Transfer pricing: master file, local file and your defence

Every transaction between related parties is valued at market price and the burden of proving it is yours. This proof is not a return submitted at a counter: it is a file that must be closed and kept, ready to be handed over if the Tax Inspectorate requests it.

The file has 2 parts. The group documentation, known as the master file, describes the entire group: structure and organisation, activities and markets, pricing policy, intangibles, financing and consolidated financial statements. It is only required when the group's turnover reaches 45 million euros. The taxpayer documentation, the local file, is for your company: who it is, what related-party transactions it has carried out, with whom, for how much, with what method, with what comparables and with what financial statements.

Below 45 million euros in turnover, the local file has simplified content: nature, characteristics and amount of the transactions, identification of the parties, valuation method used and comparables obtained. Pay attention to how this figure is measured, because it is the detail most often missed: the regulation defines it in the terms of art. 101 of the Ley del Impuesto sobre Sociedades (the Spanish Corporate Income Tax Act), so that when your company is part of a group, the turnover of all the group entities is added together, not just yours in isolation. A small subsidiary of a group that reaches 45 million cannot use the simplified content: it needs the full local file and, in addition, the master file. If your company is of a reduced size, it can comply with the standardised document approved by the Orden HAP/871/2016 (the Spanish Ministerial Order) and does not have to provide comparables, a condition that is measured with that same group calculation rule.

There are cases where specific documentation is not required: transactions between entities of the same tax consolidation group, transactions of economic interest groupings and temporary business joint ventures with their members (except those applying the exemption regime for foreign income), transactions in public offerings for the sale or acquisition of securities, and transactions with the same related person or entity when the total does not exceed €250,000 at market value. Being exempt from the documentation does not exempt you from the obligation to value at market price: if the Tax Inspectorate disputes the price, you will have to prove it anyway.

They are 2 different obligations, with different contents and calendars. Form 232 informs Hacienda of what related-party transactions you have carried out, with whom, for how much and with what method. The documentation explains why that price is a market price. Submitting the form does not replace the file, and having the file does not free you from submitting the form.

Form 232 is submitted when the total transactions with the same related entity exceed €250,000, when the so-called specific transactions exceed €100,000, when transactions of the same type valued with the same method exceed 50% of the turnover (there is no minimum amount here), when the reduction for the transfer of intangibles to related parties is applied, and whenever there are transactions or securities in tax havens, without any threshold.

The calendar is the most frequent trap. The documentation must be available to the Administration from the end of the voluntary filing period for Corporate Income Tax, that is, from 25 July for companies closing on 31 December. Form 232 is submitted 4 months later, from 1 to 30 November, and has no extension. Anyone who starts preparing comparables in October to fill in the form is late for the obligation that is actually penalised.

If the turnover of the whole group reaches 750 million euros in the 12 months prior to the start of the tax period, there is a 3rd obligation: the country-by-country report, form 231, which is submitted by the parent company or the designated entity within the 12 months following the close. The threshold is not measured with the figure of the declared financial year itself, but with that of those previous 12 months. Furthermore, any Spanish entity in the group must communicate before the end of the financial year who is going to submit it and from which country.

The law allows 5 methods: comparable uncontrolled price, cost plus, resale price, profit split and transactional net margin. When none fits, other generally accepted techniques can be used, such as discounted cash flow, explaining the magnitudes, rates and tasas (rates) used. The comparable uncontrolled price is the most direct when a reliable comparable exists; the net margin is the most used in distribution and services because data from comparable companies is available.

The choice is neither free nor aesthetic: it depends on the nature of the transaction, the availability of reliable information and the degree of comparability. This is proven with the comparability analysis, which compares characteristics of the good or service, functions assumed with their risks and assets, contractual terms, economic circumstances of the market and business strategies, and which must also include losses, location savings or synergies when they exist.

The functional analysis is the part that decides inspections. A contract stating that the Spanish subsidiary assumes inventory risk is invalid if the inventory is decided and financed by the parent company. The guidelines of the 2026 Tax Control Plan state it bluntly: the Agency will look at the documentation not only formally, but in the substantial analysis of functions, assets and risks.

When comparables are not perfect, the regulation allows the use of statistical measures to reduce the risk of error, and from there comes the eternal discussion about the median. The doctrine of the Central Economic Administrative Tribunal has established that the Administration resorts to the median when comparability defects persist, not systematically: if your price falls within a well-constructed arm's length range, no adjustment is appropriate. That is why the work of selecting and discarding comparables, documented step by step, is your best defence.

First comes the primary adjustment: the Administration corrects the value and increases the taxable base. This regularisation is documented in a report separate from the rest of the audit and gives rise to a provisional settlement, precisely because it affects more than 1 taxpayer.

Then comes the bilateral adjustment, which is what avoids paying twice for the same income. If the other related party is Spanish, the Administration regularises its situation ex officio once the settlement is final. If it is foreign, the adjustment is not automatic: it must be requested through the mutual agreement procedure provided for in the treaty, and the deadline to request it is 3 years from the day following the notification of the act causing the double taxation. Within the European Union, if the 2 administrations do not agree within 2 years, an advisory commission can be reached to decide.

There remains the secondary adjustment, the least known and the one that hurts the most. The difference between the agreed value and the market value is reclassified according to its nature: if it favours the partner, it is treated as remuneration of equity and participation in profits; if it favours the company, as a partner's contribution or, in the part that does not correspond to their percentage, as income for the entity and a liberality for the partner. It is avoided with the restitution of assets, provided it is justified before the settlement is issued.

A procedural detail worth knowing: if you appeal, the situation is notified to the other affected related persons or entities so they can appear; and if you do not appeal, the settlement is notified to them so they can do so jointly. The defence strategy is decided between the 2 parties to the transaction, not separately.

There are 2 regimes. If documentation is missing, incomplete or contains false data, but the Administration does not correct the value, the fine is fixed: €1,000 for each piece of data and €10,000 for each set of data omitted or false, with a maximum limit equal to the lower of these 2 figures: 10% of the total amount of the related-party transactions carried out in the tax period, subject to Corporate Income Tax, Personal Income Tax or Non-Resident Income Tax, or 1% of the net amount of the turnover. The 10% percentage is not calculated on the company's entire billing, but on that set of transactions with related parties.

If, in addition to this breach, the Tax Inspectorate makes corrections, or if the value resulting from your own documentation is not what you declared, the fine becomes proportional: 15% of the amount of the corrections. This penalty is incompatible with the general infringements for failing to pay or for improperly crediting items in the part of the base that has already been penalised here.

And now the good news, which is the reason why this documentation is done well and on time: if you complied with the documentary obligation and the declared value is consistent with it, the corrections made by the Administration do not constitute an infringement for the adjusted base part. In practice, the file works like an insurance policy: you can lose the discussion about the price and not pay a penalty for it.

What counts as a piece of data and what counts as a set of data is not a matter of opinion: the regulation sets it block by block, both in the master file and in the local file. That is why a summarised document, made just to get by, multiplies the fine without anyone noticing until the requirement arrives.

Yes, and it is the only way to have prior certainty. The advance pricing agreement allows the Administration to approve your method before carrying out the transactions. You can test the waters first with a brief preliminary request, identifying the parties, describing the transactions and anticipating the basic elements of the proposal: the Administration replies whether the agreement is viable.

The procedure must be resolved in 6 months and silence is understood as a dismissal. Neither this dismissal nor the resolution ending the procedure can be appealed on their own, although appeals against the settlements issued later always remain. The approved agreement applies to subsequent transactions and can cover up to the 4 tax periods following the current one, and also to unprescribed previous financial years for which there is no final settlement.

The agreement binds both parties: you apply it and submit every year, together with the tax return, a document on how it has been applied and whether the economic circumstances have changed. You can also request an agreement with the participation of the tax administration of the other country, which is what truly closes the risk of double taxation. The 2026 control guidelines confirm that the Agency maintains the policy of promoting these agreements.

When the doubt is not about valuation but about criteria (whether 2 entities are related, whether a transaction goes into form 232, how a restructuring is documented), the fast track is a written consultation to the Dirección General de Tributos (the Spanish Directorate General for Taxes), which binds the Administration and is resolved in 6 months. Managora drafts and submits it for you.

Yes, and it is best not to mix them up. In Bizkaia, Gipuzkoa, Álava and Navarre, the Corporate Income Tax is not the state one: it is governed by their Normas Forales and by the Ley Foral navarra (the regional tax laws), with their own regulatory development, their own informative return for related-party transactions and their own electronic headquarters. The concepts are the same, because they all draw from the international standard, but neither the thresholds, the deadlines nor the penalty regime can be assumed to be identical without checking them in the regional regulations that apply to you.

In the Canary Islands, Ceuta and Melilla, the Corporate Income Tax is the state one, so the documentation, thresholds and penalties are those explained in this guide. What changes is the incentive: the Canary Islands Special Zone, the Canary Islands deductions or the bonus for Ceuta and Melilla reduce the bill, and precisely for this reason, transactions between a group entity located there and the rest of the group should be documented in the greatest detail, because the tax differential is exactly what an audit seeks to explain.

If your group operates simultaneously in common territory and in regional territory, the practical rule is simple: 1 single economic analysis, 2 compliance formats. The functional analysis and the comparables serve both administrations; the returns, deadlines and regulatory references do not.

Managora prepares the master file and local file for your group, submits form 232 and form 200 for Corporate Income Tax, and raises the binding consultation when the doubt is about criteria. You can see the updated amount in the file for each procedure.