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Newsletter TPS – March 2023

  • National Court Partially Accepts Universal Pictures International Spain’s Appeal Against Tax Assessment on Transfer Pricing Methodology

The National Court in Spain has partially accepted the appeal made by Universal Pictures International Spain SL against a tax assessment made by the Spanish tax authority regarding its transfer pricing methodology. Universal Group’s business activities included the marketing and distribution of feature films through its distribution arm, which was organised by different regions. In Europe, a Dutch company sublicensed the distribution rights in each market, including Spain, through Universal Pictures International Spain SL.


The tax authority acknowledged that the risk assumed by the Spanish company as a distributor of Universal Group was limited, while the risk assumed in distribution of other producers’ films was complete. The National Court found that the Spanish tax authority could not prove the existence of similar internal comparable transactions to apply the Comparable Uncontrolled Price (CUP) Method. The court rejected the comparability of the transactions with unrelated parties due to the existence of differences in the assumption of risks.


However, the National Court also rejected the comparables selected by the appellant that considered entities operating in foreign markets, citing differences in production costs and consumer purchasing power between the Spanish and foreign markets.


The decision, SAN 5855/2022 – ECLI:ES:AN:2022:5855, was issued on 7 December 2022, but made public only recently. The decision can be appealed before the Spanish Supreme Court within 30 days of notification of the decision.

  • UK Tax Authority Clarifies Alternative Dispute Resolution Process for Tax Disputes in a new Alternative Dispute Resolution Guidance Manual

The tax authority of the United Kingdom, His Majesty’s Revenue and Customs (HMRC), has provided further details on the alternative dispute resolution (ADR) process in their recently released Alternative Dispute Resolution Guidance Manual.


A neutral and impartial mediator from HMRC can be brought in to help resolve tax disputes between the taxpayer and the tax authority without the need for a tribunal or court. The decision to use this process is voluntary and up to the parties involved.


This ADR procedure can be utilized by either party, regardless of whether HMRC has made an appealable decision or at any point during a tax investigation. The mediator generally decides on the suitability of the dispute for the ADR procedure within 30 days, and ideally, the entire process is completed within four months.

  • The OECD released the Manual on the Handling of MAPs and APAs – (MoMA)


The Organisation for Economic Co-operation and Development (OECD) released the Manual on the Handling of Multilateral Mutual Agreement Procedures (MAPs) and Advanced Pricing Arrangements (APAs) – (MoMA) on 1 February 2023. The MoMA provides guidance on the legal and procedural aspects of multilateral MAP and APA processes for tax administrations and taxpayers.


While the MoMA contains information on the operation of these procedures and provides different approaches based on practices in various jurisdictions, it is important to note that it is not legally binding, and jurisdictions will not be reviewed or monitored regarding its implementation.


The MoMA is intended to complement the criteria, procedures, best practices, guidance, and requirements established under the OECD Model (2017), the OECD Guidelines, and BEPS Action 14 final report. It does not modify, restrict, or expand any rights or obligations of any tax treaty. In case of any conflicting provisions or statements, the OECD Guidelines, BEPS Action 14 final report, and the OECD Model (2017) will take precedence over the MoMA.


In essence, the MoMA enables tax administrations to determine whether implementing these procedures is appropriate, taking into account their domestic circumstances, APA and MAP programs, and the unique features of each case. It also allows jurisdictions to consider whether to adapt, incorporate the MoMA into their domestic guidance, or make a direct reference.

  • Publication of the Resolution of February 6, 2023, (Official State Gazette of February 27, 2023), where the general guidelines of the General Tax and Customs Control Plan 2023 are reported.


The General Tax and Customs Control Plan 2023, recently published in the Spanish Official State Gazette, maintains as one of its main objectives the fight against related-party transactions between members of multinational groups.


Specifically, special attention is paid to the determination of transfer prices in these groups, in the context of corporate restructurings, the valuation of intra-group transfers or assignments of intangibles, royalty payments derived from the assignment of intangibles or for services rendered within the group, related-party transactions of a financial nature or the existence of repeated losses.


The plan highlights the importance of advance pricing agreements (APAs) as a tool for providing certainty in international tax-legal relations. Amicable procedures are also presented as an efficient mechanism to resolve conflicts between two tax administrations when the actions of one or both may generate double taxation that does not comply with the tax treaties signed between Spain and other countries.


In addition, the figure of Joint Audits will be promoted, with the aim of stimulating those carried out at the initiative of the Spanish tax administration. In the case of specific audits of groups of companies taxed in common and foral territory, continuous coordination mechanisms will be established to obtain satisfactory results, taking advantage of the work of the various control bodies of the tax administrations.

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