Those of us who have worked in business groups more than once we have heard phrases like this, among the financial directors from the different companies:
"Send me an invoice this month for anything and for such an amount that I need to increase the input VAT so I don't have to pay VAT this quarter."¨
This fraud to the tax agency related to the accounting consolidation In companies belonging to the same group, it can occur by inventing and billing operations that do not exist or by altering the normal price of operations between companies, setting a price different from what would be a normal market price.
Accounting consolidation and tax groups
The operations between related companies They have always been subject to fraud and, therefore, inspection. The Treasury has its reasons, because when one is part of a group, it may seem right to come to the defense of the sister company, preventing it from having to pay the taxes that are charged at all times.
Who says VAT, says corporate tax or other operations that are offset between one company and another in the group, in order to avoid tax burden or of make up the financial statements from one of these companies.
Treasury knows about these inter-group “cheating”; For this reason, these operations between related companies are looked at under a magnifying glass and, in fact, a increase in tax penalties by the Administration.
To avoid this type of fraud, Tax authorities is intensifying the requirements to verify whether the intra-group transactions are correctly valued, sanctioning those companies that do not have their operations properly documented.
A legal requirement has been put in place whereby:
¨Groups of companies that have related transactions for an amount greater than €250,000 with the same counterparty must have transfer pricing documentation available to the Tax Administration in which it is explained that said transaction is at normal market value.¨
This documentation must be available to the Tax Administration from the end of the voluntary declaration period, and is independent of any additional documentation or information that the Tax Administration may request in the exercise of its functions.
Currently, the Tax Administration is issuing requirements requesting said documentation in the within 10 days. If you do not have or do not provide said documentation, you are imposing sanctions for amounts that exceed, in some cases, €100,000.
As we see, the concept of market value takes center stage, being the definition of Operations at market value (arm's length principle)
¨Set prices in the same way as they would under normal conditions between independent parties.¨
Transfer pricing calculation
Methods that can be used For the calculation of transfer prices between related parties, they can be direct and indirect.
We now list the most common direct methods for calculation of transaction valuation between related parties:
- Comparable Uncontrolled Price (CUP). Compare the price of this linked transaction with other similar, comparable, uncontrolled or external transactions carried out between the parties. Prices from clients or suppliers can be used, comparing the physical characteristics of the product, its quality, geographic market of sale, etc.
- Resale Price. It uses the margin that an independent seller would obtain in the resale of a product similar to the one that has been the subject of the transaction in the linked operation.
- Cost Plus Method (C+). Compares linked transactions according to the gross margins achieved, adding an appropriate margin that would be used in a stand-alone transaction.
Any of these methods of calculating the value of the transaction between related parties is correct, and it is necessary to have it rigorously documented and in accordance with the regulations and supported in order to avoid large penalties and problems with the Treasury.
