B Law & Tax
03 August 2023

Tax advisor: Field work is not a related party service; its value must be taken into account in final stocks

The Superior Court of Castilla y León (Burgos) reviews the adequacy of the correction made by the Administration in a related-party transaction under analysis. In the 2014 Corporate Income Tax Compliance Report, it was not considered that the value of field work in linked vineyards should be added to the purchase cost of the grapes, thus increasing the value of the final inventory of wine produced. The Inspection used an average purchase price for red grapes based on payments to other suppliers, but the Chamber notes that other prices have been considered in invoices related to non-linked red grapes. Nevertheless , it  has beenestablished that the value of field work was deducted from the cost of grapes purchased from the recipients of this work, which affects the prices of red grapes: €1.19/kg for red grapes A and €0.69/kg for red grapes B, which differs from the Inspectorate’s calculation.

Due to these factual errors, the Chamber determines that the liquidation in the Acta de Conformidad is not legally valid. It also holds that it is not appropriate to increase the corporate income tax base by considering the field work as related services, since these costs should be incorporated into the value of the final stock of wine produced. Therefore, it is ordered the annulment of the liquidation made, without prejudice to the possibility that the Administration may properly determine the tax debt in relation to the valuation of the final stocks. In addition, the penalty imposed in the sanctioning process is annulled.

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