Form 232, informative tax return for linked transactions related to territories deemed tax havens

Form 232, informative tax return for linked transactions and transactions and situations related to countries or territories deemed tax havens.

Last August, the Spanish Tax Ministry published Order HFP/816/2017, dated August 28th, approving informative tax return form 232 for linked transactions and transactions and situations related to countries or territories deemed tax havens.

This new form includes the obligation to report to the Tax Administration about certain information related to entities and linked transactions for tax periods beginning on or after January 1st, 2016, which was previously stated in Corporate Income Tax form.

Prior to listing the operations that determine the obligation to submit this new informative return, we refer hereto to article 18.2 of Law 27/2014, of November 27th, on Corporate Tax (LIS) where linked entities or persons (related parties) are defined as:

a) An entity and its partners or participants.
b) An entity and its directors or administrators, except for the remuneration for their functions.
c) An entity and the spouses or persons united by kinship relations, in direct or collateral line, or by a blood or in-law relationship up to the third degree of the partners or participants, directors or administrators.
d) Two entities that belong to a Group.
e) An entity and the directors or administrators of another entity, when both entities belong to a Group.
f) An entity and another entity invested by the first indirectly in at least 25 percent of the share capital or equity.
g) Two entities in which the same partners, participants or their spouses, or persons united by kinship relations, in direct or collateral line, or by a blood or in-law relationship up to the third degree, participate, directly or indirectly, in at least the 25 percent of the share capital or own funds.
h) An entity resident in Spanish territory and its permanent establishments abroad.

In case of a relationship which is defined based on the relationship of the partners or participants with the entity, the participation must be equal to or greater than 25 percent. If participation is less than 25 percent, they won’t be linked entities.

Remuneration to Directors for accomplishing their administrator’s functions or roles is not included as a transaction between related parties. However, such works are deemed as such when remunerated services are rendered or remunerated works are performed for the entity.

Companies must fill in and submit this new informative declaration when meeting one of the following assumptions:

  1. 1.- Entities whose transactions in the tax period with the same related party – according to the market value – exceed €250,000.
  2. Entities carrying out any of the following transactions (if the amount of each type of transaction exceeds €100,000 according to the market value):
    a. Transmission of business.
    b. Transmission of real estate.
    c. Operations on intangible assets.
    d. Transactions carried out by Personal Income Tax payers when they are developing an economic activity to which the objective evaluation method is applicable, with entities in which individuals or their relatives have a percentage equal to or greater than 25% of the capital share or the own funds.
  3. Entities that shall have the obligation to report those operations when the amount of all of them is higher than 50% of the entity’s turnover.
  4. Entities that carry out transactions with countries or territories considered as tax havens, regardless of the amount.
  5. Entities transmitting intangible assets to related persons or linked / related entities and applying the reduction regulated in article 23 of the Corporate Income Tax Law.

modelo 232 form 232

The deadline to submit this new form is by the end of the month after the ten months that follow the end of the tax period to which the information to be supplied refers. As an example, for tax periods ending on December 31st, 2017, the filing deadline will be November 1st to 30th, 2018.

At SCHILLER Abogados & Rechtsanwälte we offer you the services to submit the 232 form and fulfill linked transactions obligations. If you have any questions or need further information about this, don’t hesitate to contact us.

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