The following factors may be considered while determining the arm’s length price for intragroup services:
- Whether any real intra-group services have been provided;
- Whether the provision of intra-group services has conferred an economic or commercial value to a group member; and
- Where services are provided jointly in favor of several related entities, and determination of the remuneration is not possible for each entity, the total consideration may be apportioned by an appropriate method among the related entities taking into account the nature of the service, the circumstances in which it is provided, and the benefits obtained or likely to be obtained by the recipient entities.
Cost Contribution Arrangements (CCAs) are contractual agreements between affiliated companies to share the contributions and risks in connection with the joint development, production, or procurement of intangible assets, tangible assets or services, whereby it is expected that the relevant intangible assets, tangible economic goods or services will result in advantages for all CCA participants.
Cost contribution agreements must be in compliance with the following conditions:
- The agreement should be concluded in advance and with appropriate documentation;
- The contribution of each participating person or entity must be determined in accordance with criteria of rationality taking into account the profit that each one of them expects to obtain from the agreement; and
- The agreement must contemplate the compensatory payments and adjustments for variation in circumstances or participating persons or entities.
Under the Authorized OECD Approach (AOA), the OECD has published guidelines for the allocation of profits to permanent establishments. Spain has concluded a tax treaty with Japan which follows the AOA by reproducing the version of Art. 7 of the Model Convention as amended in 2010. Most other Spanish tax treaties do not reflect the AOA approach since based on the pre-2010 OECD Model.