Spain vs Reichle & De-Massari Iberia S.L.U., May 2026, High Court, Case No STSJ M 5948/2026
Table of Contents
Case Information
Court: Tribunal Superior de Justicia de Madrid, Sala de lo Contencioso-Administrativo, Sección Quinta
Case number: Recurso núm. 1186/2022, Sentencia núm. 251/2026
Citation: STSJ M 5948/2026, ECLI:ES:TSJM:2026:5948, Id Cendoj: 28079330052026100245
Applicant: Reichle & De-Massari Iberia S.L.U.
Respondent: Tribunal Económico Administrativo Regional de Madrid (Ministerio de Economía y Hacienda), represented by the Abogacía del Estado
Jurisdiction: Spain (contencioso-administrativo, tax)
Judgment date: 6 May 2026
Judgment Summary
Reichle & De-Massari Iberia S.L.U. (RM Iberia) appealed to the Tribunal Superior de Justicia de Madrid against a resolution of the Tribunal Económico Administrativo Regional de Madrid (TEAR) dated 29 September 2022. That TEAR resolution had dismissed RM Iberia's economic-administrative claim against a corporate income tax (Impuesto sobre Sociedades) assessment for the tax year 2014, which produced a liability of 122,827.74 euros.
The tax inspection had been initiated on 30 May 2019 and covered the tax years 2014 and 2015. The inspection was of a general nature under Article 148 of Ley 58/2003 (LGT) and Article 178.3 of RD 1065/2007. The maximum duration of the inspection was 27 months pursuant to Article 150.1.b).10 LGT, because the taxpayer's annual turnover equalled or exceeded the audit threshold of 5,700,000 euros set by Article 263.2 of the Texto Refundido de la Ley de Sociedades de Capital (RDL 1/2010). RM Iberia's turnover was 8,035,820.94 euros in 2014 and 7,419,473.22 euros in 2015.
The court dismissed the appeal in its entirety, confirmed the TEAR resolution, and ordered RM Iberia to pay costs capped at 2,000 euros plus VAT where applicable.
Background
RM Iberia was incorporated on 18 July 2012 in Madrid. It is wholly owned (100%) by Reichle & De Massari AG, a Swiss company, which is in turn owned by Reichle & De Massari Holding AG, also Swiss and the ultimate parent of the RM Group. The RM Group operates in the information and communications technology sector, providing cabling solutions for high-end communications networks in the LAN, data centre and public network fields.
RM Iberia's registered activity (epígrafe de IAE 6.154, COM.MAY.APAR.Y MAT. ELECTRONICO) consisted of the distribution of passive cabling solutions for communications networks in Spain and Portugal. In 2014, RM Iberia purchased products principally from the Swiss related party Reichle & De Massari AG and also from independent third-party suppliers. All customers were independent third parties.
The RM Group had previously operated in Spain through a branch (RM Sucursal), which had been filing the modelo 200 tax return at least since 2006 with annual turnover consistently above 500,000 euros. RM Iberia contended that it was a start-up distributor replacing a functionally different branch, whereas the tax authority considered RM Iberia to be a continuation of the group's established Spanish presence.
A tax inspection covering the 2014 and 2015 Impuesto sobre Sociedades was initiated on 30 May 2019. A notice of the opening of the hearing prior to signature of the inspection report was communicated to RM Iberia on 2 December 2020. RM Iberia submitted representations on 18 December 2020. An acta de disconformidad was raised on 22 December 2020 and RM Iberia filed further allegations on 14 January 2021. The liquidation agreement was issued and notified on 25 June 2021.
Core Dispute
The central disputes concerned three matters arising from the 2014 corporate income tax assessment.
First, whether RM Iberia was entitled to segment its profit-and-loss account between (a) transactions involving products purchased from related parties and resold to independent customers, and (b) transactions involving products purchased from independent third parties and resold to independent customers. The tax authority concluded that RM Iberia carried on a single distribution activity and that the segmentation was therefore impermissible. RM Iberia argued that the segmentation was necessary and economically justified for the correct application of the transfer pricing comparability analysis, and that it had applied reasonable allocation keys for indirect costs in line with OECD Guidelines paragraphs 2.83 and 2.84.
Second, whether the transfer pricing adjustment should have been made to the upper quartile of the arm's length range (4.73% ROS for 2014, as applied by the inspection) or to the median, and whether the inspection had adequately justified the existence of comparability defects. RM Iberia argued that only the median or the nearest point to its actual margin (i.e. the lower quartile) could lawfully be applied, and that the inspection had not discharged the burden of proving that the additional functions it attributed to RM Iberia generated above-median profitability.
Third, whether negative taxable bases (BINs) declared by RM Iberia for 2012 and 2013 were justified. RM Iberia maintained that the losses arose from genuine start-up costs incurred as a new distributor, including a bad debt provision of 78,348 euros relating to a customer (Telephone SL) that entered insolvency proceedings at the end of 2013. The tax authority considered that RM Iberia was the continuation of the group's pre-existing Spanish branch and that, once the segmentation was disregarded, any value within the arm's length range would have produced a positive result, leaving the declared losses unsubstantiated.
Court Findings
On the segmentation issue, the court held that RM Iberia had not demonstrated that it carried on two distinct activities. The court accepted the administration's finding that RM Iberia performed a single distribution activity. It noted that RM Iberia applied segmentation only to purchases (distinguishing group purchases from third-party purchases) but not to sales, and that it had failed to differentiate within its sales to third parties between those deriving from group-purchased products and those deriving from third-party-purchased products. The court held that it was not for the administration to perform a segmentation of sales or costs when RM Iberia itself had not done so, and that the obligation to prove the existence of two separate activities rested with RM Iberia under Article 105.1 LGT.
The court also found that the Audiencia Nacional judgment of 19 November 2022 (recurso 103/2019) cited by RM Iberia did not bind the court, because it was not a Supreme Court ruling, and that it concerned a different factual situation in which the taxpayer had, unlike RM Iberia, differentiated its costs including personnel costs across the segmented activities.
On the upper quartile adjustment, the court upheld the inspection's application of 4.73% ROS for 2014. It found that the inspection had adequately motivated the existence of comparability defects by reference to RM Iberia's additional functions of installation, after-sales service and training, as evidenced by declarations from named individuals and responses to enquiries from customers. Because the defects of comparability were sufficiently motivated, the court considered it lawful to apply the upper quartile rather than the median, and held that RM Iberia had not discharged its burden of proving that those additional functions had not been performed. The court noted that the 4.73% figure was derived from RM Iberia's own transfer pricing documentation and was consistent with the margins applied by the Spanish branch in 2010 and 2011 (4.90% and 4.99% respectively).
On the negative taxable bases for 2012 and 2013, the court upheld the disallowance. It found that RM Iberia had provided only the branch's 2010 and 2011 financial accounts as evidence that the branch's activity was materially different from its own, and that this was insufficient to justify the deeply negative margins declared (minus 56.5% and minus 19.2% in 2012 and 2013 respectively). The court agreed with the inspection that any value within the arm's length intercuartile range from RM Iberia's own documentation (upper 4.7%, lower 1.9%) would have produced a positive result, so the declared losses were not substantiated.
The court rejected the allegation of lack of motivation, finding that both the liquidation agreement and the TEAR resolution were adequately reasoned within the meaning of Article 102 LGT and Article 239 LGT respectively, and that RM Iberia had suffered no procedural indefensión. The court relied on the Supreme Court's judgment of 9 June 2025 (recurso de casación 6737/2023) confirming that motivation by reference to another decision satisfies the constitutional requirement of effective judicial protection under Article 24 of the Constitution.
Outcome
The court dismissed the appeal in its entirety and declared the TEAR resolution of 29 September 2022 to be in conformity with the law. The corporate income tax assessment for 2014, producing a liability of 122,827.74 euros, was confirmed. Costs were imposed on RM Iberia, capped at a maximum of 2,000 euros for all items, plus VAT where applicable, pursuant to Articles 139 and 139.4 of the Ley de la Jurisdicción Contencioso-Administrativa and Article 243.2 of the Ley de Enjuiciamiento Civil as amended by Ley 42/2015. The judgment is open to a cassation appeal before the Supreme Court, to be prepared within thirty days of notification.
TP Method Highlighted
RM Iberia selected the Método del Margen Neto Operacional (Transactional Net Margin Method) for its comparability analysis. The profit level indicator used was the return on sales (ROS), defined as the ratio of operating result to net turnover. The tax authority accepted the validity of the economic analysis submitted by RM Iberia (noting only that two comparables, DABOK SRO and EUROTRONIX SA, did not satisfy the requirements of Article 16.2 of the Reglamento del Impuesto sobre Sociedades, RD 1774/2004) but, having rejected the segmentation, applied the upper quartile of the intercuartile range from RM Iberia's own documentation: 4.73% ROS for 2014 and 5.00% ROS for 2015. RM Iberia's declared total margin was minus 4.5% in 2014 and minus 2.5% in 2015, both outside the intercuartile range. The arm's length range from RM Iberia's own documentation for 2012 and 2013 had an upper quartile of 4.70% and a lower bound of 1.9%. The inspection's own revised analysis produced an upper quartile of 5.81% for 2014 and 4.99% for 2015. The applicable statutory framework for the 2014 tax year was Article 16 of the Texto Refundido de la Ley del Impuesto sobre Sociedades (RDL 4/2004, as amended by Ley 35/2006) and Article 16 of the Reglamento del Impuesto sobre Sociedades (RD 1774/2004).
Major Issues / Areas of Contention
- Whether RM Iberia was entitled to segment its profit-and-loss account between group-sourced and third-party-sourced product lines for transfer pricing purposes, given that segmentation was applied only to purchases and not to sales.
- Whether the tax authority lawfully applied the upper quartile (4.73% ROS for 2014) of the arm's length range rather than the median, and whether comparability defects were sufficiently motivated to justify that choice.
- Whether RM Iberia's declared negative taxable bases for 2012 and 2013 were substantiated, having regard to the question of whether RM Iberia was a genuine start-up or a continuation of the group's pre-existing Spanish branch.
- Whether the liquidation agreement and the TEAR resolution were adequately motivated and whether the taxpayer suffered procedural indefensión in breach of Articles 9.3 and 24 of the Spanish Constitution.
- Allocation of the burden of proof under Article 105 LGT as between the tax authority and the taxpayer in respect of the comparability analysis, the additional functions attributed to RM Iberia, and the origin of the 2012 and 2013 losses.