Transfer pricing documentation is a key pillar of international tax compliance for multinational groups operating in Spain. Since the OECD’s BEPS project, the Master File and Local File have become mandatory components that allow tax authorities to assess whether intra-group transactions follow the arm’s length principle.
This article explores the contents of each type of documentation, who is required to file them, and how to avoid common pitfalls. As a strategic partner for multinational companies in Spain, EUROACCOUNTS supports clients in meeting OECD and AEAT standards—without the cost and rigidity of the Big Four.
Learn how to protect your group from penalties, enhance consistency across jurisdictions, and optimize your transfer pricing strategy.
What Is Transfer Pricing Documentation?
Transfer pricing documentation is the set of reports that a multinational group must prepare to justify that intra-group transactions comply with the arm’s length principle. This principle requires that prices set between group entities be comparable to those that would be agreed upon between unrelated parties under similar market conditions.
The Importance of Compliance in Multinational Groups
Non-compliance with documentation requirements can lead not only to significant tax adjustments but also to financial penalties from the Spanish Tax Agency (AEAT). For groups with cross-border operations, proper documentation is critical to demonstrate transparency, reduce double taxation risk, and avoid disputes with tax authorities.
At EUROACCOUNTS, we work with multinational companies in regulated industries—such as technology, healthcare, and fintech—that must accurately report every transaction with their parent or affiliated entities. Through a tailored approach, we help clients structure their documentation in line with both OECD standards and Spanish legal requirements.
Spanish and OECD Regulation: Alignment
Spain has aligned its tax legislation with the OECD’s BEPS Action Plan. Since fiscal year 2016, companies meeting certain thresholds must submit a Master File and Local File as part of their annual compliance obligations.
- Master File: A global overview of the corporate group, including organizational structure, business activities, transfer pricing policies, and consolidated financials.
- Local File: Detailed report of related-party transactions in Spain, including functional and economic analysis.
Who Is Required to Submit It?
The obligation to prepare this documentation applies to companies that:
- Belong to a group with consolidated revenue exceeding €45 million.
- Engage in related-party transactions over €250,000 per transaction.
- Carry out specific operations such as IP transfers, restructuring, or high-value intercompany payments.
In some cases, groups must also submit the Country-by-Country Report (CbCR), typically managed by the parent company if it is located outside Spain.
For a complementary perspective on Spain’s tax system, see our guide on the Spanish tax framework for international companies.
The Master File: A Global Group Overview
The Master File is a central document in any multinational group’s transfer pricing strategy. Its purpose is to provide tax authorities with a comprehensive overview of the group’s structure, global operations, and internal policies. It does not focus on individual subsidiaries but offers a high-level perspective of how value is created and profits are allocated within the group.
Purpose of the Master File
The Master File allows the Spanish Tax Agency to understand how a multinational group is organized, how profits are generated, and how they are distributed. It typically includes:
- Legal and operational structure.
- Descriptions of key business activities and value chains.
- Transfer pricing policies and guidelines.
- Intangible assets and intercompany financing.
- Consolidated financial statements.
Contents Required by Spanish Tax Authorities
According to Spanish regulations (Article 13 of the Corporate Tax Regulation), the Master File must include the following sections:
- General description of the group: legal structure, corporate chart, and main entities.
- Group business activities: value chains, core functions, and markets served.
- Intangibles: ownership, licensing agreements, and development strategy.
- Intercompany financing: capital structure and intra-group loans.
- Consolidated financial and tax information.
This content must be consistent, up to date, and aligned with the Local File. It is usually submitted along with the corporate income tax return (Form 200).
Common Mistakes and How to Avoid Them
Based on EUROACCOUNTS’ experience, the most frequent errors in the Master File include:
- Inconsistencies between documents filed in different countries.
- Generic descriptions that fail to reflect actual value creation flows.
- Omission of relevant intangibles such as software, licenses, or know-how.
To avoid audits and penalties, it is essential that the Master File truly reflects group strategy. Our team ensures alignment between the Master File, Local File, and informative forms such as Form 232 (where applicable).
The Local File: Transaction Details in Spain
The Local File complements the Master File by providing a detailed report of the related-party transactions carried out by the Spanish entity of the multinational group. It is a core document used to demonstrate that the transfer prices applied are in line with the arm’s length principle, supported by functional and economic analysis.
Mandatory Transactions to Document
Companies are required to prepare a Local File when they exceed certain thresholds in related-party transactions. Common transactions that must be documented include:
- Intercompany services (e.g., consulting, IT support, financial services).
- Transfers or licenses of intangibles (e.g., software, trademarks, know-how).
- Intercompany loans or financial guarantees.
- Purchase or resale of goods, subcontracting, or manufacturing agreements.
It’s also critical to document specific operations such as business restructurings, function transfers, or major changes in operating models.
Functional and Economic Analysis
The Local File must include a detailed functional analysis that outlines:
- Functions performed by the Spanish entity.
- Assets used and risks assumed.
- Linkage to the group’s global transfer pricing policy.
In addition, the file must justify the pricing method used (e.g., CUP, Cost Plus, TNMM) and include a benchmarking study with reliable comparables and economic rationale.
At EUROACCOUNTS, we help multinational groups build these reports using audited financial data, sector-specific benchmarks, and contract reviews to ensure robustness and defendability before the Spanish Tax Agency.
Risks of Incomplete or Misaligned Documentation
Mismatches between the Local File and the Master File can result in:
- Tax adjustments by the Spanish Tax Agency.
- Reclassification of transactions as non-arm’s length.
- Penalties of up to €1,000 per missing or incorrect data point, or 1% of the undeclared transaction value.
To mitigate these risks, compliance strategies should include periodic reviews, alignment with the group’s ERP, and coordination with tax advisors both locally and at headquarters. For more insights, check our guide on how transfer pricing is calculated.
From Risk to Control: Your Transfer Pricing Roadmap
Properly managing transfer pricing documentation not only minimizes tax risks but also enhances corporate transparency and builds trust with the tax authorities. Below are key recommendations to help multinational groups operating in Spain maintain a compliant and future-proof transfer pricing strategy.
Transfer Pricing Compliance Checklist
At EUROACCOUNTS, we recommend reviewing the following items annually:
- Have all related-party transactions been correctly identified?
- Is there a formal group-wide transfer pricing policy?
- Are the Master File and Local File consistent and updated?
- Are benchmarking studies current and well-documented?
- Have all required forms, such as Form 232, been submitted?
This checklist should be part of the annual tax planning process and shared between local finance teams and the headquarters.
Why Work with a Specialized Advisor
While some multinationals rely on in-house teams or generalist advisors, these solutions can be expensive and may not integrate well across jurisdictions. Specialized assistance ensures both technical accuracy and operational efficiency.
EUROACCOUNTS acts as a dedicated partner for foreign subsidiaries, offering:
- Full preparation of Master File and Local File in line with OECD and Spanish regulations.
- Sector-specific benchmarking studies.
- Continuous bilingual tax advisory for both headquarters and subsidiaries.
- Integration with ERP systems to automate data gathering.
Case Study: European Group in the Healthcare Sector
A German-headquartered pharmaceutical group set up its Spanish subsidiary to handle distribution. After working with a Big Four firm during the first year, they sought a more agile and cost-efficient solution.
With EUROACCOUNTS:
- Transfer pricing policies were redesigned to reflect the subsidiary’s real functions.
- A tailored Local File was created with a healthcare-specific benchmarking study.
- Form 232 was submitted with full supporting documentation.
Result: a 25% reduction in compliance costs and improved coordination with headquarters in Munich.
To reinforce your strategy, we also recommend reading our article on transfer pricing calculation methods.
From Documentation to Strategy: Stay Compliant, Stay Competitive
Transfer pricing documentation—the Master File and Local File—is a cornerstone of compliance for multinational groups operating in Spain. Meeting these requirements not only helps avoid penalties, but also provides tax authorities with a transparent, well-structured view of your operations.
At EUROACCOUNTS, we help international subsidiaries draft robust documentation that aligns with both OECD and Spanish standards. Our approach blends tax expertise, documentation control, and scalable tech tools to streamline compliance and reduce risk.
Contact EUROACCOUNTS and ensure your group is fully compliant in Spain—efficiently and strategically.
Frequently Asked Questions
What is the Master File in transfer pricing?
It is a report that provides an overview of the multinational group’s structure, activities, intangibles, and global transfer pricing policies. It is part of the mandatory documentation under OECD guidelines.
What should be included in the Local File?
The Local File details the related-party transactions conducted by the Spanish entity, including functional analysis, pricing method, and benchmarking studies.
Who must file this documentation?
Companies that are part of a group with consolidated turnover above €45 million or that engage in specific related-party transactions must prepare this documentation.
What are the penalties for not filing the Master File or Local File?
Penalties can reach €1,000 per missing or incorrect data point, or 1% of the transaction value if improperly documented.
Does EUROACCOUNTS offer this service?
Yes, EUROACCOUNTS prepares both the Master File and Local File for international groups, ensuring full compliance with OECD and Spanish requirements.
