costs borne.
- Groups with turnover < €10 million: they can use a simplified documentation format, except for complex transactions such as transfers of property, businesses or intangibles.
- Groups with turnover > €10 million: they must prepare a full Local File with comparables studies taken from approved financial databases.
2. Group documentation (Master File)
Mandatory for entities belonging to a group whose consolidated net turnover is equal to or higher than €45 million. It includes the global organisational structure, the industrial/intellectual property strategy and the group’s financial activity.
3. Related-party transactions informative return (Form 232)
Form 232 is the specific annual informative return used to report related-party transactions to the AEAT. As a general rule it is filed in November (the eleventh month after the end of the tax period) and must include:
- Transactions with the same related party that together exceed €250,000.
- “Specific” transactions (such as sales of property or shares) exceeding €100,000.
- Transactions of the same type that use a specific valuation method and exceed 50% of the entity’s turnover.
⚠️ The risk of the “secondary adjustment” and penalties
One of the most burdensome aspects of transfer pricing rules is the secondary adjustment. When the AEAT changes the value of a transaction to bring it to market value, the difference between the agreed price and the market price is taxed according to its real nature:
- If the difference benefits the shareholder, the AEAT will treat it as a dividend distribution or a return on equity (subject to withholding under personal income tax or non-resident income tax).
- If the difference benefits the company, it will be treated as a shareholder contribution to equity.
In addition, the penalties for missing or incomplete documentation are severe, with fixed fines of €1,000 per item of data or €10,000 per set of data omitted or false, whether or not there has been any loss to the public purse.
🤝 Integrating transfer pricing into corporate strategy
The transfer pricing policy must be fully aligned with the rest of the group’s corporate and tax structure:
- In family businesses that apply a family protocol and succession plan, the pay of family members in management roles must reflect market prices to keep the wealth tax exemption.
- If the company has set up incentives such as Phantom Shares for its team, the valuation of the shares must be coordinated with the metrics used in related-party transactions.
- Keeping files up to date avoids automated alerts in the DEHú and electronic notifications and makes it easier to prepare the accounts for the tax year-end.
To go deeper into the Corporate Tax framework, you can read the consolidated text of Law 27/2014 on Corporate Tax (Art. 18) in the Official State Gazette or the valuation criteria of the Spanish Tax Agency.
🏢 Ruiz & Asociados: transfer pricing and transaction valuation
At Ruiz & Asociados we have spent more than three decades advising business groups, SMEs and startups on planning, valuing and documenting their related-party transactions. 🤝
Our team of economists and tax lawyers carries out comparability studies based on international financial databases, drafts Local File and Master File documentation in line with current rules and prepares Form 232 to guarantee full legal certainty for your transactions between related parties.
Do you carry out sales, loans or services between the companies in your group? Avoid tax contingencies before the year ends. Contact our firm today and let us review your transfer pricing policy. 🚀
