Information return on related-party transactions and transactions and situations related to countries or territories classified as tax havens (form 232)

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Taxpayers of Corporate Income Tax and Non-Resident income tax who act through a permanent establishment, as well as entities under the income allocation system incorporated abroad with a presence in Spanish territory, who carry out certain transactions with related persons or entities, whose fiscal year ends on December 31st, will be obliged to file the information return on related transactions and transactions and situations related to countries or territories classified as tax havens (Form 232) during the month of November.

Taxpayers who conduct the following transactions with related persons or entities are obliged to file Form 232:

  1. Transactions conducted with the same person or related entity provided that the amount of the consideration of the set of transactions in the tax period exceeds €250,000, according to the market value.
  2. Specific transactions [1], provided that the aggregate amount of each of these types of transactions in the tax period exceeds €100,000.
  3. Transactions of the same type and same valuation method, which in total would exceed 50% of the entity’s turnover.

The following shall be considered related persons or entities:

  1. An entity and its shareholders or participants.
  2. An entity and its directors, except for the remuneration for the exercise of their functions.
  3. An entity and the spouses or persons related by blood or marriage up to the third degree of consanguinity or affinity of the shareholders participants or directors.
  4. Two entities belonging to a group.
  5. An entity and the directors of another entity, when both entities belong to a group.
  6. An entity and another entity in which the former has an indirect shareholding of at least 25 percent of the share capital or equity.
  7. Two entities in which the same partners, participants or their spouses, or persons related by direct or collateral kinship, by blood or affinity up to the third degree, participate, directly or indirectly, in at least 25 percent of the capital stock or shareholders’ equity.
  8. An entity resident in Spanish territory and its permanent establishments located abroad.
    In those cases, in which the link is defined according to the relationship of the partners or participants with the entity, the participation should be equal to or greater than 25%. The reference to the administrators shall include both de jure and de facto administrator.

However, it will not be obligatory to complete the «Information on transactions with related persons or entities» of Form 232, with respect to the following transactions:

  1. Transactions are conducted between entities that form part of the same tax consolidation group [2].
  2. The operations carried out with its members or with other entities integrating the same tax consolidation group by the Grouping of Economic Interests (GIE), in accordance with the provisions of Law 12/1991, of April 29, on Economic Interest Groupings, and the temporary unions of companies, regulated in Law 18/1982, of May 26, on tax regime of groupings and temporary unions of Companies (“joint venture”) and of the Companies of regional industrial development, and registered in the special registry of the Ministry of Finance and Public Function.
    However, Form 232 should be filed in the case of temporary joint ventures, or formulas of collaboration analogous to temporary joint ventures, which avail themselves of the exemption regime for income obtained abroad through a permanent establishment, established in Article 22 of the Spanish CIT Act.
  3. Transactions conducted in the context of public offers for sale or public offers for the acquisition of securities.

Likewise, regardless of the amount of consideration of the set of transactions carried out with the same person or related entity, there will always be the obligation to file form 232 and complete the «Information on transactions with related persons or entities» with respect to those transactions of the same type which in turn use the same valuation method, provided that the amount of the set of such transactions in the tax period exceeds 50% of the entity’s turnover.

Likewise, Form 232 should be filed and the «Information on transactions with related persons or entities in the event of application of the reduction of income from certain intangible assets» should be completed in those cases in which the taxpayer applies the reduction of income from certain intangible assets, provided for in Article 23 of the Spanish CIT Act, because it obtains income as a result of the assignment of certain intangible assets to related persons or entities.

Form 232 should also be filed and the information on «Operations and situations related to countries or territories qualified as tax havens» should be completed in those cases in which the taxpayer conducts operations or has securities in countries or territories qualified as tax havens, regardless of the amount.

From AGM we are at your disposal to review the application not only of this tax form (Form 232), but of the rest of the obligations in this matter (documentation obligations, Masterfile vs. Locafile, BEPS application to Spanish groups, obligation of preparation and/or communication of Country by Country / CBC, obligations in this matter of the subsidiaries or related entities of your companies abroad, etc.).

[1]
  1. Transactions conducted by PIT taxpayers, in the development of an economic activity, to which the objective estimation method is applicable with entities in which they or their spouses, ascendants or descendants, individually or jointly among all of them, hold a percentage equal to or greater than 25% of the capital stock or equity.
  2. Transfers of businesses.
  3. Transactions involving the transfer of securities or shares representing the participation in the equity of any type of entities not admitted to trading on any of the regulated securities markets, or which are admitted to trading on regulated markets located in countries or territories classified as tax havens.
  4. Transactions involving real estate.
  5. Transactions involving intangible assets.
[2] The assignment of the right to use or exploit patents, utility models, complementary certificates for the protection of medicines and phytosanitary products, legally protected designs and models deriving from research and development and technological innovation activities, and advanced registered software deriving from research and development activities will be subject to the documentation obligations of related-party transactions.

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