Does your company carry out transactions with related companies or individuals? Are you currently applying the “Patent box” tax incentive? Have you carried out operations with tax havens? If so, the tax regulations of the Corporation Tax require the filing and reporting of the transactions carried out through Form 232, “informative declaration of related operations and operations and situations related to countries or territories classified as tax havens” whose filing deadline is next November, if your company closes the year on December 31. Otherwise, you must prepare it in the following month after the 9-month period has elapsed since the end of the financial year.

The obligation arises in the following cases:

(1) if the amount of the compensation with each related entity exceeds the threshold of €250,000 for the overall transactions,

(2) if you carry out specific operations, provided that the combined amount of each of this type of operations exceeds €100,000:

  1. a) Transactions with individuals who are taxed in modules and whose individual or joint investment in the entity with their relatives is equal to or greater than 25% of the capital or own funds.
  2. b) Transfer of business, securities or shares in the own funds of non-listed entities or listed in tax havens.
  3. c) Transfer of real estate and operations on intangibles.

(3) regardless of their amount, the overall amount of operations of the same type and valuation method with related persons or entities have a value greater than 50% of the entity’s turnover.

(4) If you carry out operations or own securities in countries or territories classified as tax havens, regardless of their amount. Likewise, when an entity benefits from the reduction of the “Patent Box” regime for operations with related persons or entities, it will be obliged to submit the 232 tax form.

It is important to remember that when determining whether they should be declared, credit or loan operations are not valued for their capital amount, but rather for the total interest during the term of the contract. If the total interest and other operations with the same entity exceed 250 thousand euros in that year, then they will be included in the 232 tax form, as well as the granting and repayment of the capital.

There is no obligation to inform in the 232 model the operations carried out between entities that are members of the same tax consolidation group and those carried out with its members by economic interest groups or temporary business unions. However, it is important to remember that there is an obligation regarding related-party transactions with entities that are not part of the tax group (for example, entities abroad).

The ultimate purpose of this 232 tax form, which has been endorsed by the recent ruling of the Supreme Court of March 16, 2022 is twofold: on the one hand, it is an informative declaration that only those entities that are obliged to report the above mentioned operations will have to complete and, on the other hand, it is understood that the indirect tax burdens associated with filing the Corporation Tax return are reduced.

It is important to emphasize the importance of the correct declaration and submission of these operations in this 232 tax form, given that, by virtue of article 198 of the General Tax Law, the Tax Agency can impose a penalty of 20 Euros per each omitted data, with a minimum of 300 euros and a maximum of 20,000 euros. However, if the declaration is filed after the deadline without prior request, the penalty and previous limits are reduced by half.

On the other hand, the incorrect submission of form 232, inaccurate or with false data, exposes the taxpayer to a proportional pecuniary fine of up to 2% of the amount of the undeclared or incorrectly declared operations, with a minimum of €500.

Sole or complementary obligation

If related transactions that exceed €250,000 per year with a Group company are carried out, the Tax Law also requires to document and justify these through the so-called Transfer Pricing Documentation.

This requirement is independent from the232 tax form and is cumulative, as long as the group turnover exceeds 10 million euros.

However, in the event that the group turnover is less than those 10 million, there is only an obligation to submit the form 232. Therefore, once the aforementioned thresholds have been exceeded, the filing of the232 tax form is mandatory for all entities that meet the aforementioned requirements.

Addwill has the necessary team and experience to carry out this task with a practical approach to the matter, in order to be able to fulfill this essential obligation and obtain, additionally, the necessary information to help make your business more efficient.