Related-party transactions: rents and salaries between shareholder and company
When a shareholder rents a property to their company, draws a salary as director or provides professional services, these are related-party transactions. The rules require them to be valued at market price (the arm's length principle).
What if the price is not a market price?
- The Tax Agency can adjust the valuation and claim the difference.
- If the rent is below market: upward adjustment with additional tax.
- If the salary is above market: part may be treated as a non-deductible gratuity.
Does it have to be documented?
Companies with turnover below €10 million have simplified obligations, but must have a reasonable, documented valuation. At DPL Asesores we prepare the transfer pricing documentation.