You are Inés Valcárcel, Group Tax Director of GAIBSA, a Madrid-based maker of precision components. Spain's tax agency has opened a transfer-pricing inspection, and on Friday 13 February 2026 you must put on the table the margin you believe the group's Moroccan plant should earn.
The situation
GAIBSA has revenue of about €184 million and earns €22.0 million of operating profit (EBIT). The Madrid parent runs the group and does the R&D; an 820-employee plant in Morocco makes the components; two subsidiaries, in Germany and France, sell them to carmakers; and a Dutch company with two employees holds the patents. The distributors buy from Morocco at cost plus 8% and pay the Netherlands 6% of their sales for the use of the patents.
The letter of 3 February opens an inspection of 2021 to 2023 and questions two things: the profit the Moroccan plant keeps and the Dutch royalty. The estimated exposure is €4.8 million, plus interest and a possible 15–20% penalty. On Morocco, the inspector's view is clear: the plant works to the parent's instructions and carries little inventory risk, so it is a low-risk contract manufacturer, and independent comparables earn between 4% and 8% on cost. The group's policy says cost plus 8%, but the Moroccan company reported €14.8 million of EBIT on about €120 million of sales to the group: close to 12%. Every point of margin taken away from Morocco is profit Spain taxes at 25%.
The finance team reads it differently: the plant bears real production risk, its managers make decisions on the ground, and its lower labour cost is an advantage of its own that Spain has no claim to tax. You joined in 2022 from an advisory firm, after eleven years preparing transfer-pricing files; you have defended many, never one about your own employer's structure. Your boss, the CFO Tomás Orbegozo, wants a number by Monday.