On August 30, 2017, Order HFP / 819/2017 was published in the Spanish Official Gazette approving new Form 232 which updates certain existing reporting obligations in connection to: related party transactions, transactions and shareholdings involving blacklisted jurisdictions, and/or related party transactions applying the Spanish “patent box” regime.
These reporting obligations used to be complied with by completing a section in the Spanish Corporate Income Tax (CIT) return that is filed on an annual basis, 6 months plus 25 days following year-end closing (e.g., each 25 July, when the company’s tax period coincides with the calendar year).
The reporting obligations, discussed below, are now moved to Form 232, which is due 10 months following year-end, for tax periods commencing in 2016 (i.e., the first Form 232 is due in November 2017 with respect to tax periods ending on 31 December 2016).
Detailed discussion
Since 2013 with the entry into force of the BEPS Project – Erosion of the Base and Change of Benefits in International Taxation, the OECD seeks to provide transparency and security in the international environment, through 15 actions which regulate all operations between parent – subsidiary.
Specifically, «Action 13: Documentation of Transfer Pricing and Country-by-Country Reports» Collect a series of information and documentation measures aimed at obtaining greater transparency on the policies applied in transfer pricing by multinational groups.
Spain has been one of the pioneer countries in integrating in its internal legislation a large part of the actions envisaged in the project, specifically through the recent Corporate Tax Law, Law 27/2014 and its regulations, introducing:
- Taxation of hybrid instruments
- Limitation of deductibility financial expenses
- Documentation and valuation of transactions between related parties
- Obligation to submit Country Report by Country
Form 232 now introduces some changes with respect to the transactions that were already reported in Form 200. The following are the related party transactions that had to be reported in Form 200:
- One or more transaction(s) of the same type when carried out with one related party for a total consideration (valued at arm’s length) in excess of €250,000 in a tax period.
- One or more “specific” transaction(s) of the same type when carried out with a related party for a total consideration (valued at arm’s length) in excess of €100,000 in a given tax period. “Specific” transactions for these purposes include transfers of stocks (unless these are publicly traded in a non-blacklisted jurisdiction), transfers of businesses (i.e., going concerns), immovable properties or intangible assets, among others.
Furthermore, changes in Form 232 are detailed below:
- The €250,000 threshold remains unchanged but the €100,000 threshold is now computed for one or more “specific” transaction(s) in the same terms but regardless of the valuation method used.
- Transaction(s) with one related party (which are of the same type and use the same valuation method) must be reported through Form 232 when the total amount of the transaction exceeds 50% of the company’s revenues in a given tax period (irrespective of the amount involved).
- All transactions with blacklisted jurisdictions must be reported, regardless of the amount involved.
Certain exceptions to these reporting obligations apply, for instance, to intra-group transactions taking place between entities within the same Spanish tax consolidated group that need not be reported.
Form 232 is due 10 months following year-end (i.e., in November in cases where the tax period coincides with the calendar year). Exceptionally, the deadline to file Form 232 in respect of fiscal years ending in December 2016 is November 2017.
IMPORTANT: These reporting obligations are independent from the statutory transfer pricing documentation obligations and from documentation obligations of transactions with entities tax resident in jurisdictions blacklisted by Spain.
From each operation described, it will be necessary to provide, among other things, the information that is detailed below, and which is understood reflected in the transfer pricing documentation of the group/company:
- Identification of the related entity with which it is operated.
- Type of link
- Valuation method
- Total amount of the transaction
Therefore, we emphasize the need to have a Master File, standard information on all members of the group, and the Local File, the documentation of the operations of each country; so that the tax authorities can have a complete and overall composition of transactions between related parts, assumed risks and functions, distribution margin, valuation method used and analysis and location of the creation of value in the production chain.
In this regard, it is convenient to consider each case in particular, to determine the obligation of documentation at group / company level.
For all the above and to receive more information about it, you can contact our tax department calling 934 45 46 47 or contact us through web@xterna.es
Written by: Marcela Ortegon, you can find her in Linkedin here