Tax Treaty Case Law around the Globe 2014

S. 171Chapter 18 Spain: Distribution Agreements between Independent Parties, Royalties and Use of Secret Comparables To Fix the Royalty

Adolfo Martín Jiménez and José Manuel Calderón Carrero

18.1. Introduction

This note will comment the judgment by the Central Administrative Court of 3 October 2013, R.G. 2296/2012,, which refers to the powers of the Tax Administration to recharacterize private contracts - in this particular case payments for purchases of goods were partially converted into royalty payments - and the use of secret comparables to fix the amount of the royalties and the price for the goods. One of the specific features of this case is that it refers to a contract between independent parties. For the purposes of the Spanish domestic legislation on associated companies, the parties were not associated parties. For the purposes of article 9 of the OECD Model, they were not associated parties either since they were not in the same group or under common control (even if there may be a special relationship within the meaning of article 12(4) of the OECD Model, although this issue is irrelevant in the specific case commented).

18.2. Facts of the case

The facts refer to a tax audit cov...