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Practical manual for Income Tax 2020.

Estimated returns on capital and related operations

Regulations: Articles 6.5, 40 and 41 Personal Income Tax Law

The provision of goods or rights likely to generate capital gains are presumed to be remunerated, unless proven otherwise . In the absence of proof to the contrary, the valuation of the estimated returns will be carried out at the normal market value, which is understood to be the consideration that would be agreed between independent subjects, unless there is proof to the contrary, of another lower value.

If it is a loan and capital raising operations in general , the normal market value will be understood as the legal interest rate of money force on the last day of the tax period, 3 percent for the 2020 financial year.

In the case of transactions between related persons or entities , the valuation will be carried out imperatively at the normal market value, in accordance with the terms set forth in article 18 of Law 27/2014, of November 27, on Corporate Tax ( LIS ). This same Chapter discusses the integration into the tax base of the income obtained from the transfer to third parties of equity from related entities.

According to article 18 of the LIS the linking relationships occur in the operations carried out between:

  • An entity and its partners or participants,
  • An entity and its legal and de facto directors or administrators,
  • An entity and the partners or directors of another company that belongs to the same group,
  • An entity and the spouses or persons related by direct or collateral family ties, by consanguinity or affinity up to the third degree of the partners or participants, directors or administrators.

When the link is defined based on the partner-company relationship, the partner's participation must be equal to or greater than 25 percent.

The tax authorities may verify that transactions carried out between related persons or entities have been valued at their normal market value and will, where appropriate, make appropriate valuation corrections with respect to transactions subject to Corporate Tax, Income Tax or Non-Resident Income Tax that have not been valued at their normal market value. For this purpose, the taxpayer of IRPF must comply with the documentation obligations of related-party transactions under the terms and conditions established in Chapter V (articles 13 to 16) of the Corporate Tax Regulations, approved by Royal Decree 634/2015, of July 10 ( BOE of the 11th).