Have you ever wondered if it’s necessary to appraise the rent price in related party transactions in Spain? The answer is yes, and at Welex, your law firm and tax advisors in La Costa del Sol, we want to explain why it is so important.
Why is an Appraisal Necessary?
When renting a property from your own company, it is crucial to ensure that the agreed value matches the market value. This not only complies with Spanish legislation but also avoids potential adjustments by the tax authorities. In short, a precise and professional appraisal protects you and ensures that everything is in order.
Legislation and Regulations in Spain
To give you some context, Royal Decree 634/2015, which approves the Corporate Income Tax Regulations in Spain, clearly establishes in its Article 17 the need to determine the market value in related party transactions. This comparability analysis with similar transactions between independent entities is fundamental. It ensures that the agreed price respects the arm’s length principle.
Article 17: Determination of the market value of related party transactions: comparability analysis
Spanish Jurisprudence
Spanish jurisprudence also underscores the importance of appraisal. For example, the Judgment of the Superior Court of Justice of the Community of Madrid No. 552/2023 allows the tax authorities to check and adjust the value of related party transactions to ensure that they are valued at the normal market price. This may include the need for an appraisal in certain cases.
«The tax authorities may check that transactions carried out between related persons or entities have been valued at their normal market value and will make the necessary value adjustments.»
Administrative Decisions in Spain
Similarly, the administrative doctrine in Spain, such as Binding Consultation No. V0746-24 of the General Directorate of Taxes, highlights the importance of valuing assets in related party transactions at their market value. This suggests that performing an appraisal is essential to determine this value.
«The market value will be understood as the value that would have been agreed upon between independent parties, allowing for any of the methods provided for in Article 18.4 of this Law.»
Implications and Limitations
Although an appraisal is generally necessary to comply with tax regulations in related party transactions, it is important to consider that methodologies and accuracy may vary depending on the type of transaction and the assets involved. Additionally, administrative and judicial decisions can influence how these rules are applied in specific cases.
At Welex, we are here to help you with any tax and accounting queries, we are expert in those areas.
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https://www.welex.es/category/spanish-accountancy/
Do not hesitate to contact us for professional advice and to ensure that all your transactions comply with the current regulations.
