b. Grounds for refusing a request for initiation
The grounds for denying the initiation of mutual agreement procedure vary depending on whether initiation was requested under Titles II (Mutual agreement procedure provided for in the Tax Treaties ) and IV (Mechanisms to resolve disputes between Member States of the European Union when those disputes arise from the international conventions and treaties for the elimination of double taxation of income and, where applicable, capital, as referred to in the Directive) or under Title III (Proceedings related to the application of the Arbitration Convention).
Where a mutual agreement procedure is requested under the relevant article of an applicable Tax Treaty or under the Directive, the request may be denied, inter alia, for the following reasons (Article 11.2 of the Regulation on Mutual Agreement Procedures):
There is no applicable convention including an article relating to the mutual agreement procedure.
The request has been submitted outside the time limit stipulated in the convention or by a non-legitimized person.
It is not appropriate to initiate a mutual agreement procedure because the matter concerns domestic law and not a divergence or discrepancy in the application of the convention.
The request refers to the initiation of a new procedure regarding a question that has already been the addressed in another mutual agreement procedure previously requested by the same taxpayer and regarding which an agreement has been reached between the two competent authorities or which the taxpayer has withdrawn.
The request for amendment and additional information has been answered within the required time limit, but the defects are not deemed to have been rectified or the required documentation provided.
Where a mutual agreement procedure is requested under the Arbitration Convention, the request will be refused, giving reasons, in the following cases (Article 28.1 of the Regulation on Mutual Agreement Procedures):
When the principles contained in Article 4 of the Arbitration Convention are not complied with.
When the request has not been submitted within three years of the day following notification of the tax assessment or equivalent measure giving rise to, or which could give rise to, double taxation pursuant to the European Arbitration Convention.
When the request has been submitted by a non-legitimized person.
When any of the following penalties has been imposed in a final ruling:
penalties for offences against the Public Treasury regulated under Articles 305 and 305 a of the Spanish Criminal Code;
penalties regulated under Articles 191, 192 and 193 of Law 58/2003, of 17 December, the General Tax Law, provided that qualification criterion referred to in Article 184 of the said General Tax Law applies;
penalties regulated under Article 18.13.2 of Law 27/2014, of 27 November, on corporation tax, provided that a qualification criterion referred to in Article 184 of Law 58/2003, of 17 December, the General Tax Law, applies. For these purposes, any reference to “tax return” in said Article 184 of the General Tax Law shall be understood as references made to transfer-pricing documentation.
Notwithstanding the provisions of point c), penalties applied for incomplete provision of transfer pricing documentation, where then quantification or determination of market value is nor seriously hampered, shall not be considered as a penalty for these purposes.
Once a mutual agreement procedure conducted under the Arbitration Convention has been initiated, it will be suspended automatically if any appeal or claim is brought, whether of an administrative nature or in the administrative courts, against penalties imposed among those referred to in the preceding paragraph. The suspension will last from when the first relevant appeal is lodged until a final decision or judgement is issued deciding, definitively, whether or not the penalty should be imposed.For these purposes, the taxpayer must inform the competent authority both that the appeal has been lodged and of the definitive decision or judgement, within one month, starting from the day following the date the appeal is lodged or the decision or judgement is notified, respectively (Article 23.3 of the Regulation on Mutual Agreement Procedures).