Spanish resident companies and permanent establishments in Spain with tax year ending 31 December 2019 must file the Tax Reporting (Form 232) on related-party transactions and transactions/investments in tax havens during the month of November 2020. For those taxpayers with a different tax year closing date, the filing period is the eleventh month after the year-end.
Form 232 must be filed by electronic means through the Tax Agency’s site.
What must be included in Form 232?
Form 232 must be filed when the following transactions/positions should be reported:
1.- As a general rule, related-party transactions subject to transfer pricing documentation requirements, carried out with the same related party when they totaled EUR 250,000 or more. Remember that the following related-party transactions are excluded from the transfer pricing documentation:
- Those carried out between companies forming the same tax consolidation group (“tax unity”). This exclusion does not apply to the intragroup cessions of intangible assets benefiting from the “patent box” regime.
- Those carried out between an Economic Interest Grouping (EIG) or Temporary Consortium and its members (or other companies being part of the same “tax unity” of its members). However, this exclusion does not apply to the transactions with permanent establishments abroad of a Temporary Consortium.
- Those transactions carried out in the framework of a supervised public offering for sale or a buy-out of securities.
2.- The following types of related-party transactions (excluded from the simplified documentation regime) when exceeding of EUR 100,000:
- Related-party transactions between individuals carrying out business activities taxed under the simplified tax regime (“modules”) in the Personal Income Tax, and entities in which the individuals, their spouses, ancestors or descendants held at least a 25% interest in equity;
- On-going business transfers;
- Sales of shares in non-listed companies or companies listed in tax havens;
- Transactions on real estate;
- Transactions on intangible assets.
3.- Related-party transactions, regardless of their amount, of the same type and using the same transfer pricing method when they exceed 50% of the reporting entity’s turnover;
4.- Related-party transactions involving the license of intangible assets to related parties or entities and applying the “patent box” regime; and
5.- The transactions carried out or the securities held in tax havens, regardless of their amount.
The lockdown and the economic crisis derived from the COVID-19 pandemic are having a significant impact in terms of non-ordinary expenses or operating losses at many businesses during tax year 2020. In order to defend the transfer pricing criteria applied in the exceptional circumstances of tax year 2020, the description of the economic and business circumstances and the transfer pricing policies used in previous tax years is particularly important.
With this in mind, the preparation of transfer pricing documentation and tax information on related-party transactions for tax year 2019 is essencial to lay the foundation for the transfer pricing policy and the decisions applied by the group in 2020. In particular, the attribution of market, operational and financial risks between the group entities reflected in the 2019 TP documentation will be the basis for justifying the allocation between the group entities of the losses incurred by the COVID-19 crisis in 2020.
TPS has a team of professionals specialised in transfer pricing issues and can help your company or your clients to comply with tax reporting obligations through model 232 and the compliance with the transfer pricing documentation requirements.