Form 232: when it must be submitted and what must be declared

Form 232 is an informative declaration that some companies are required to submit during the month of November, provided that in the previous year they carried out certain related-party transactions or transactions with persons or entities located in tax havens.

For this reason, it is advisable for companies to review the transactions carried out in the previous financial year to confirm whether they must submit this formal obligation to the Tax Agency.

What are related-party transactions?
For a transaction to be considered ‘related,’ there must be a special relationship between the two parties (companies or entities). This relationship is defined in Article 18.2 of the Corporate Income Tax Law (LIS).

Some examples of related parties:

• An entity and its partners or shareholders with a significant stake (≥ 25%).
• An entity and its directors or administrators, except in the case of remuneration for the position of administrator.
• An entity and the relatives (spouses, siblings, nephews and nieces, etc.) of the partners, directors, etc., up to a certain degree of kinship.
• Two entities belonging to the same group.
• Entities in which one holds at least a 25% stake in the other.

A resident entity and its permanent establishment abroad.

When is it mandatory to declare related-party transactions on Form 232?

Form 232 requires reporting on various types of transactions when they exceed certain quantitative thresholds or when they are of a specific nature:

• Transactions carried out with the same related entity if, when added together, they exceed €250,000 in the tax period.
• Special transactions, such as the transfer of real estate, the sale of businesses or shares, the transfer or assignment of intangible assets, or transactions carried out using special valuation methods, which must be declared if they exceed €100,000 in total.
• Related-party transactions which, being of the same type and valued using the same method, exceed 50% of the company's turnover.

For example, if a company sold goods to a company in the same group for €175,000 and these transactions represent more than half of its turnover (e.g. €240,000), they must be included in form 232. Similarly, an acquisition of shares for €135,000 from another related entity must also be declared, as it exceeds the €100,000 threshold established for specific transactions.

Transactions to be declared regardless of the amount

In addition to these transactions, the regulations require other cases to be included regardless of their amount:

• All transactions carried out with individuals or entities located in tax havens, even if the amounts are small.
• Transfers of intangible fixed assets to related entities that benefit from the 60% reduction provided for in Corporation Tax, which must also be declared on the form.

What is Form 232 used for?

In summary, Form 232 acts as a fiscal transparency tool to report on relevant related-party transactions, transactions with tax havens and transfers of intangible assets with tax benefits, thus ensuring greater control over transactions between related entities.