Compatibility with penalties
Section 10 of the First Additional Provision of the revised text of the Non-Resident Income Tax Act states that they are considered as such:
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 it the quantification or determination of market value is nor seriously hampered, shall not be considered as a penalty for these purposes.
Mutual agreement procedure requested under a Tax Treaty.
In such cases, the provisions of the applicable Tax Treaty would apply.In general, the Tax Conventions in force in Spain do not limit access to an amicable procedure in the case of serious penalties, although there may be limitations on access to arbitration when a penalty as provided for in section 10 of the First Additional Provision of the revised text of the Non-Resident Income Tax Act has been imposed and is final.
Therefore, if the convention does not provide for restrictions on the mutual agreement procedure as a consequence of the existence of serious penalties imposed in a final ruling, the mutual agreement procedure will take place as normal and will take priority over any domestic appeals or claims, which will be suspended until the conclusion of the mutual agreement procedure.
Conversely, if the convention restricts access to arbitration in the case of a serious penalty imposed in a final ruling, where a mutual agreement procedure and an administrative or judicial appeal relating to the penalty are taking place at the same time, it will be necessary to wait until a final decision is issued regarding the penalty (see FAQs).
Mutual agreement procedure requested under the Arbitration Convention.
Article 23 of the Regulation on Mutual Agreement Procedures states that the mutual agreement procedure will not take place if the companies in question have been subject to a serious penalty imposed in a final ruling.In the case of Spain, serious penalties are those listed in section 10 of the First Additional Provision of the revised text of the Non-Resident Income Tax Act (see question 3.a of this section on Penalties).
In the same regard, Article 28 of the Regulation on Mutual Agreement Procedures states that initiation of the mutual agreement procedure will be refused, giving reasons, where a serious penalty has been imposed in a final ruling as defined in the Arbitration Convention.
A sensu contrario as long as a sanction is not final, i.e. it has been appealed in administrative or judicial proceedings, the initiation of a friendly procedure may be admitted, but in this case and as established in section 9 of the first additional provision of the revised text of the Non-Resident Income Tax Act, the friendly procedure will be suspended until a final judgement is handed down.
Mutual agreement procedure requested under the Directive.
In this case, the Regulation on Mutual Agreement Procedures allows a mutual agreement procedure requested under the Directive to be initiated in cases where serious penalties have been imposed on the taxpayer in a final ruling.
Notwithstanding the above, Article 43 of the Rules on Mutual Procedures states that access to the advisory committee provided for in Article 42 of the Rules on Mutual Procedures (see section on arbitration) shall be denied when the penalties and sanctions referred to in section 10 of the First Additional Provision of the revised text of the Non-Resident Income Tax Act have been firmly imposed.
Where the ruling imposing the relevant penalty is not final and is the subject of an appeal, access to the advisory commission will be prevented until a final decision is issued regarding the penalty, in either administrative or judicial proceedings (see FAQs).