Transfer pricing in the annual accounts

April 19, 2022

When preparing the annual accounts, whose deadline for their formulation by the administrators is three months from the corporate fiscal year-end (Art. 253 of the Capital Companies Act), it is essential to show reliable tax and corporate information, which should include tax aspects such as related-party transactions.

Annual Accounts

The annual accounts are seen as reference documents when providing information on related parties and transactions with these during tax inspections. Therefore, the transfer pricing policy of the companies must be consistent.

3 key sections

In this regard, those sections must be duly considered and coordinated with the taxation of related-party transactions and all supporting documentation (Form 232, Local Report, or Master File). These three sections are as follows:

Regarding investments in group entities and associates: it is the responsibility to provide information on the company’s participation in other companies with which it has been linked, identification details, and their activities. Coordination with tax advisors on related-party transactions and transfer pricing is required.
Regarding transactions with related parties: The detail of the amounts of the transactions carried out with related parties and the balances with such parties shall be provided. It must be consistent with the information provided by the entity in the Local File and Model 232.
Regarding the detailed information on specifically related operations: It is essential to pay attention to those specific operations that were analyzed in the report sections, such as leasing operations and financial operations. It must be confirmed by the persons in charge of elaborating the transfer pricing policies of the companies to corroborate that the information at the accounting and tax levels is the same.

The annual report, within the annual accounts, is responsible for providing important information on related parties and the operations carried out. These must be fully coordinated with the tax documents of related operations. Otherwise, if there is an inspection, the Tax Agency could detect inconsistencies regarding the credibility of the entities’ transfer pricing policies.