Mutual agreement procedure for discussing the interest and penalties

Spain does not consider interest and administrative penalties that may apply to taxes covered by the agreements and conventions that provide for the elimination of double taxation of income and, where applicable, capital to fall within the objective scope of such conventions and, therefore, nor can they be the subject of a mutual agreement procedure. However, if the Spanish tax administration applies interest or an administrative penalty calculated on the basis of an eligible underlying tax and, afterwards, under an agreement reached with the other competent authority in the course of a mutual agreement procedure, reduces or eliminates the eligible underlying tax, it will reduce or eliminate the amount of the interest or the administrative penalty in the same proportion. Conversely, the imposition of other administrative penalties not directly related to the underlying tax will not be affected by agreements reached between competent authorities in the context of a mutual agreement procedure.