Employment of Technology for Transfer Pricing Audits

December 13, 2022

The tax administration is becoming more demanding with the increasing implementation of advanced technology for transfer pricing audits due to all the information shared with this entity, which will be analyzed more rigorously through a new automated risk analysis system. 

1. Double Impact

In Transfer Pricing, the implementation of technology has a double impact, either by creating more obligations for multinational groups or by assisting tax administrations through the analysis and review of information. 

2. Fundamental Factor

Technology is an essential element in the increase of multinational groups’ transactions, as well as for gathering information by the tax authorities and its systematization and analysis, the promotion of agreements to avoid double taxation or any national and international collaboration, and the execution of detailed tax auditing actions. 

3. New Strategy for the Prevention of Tax Fraud

Currently, the Tax Agency is focused on the reinforcement of assistance and prevention of tax fraud. Therefore, they have intensified control actions so that taxpayers voluntarily comply with Transfer Pricing obligations.  

One of the new strategies is the implementation of the new automated risk analysis system by the Spanish Tax Administration, based on the implementation of technology to review all available information on related party transactions.  

In addition to the greater knowledge of multinational groups by the Tax Administration, this will lead to more specific risk analysis through the development of indicators, indexes, and models, as well as the identification of potential tax risk behavior patterns. 

4. Information Statements

Technology is also being implemented for campaigns to verify effective compliance with reporting obligations on related-party transactions (Information Statement on related-party transactions and transactions and situations related to countries or territories classified as tax havens-Form 232).

Source: El Confidencial 12/12/22