As established by the Tax Agency, below is a summary of the general requirements for filing Form 232, as well as the characteristics of the information to be included.
Who is required to file the form?
The filing of Form 232 is a compulsory information return for Corporate Income Tax (IS) and Non-Resident Income Tax (IRNR) taxpayers who act through a permanent establishment and who carry out related-party transactions.
Deadline for submission
The deadline for filing Form 232, on related party transactions carried out in the fiscal year ended December 31, 2020, is November 30, 2021.
Information to include
As a general rule, the information to be included is as follows:
- Related-party transactions in excess of 250,000 euros as a whole (36,000 euros in the case of the provinces of Bizkaia, Alava and Gipuzkoa).
- Transactions with related persons or entities that apply the reduction of income from certain intangible assets; and
- Operations and situations related to countries or territories qualified as tax havens.
Additionally, in the common territory and in the foral territory of Navarre, the following must be declared:
- Specific" related party transactions in excess of 100,000 euros; and
- Regardless of the aggregate amount, transactions of the same type and with the same valuation method, when they exceed 50% of the turnover.
Other relevant information
It is worth mentioning that the filing of Form 232 does not exempt the company from complying with other formal obligations such as the preparation of the transfer pricing documentation (Masterfile and Local file), and making it available at the request of the Tax Administration. The Transfer Pricing Documentation is considered the ideal supporting information to demonstrate the nature of the market value of the related transactions.
The mere fact of not having such documentation is a formal infringement, which may result in the imposition of penalties. Formal penalties can range from 1,000 euros per item of information to 10,000 euros per set of omitted, inaccurate or false information.
On the other hand, in the event of a tax audit, if the Tax Administration considers that the valuation agreed between the parties differs from that which should be applied under free market conditions, but it is adequately supported by the transfer pricing documentation provided(Master and Local file); without prejudice to adjusting the taxable base and demanding the corresponding amount and interest for late payment, it may not impose penalties.
However, in the absence of supporting documentation, the Tax Administration may impose penalties for the amount not paid.
The foregoing makes it advisable that tax consolidation groups, despite not being formally required to have such documentation (for intra-group transactions), have it available, in order to avoid possible penalties arising from adjustments proposed by the Tax Authorities.
