Soft-drink procurement mixed contracts deconstructed using Secret Comparables in Spain: the position of the Economic-Administrative Court

The TEAC confirms the power of the Tax Authorities to partially redetermine the allocation and characterization of a consideration –business vs. royalty income- in a contract between independent parties. Accordingly, the Tax Authorities would be able to ignore a valid civil contract for tax purposes which foresees that a good or service (e.g. license of intellectual property) is provided without any consideration where certain circumstances are met. However, the court rejected the valuation methodology used by the Tax Authorities to reallocate the income corresponding to the different services included in the contract to the extent that the use of «secret comparables» generates defenselessness to the taxpayer…