Sanctions Regime for Operation with Related Entities

documentation

The sanctions regime for operations with related entities refers to the lack of documentation of operations with related entities. It is a very strict and disproportionate regime and is regulated in article 18 of the Corporate Tax Law, Law 27/2014, of November 27 (“Ley del Impuesto sobre Sociedades”).

The sanctions applied for this matter are motivated by the lack of provision of the documentation of operations with related entities, provision of incomplete forms or false or inaccurate data of the documentation. We can find the following possible scenarios:

  • Non-existent or incorrect documentation without correction by the Authorities: documents -required by the Authorities- are provided incompletely or with false data. The sanctions are:

a) Fixed monetary fine of €1,000 per piece of information or €10,000 per omitted or false set of data, referring to each of the documentation obligations established for the group or for each person or entity in their capacity as a taxpayer.

b) This sanction has a maximum limit that will be equal to the lesser of the two amounts:

> 10% of the number of operations subject to Corporation Tax.

> 1% of the net amount of turnover.

  • Non-existent or incorrect documentation corrected by the Authorities: In the event that the Tax Authorities consider that the market value of the operation carried out that derives from the documentation that the taxpayer has prepared is not that declared in the Corporation Tax, the Personal Income Tax or Income Tax for non-residents. The penalty constitutes a serious tax violation and will be:

> Proportional fine of 15% on the amount of the amounts resulting from the corrections corresponding to each operation.

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  • Correct documentation with correction of the Authorities of the market value: In the event that the documentation related to the operations with related entities available to the Authorities is correct, but the market value is not, it does not constitute an infringement of articles 191, 192, 193 and 195 LGT (“Ley General Tributaria”) for the part of the bases corrected by the Authorities.

Finally, it should be noted that the reductions for conformity and for payment without challenges are applicable to these sanctions.

Based on the foregoing and in accordance with the sanctioning regime provided by the regulations on related-party transactions, we recommend preparing the Documentation of those entities that exceed the amount of €250,000 for the operations carried out with related entities and having said documentation available for the last 4 financial years. for the purposes of any verification that the Tax Agency may carry out.

In case of questions about this or other matters, do not hesitate to contact our tax advisors in Barcelona.

 

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