In the “Corporate Income Tax Reform 2015” enacted under the Law 27/2014 the following transfer pricing rules are amended;
- Scope of related-party transactions – The ownership requirement for related parties is increased from 5% (1% in the case of listed shares) to 25%
- Documentation requirements – The documentation obligations for controlled transactions are brought in line with the OECD and EU guidelines.
- Transfer pricing methods – A flexible application of the transfer pricing methods and methodologies following the new OECD Transfer Pricing Guidelines, the hierarchy of methods has been replaced by the “best method rule.”
- APAs – For the first time Advance pricing agreement (APA) rules include a comprehensive rollback provision. The period of an APA’s effectiveness is not modified four years following the year of the agreement.
- Secondary adjustment – It may be possible, for the first time, to eliminate a secondary adjustment whenever the parties voluntarily agree to repatriate the excess profits, so as to enable the taxpayer to conform its accounts to the primary adjustment.
Under the new Corporate Income Tax Law, related person or entities with turnover below €45 million (previously €10 million) now have an option to simplify transfer pricing documentation, with certain exceptions.
Penalty for documentation failure-The Law 27/2014, effective from 1 January 2015, has decreased penalty for documentation to EUR 1,000 for each item of data (before EUR 1,500) and EUR 10,000 (before 15,000) for each mislaid or untrue dataset.(Law 27/2014 of CIT 2014).
The government is contemplating to include the Organization for Economic Cooperation and Development’s country-by-country reporting template in the corporate income tax regulations to be issued under the new income tax law.
