Spain intensifies its scrutiny of transfer pricing
October 2026 | SPECIAL REPORT: CORPORATE TAX
Financier Worldwide Magazine
October 2026 Issue
Since the Organisation for Economic Co-operation and Development’s base erosion and profit shifting project reshaped international tax practice, tax administrations and courts across Europe have been steadily catching up in their ability to handle transfer pricing (TP) questions.
Spain is a good example of this trend. Both the Spanish tax authorities and courts, including the Supreme Court, are becoming markedly more experienced and sophisticated when analysing related-party transactions. This is no longer limited to checking compulsory documentation requirements; it increasingly involves detailed functional, economic and legal analyses.
The point is well illustrated by recent case law on intragroup transactions, where the Spanish Supreme Court has issued relevant decisions that, despite dealing with different situations, show how far TP scrutiny and litigation has advanced in Spain.
Multinational groups with a Spanish presence would do well to take note of both the tax authorities’ priorities for the year ahead and the direction the courts are taking.
The 2026 tax audit plan: TP remains a top priority
The Spanish Tax Administration published a few months ago its Annual Tax and Customs Control Plan for this year, confirming that TP continues to be one of the Spanish tax authorities’ main areas of focus.
There are no dramatic changes compared with previous years, but the plan consolidates and reinforces an audit approach that has been building for some time, and the underlying philosophy has not changed: tax authorities will keep relying on combined internal data and information obtained through international exchange to identify potential targets.
The plan singles out several areas as priorities for TP scrutiny: (i) corporate restructurings; (ii) intragroup transfer or licensing of assets, particularly intangibles; (iii) intragroup payments that may erode the tax base, such as royalties or service fees; (iv) entities with recurring losses; and (v) intragroup financing transactions.
On the review side, the authorities will keep focusing on formal and material compliance with documentation obligations, the analysis of low-risk functional structures, and the scrutiny of international structures that may lead to base erosion.
At the same time, the plan confirms a shift toward a more substantive style of review, grounded in data analytics and in testing whether the economics of a transaction are coherent with how it has been priced.
On the international cooperation front, Spain continues to promote bilateral and multilateral advance pricing agreements (APAs), to give weight to mutual agreement procedures, to participate in multilateral risk assessment programmes, and to encourage simultaneous multilateral controls.
What does this mean in practice for the finance and tax teams of multinational groups with a presence in Spain?
First, if the group uses relevant intangibles, is involved within a restructuring process or has recurring losses in a Spanish entity, or if any material intragroup financing takes place, TP should already be on the radar for 2026, since these remain the areas where scrutiny is most likely.
Second, because the authorities are combining more data sources than ever, internal consistency matters: TP documentation, financial statements and intercompany agreements should tell a coherent, defensible story about how value is created and shared across the group and its specific impact in Spain.
Third, groups facing significant restructurings or complex financing arrangements should consider APAs or other cooperative mechanisms, since these can meaningfully reduce future controversy.
In short, the message from the authorities is one of continuity rather than novelty, but backed by better tools and more data, which in practice raises the bar for taxpayers.
Recent relevant decisions on TP
Beyond the audit plan, two recent Supreme Court decisions deserve close attention. They involve very different fact patterns, one concerning the deductibility of restructuring costs and the other regarding cash pooling arrangements, but together they confirm that Spanish courts are engaging with TP at a technical level.
The Electrolux Case: restructuring costs and the limits of TP rules. In its judgment 631/2026 of 25 May 2026, the Spanish Supreme Court overturned part of an earlier National Appellate Court decision about the deductibility of restructuring costs linked to the closure of Spanish manufacturing plants.
The Spanish tax authorities had argued that the domestic affiliate, characterised as a limited-risk manufacturer working for a single related customer, should have been compensated by the group for the termination of its manufacturing arrangement; since it was not, the authorities sought to deny the deductibility of the closure costs.
The National Appellate Court had essentially agreed on the basis that the closure reflected a group-wide strategic decision to relocate production to lower-cost countries.
The Supreme Court took a different, more fundamental approach, considering that most of the disputed costs, largely arising from redundancy programmes and the termination of hundreds of employment contracts, stemmed from third parties’ relationships (employees and labour authorities).
The court concluded that TP rules could not be used as a general tool to challenge the deductibility of expenses arising from dealings with unrelated parties. If the tax authorities wished to recharacterise those relationships, the court noted, they would have needed to rely on anti-abuse provisions, with their own distinct requirements.
For multinational groups, the practical takeaway is significant. TP analysis remains, first and foremost, a valuation tool for related-party dealings; it is not a general permit for tax authorities to reallocate costs or profits whenever a Spanish entity’s results look unfavourable.
This is a useful reminder for any group currently facing or anticipating a challenge where the tax authorities attribute additional profit to a Spanish affiliate without clearly identifying the specific related-party transaction, its terms and its counterparty.
It is equally useful for groups reviewing limited-risk structures: the ruling reinforces that ‘limited risk’ does not mean ‘no risk at all’, and groups should resist the tax authorities’ temptation to consider that any loss-making event should automatically be absorbed by the parent entity.
Finally, groups undergoing restructurings should carefully document, from the outset, which costs genuinely arise from intragroup arrangements and which arise from dealings with third parties such as employees, landlords or suppliers, since this distinction may prove decisive if the restructuring is later challenged.
The Bunge Case: symmetry and group rating in cash pooling. The second set of decisions, Supreme Court judgments 3721/2025 and 1746/2026, concerned the same multinational taxpayer across different tax years and addressed the arm’s length treatment of a centralised cash pooling system managed abroad.
Under the arrangement, participating entities’ account balances were swept to zero daily, with the resulting position transferred to accounts held by the leading entity, which applied different interest rates depending on whether an entity was a net depositor or a net borrower, keeping the rate differential as its own remuneration.
The Spanish tax authorities challenged this structure, objecting to the asymmetric interest rates, the use of the Spanish subsidiary’s own credit rating rather than the group’s, the characterisation of deposits as distinct from loans, and the reference to a five-year lending rate for what were, in substance, short-term positions.
The Supreme Court sided with the tax authorities and set clear doctrine on two points.
First, the interest rate paid on amounts contributed and charged on amounts borrowed in a centralised treasury system must be symmetrical: the cash pool leader, where it has no real decision-making power over participants’ funds and bears no meaningful risk, cannot earn a margin from a rate differential.
Where the leader adds limited value, it should be remunerated as a low-value-added service provider, through a cost-plus margin, rather than through an interest spread.
Second, for the purposes of establishing an arm’s length interest rate, the relevant credit rating should generally be that of the consolidated group, not of the individual borrowing entity, at least where the cash flows form part of an integrated group financing strategy.
The court also confirmed that funds moving through this type of arrangement should be treated as short-term loans between non-financial entities, not as bank deposits, which affects both the selections of comparables and the applicable rate for TP purposes.
Although the Supreme Court was careful to note that its conclusions are tied to the specific facts of the case, the direction of travel is clear, and it is reinforced by the fact that the 2026 audit plan expressly flags “tax-related transactions of a financial nature” as a priority area, a category that naturally captures cash pooling.
Groups with similar centralised treasury arrangements involving Spanish entities should treat this as a prompt for a health check.
In practical terms, this means revisiting whether the cash pool leader’s remuneration is based on a genuine functional and risk analysis rather than an unexamined rate differential; checking whether interest rates on deposits and borrowings are symmetrical, or whether there is a defensible explanation if they are not; confirming that the reference credit rating used reflects the group’s consolidated position where appropriate; and ensuring that positions are characterised and benchmarked as the short-term instruments they typically are.
Addressing these points proactively, before the next audit cycle, is likely to be considerably less costly than doing so in the middle of a tax dispute.
Taken together, the 2026 Audit Plan and these two Supreme Court decisions send a consistent message: TP in Spain is being tested with increasing rigour, both administratively and judicially, and multinational groups that revisit their intragroup arrangements now, rather than waiting for an inspection, are in a far stronger position to manage the likely risk they could face in the future.
Mario Ortega Calle is a partner and Diego María Pérez Muñoz is a principal associate at J&A Garrigues. Mr Ortega can be contacted on +34 91 514 52 00 or by email: mario.ortega.calle@garrigues.com. Mr Pérez can be contacted on +34 91 514 52 00 or by email: diego.perez@garrigues.com.
© Financier Worldwide
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Mario Ortega Calle and Diego María Pérez Muñoz
J&A Garrigues