Advance Pricing Agreements in Spain

September 5, 2023

In Spain, within the Annual Tax and Customs Control Plan, the use of Advance Pricing Agreements (APA) is established, which clarifies international legal-tax relationships based on the Arm’s Length Principle. Therefore, we will assess the advantages and difficulties involved in their use in tax audits.


They are preventive tools for the resolution of controversies to avoid large inspection procedures and to provide tax security to taxpayers and the tax authorities. These are three: Unilateral, Bilateral, or Multilateral.

These agreements guarantee taxpayers that no Transfer Pricing adjustments will be applied regarding the transactions covered by the agreement for a certain period, provided that the conditions stipulated are complied with.

BEPS Action 14

One of the proposals put forward to strengthen the minimum standard of Action 14 was the increased use of bilateral Advance Pricing Agreements. Therefore, the OECD published a manual called BAPA, which aims to guide taxpayers and tax authorities on the procedure for their implementation.

Unilateral vs. Bilateral

The preference for bilateral agreements rather than unilateral agreements is because the latter is not beneficial from the perspective of a multinational group, given that the opposing Contracting State could doubt that Transfer Pricing policy in any eventual dispute, and at the counterparty’s premises, generating double taxation.


There are four reasons why the agreements may be difficult to employ, questioning their effectiveness. These are as follows:

  • The resolution time for an agreement is very long and sometimes even longer than the period requested in the OECD Manual.
  • The absence of a consistent framework between jurisdictions often leads to duplication for taxpayers and reporting irregularities between tax authorities.  
  • The use of a large amount of resources by taxpayers and tax administrations. Due to the level of scrutiny by tax administrations and the information requested.
  • A lengthy negotiation and agreement process due to the lack of transparency between all parties involved.
Source: Legal Today