The country-by-country report: form 231 and prior notification

The country-by-country report is a tax x-ray of the entire group: for each country or jurisdiction where the group operates, the administration receives what is invoiced there, what is earned there and what is paid in taxes there. It is not a tax and does not involve a fee to pay: it is information, and it is submitted using form 231.

The obligation only exists when the net turnover of the set of persons and entities forming the group, in the 12 months prior to the start of the tax period, reaches at least €750 million. Below that figure there is no form 231, no matter how international the group is.

The natural obliged party is the entity resident in Spain that is the parent of the group and does not depend in turn on another entity, resident or not. This is the case of a Spanish group with subsidiaries abroad.

The Spanish subsidiary, or the permanent establishment in Spain, of a non-resident parent company may also be obliged, but only if 1 of 3 circumstances occurs: that in the parent's country there is no equivalent obligation to report country by country, that despite an international agreement there is no automatic exchange agreement for this information between competent authorities, or that despite having one there has been a systematic failure that the Spanish administration has communicated to the Spanish entity.

Even if any of these circumstances occur, the Spanish entity is released if the group has designated a group entity resident in a European Union Member State to submit the information, or if another non-resident entity appointed as a surrogate of the parent has already submitted it in its territory of residence, provided that, being outside the European Union, it meets the European equivalence conditions. And if there are several group subsidiaries in Spain and 1 of them has been designated, only that one submits it.

A territorial warning: if your tax domicile is in the Basque Country or Navarre, the country-by-country information is governed by its own regional regulations and is submitted to the corresponding regional tax authority, using its own form. The figures in this guide are those for the common territory.

This is the confusion that generates the most files. Any entity resident in Spain that is part of a group obliged to submit country-by-country information must notify the tax administration of the identification and the country or territory of residence of the entity that will prepare it. The obligation is yours even if the report is submitted by the parent company in Frankfurt, Milan or New York.

The deadline is different from the report's deadline, and therein lies the trap: the prior notification must be made before the end of the tax period to which the information refers. For a financial year ending on 31 December 2026, the notification expires on 31 December 2026, while form 231 for that same financial year does not expire until 31 December 2027.

It is submitted via a form on the electronic headquarters of the Tax Agency, using an electronic certificate, electronic DNI or Cl@ve (the Spanish state electronic identification system). It can be done jointly: a single group entity submits the notification on behalf of all Spanish entities, identifying each one with its NIF (tax identification number), and with that the obligation of all of them is fulfilled.

The notification identifies the group, the entity obliged to prepare the information and its country of residence. It is repeated every year: it is not a registration that is valid forever.

If the non-resident parent company ever refuses to provide you with the group's data, the obliged Spanish entity must expressly request it and, in the event of a refusal, submit the information it has available and notify the administration of this circumstance. Staying silent is not an option.

Form 231 refers to the tax period of the parent entity and is submitted aggregated for each country or jurisdiction, not entity by entity. The amounts are in euros.

For each jurisdiction, the group's gross income is declared, distinguishing that obtained with related entities from that obtained with third parties; the profit before Corporation Tax or similar taxes; the tax paid, including withholdings borne; the tax accrued, also with withholdings; the capital figure and other undistributed profits at the close; the average workforce; and tangible assets and real estate investments other than cash and credit rights.

To this is added the list of entities resident in each jurisdiction, with their permanent establishments and the main activity of each one, and a free section for any relevant information or to explain the data included. That free section is not decorative: it is where figure jumps that, without explanation, seem like an inconsistency are justified.

The figures come from the group's consolidation, and here it is advisable to be prudent, because the same data travels along 3 paths: the report that your parent company submits in its country, the one you submit in Spain and the one that is later exchanged between administrations. All 3 must tell the same story.

Form 231 can be submitted from the day following the end of the tax period to which the information refers and until 12 months have elapsed since that close. For a financial year coinciding with the calendar year, that means the entire following year, expiring on 31 December.

The prior notification expires earlier: on the last day of the declared tax period itself.

Submission is exclusively electronic, via web service or form, at the electronic headquarters of the Tax Agency, using an electronic certificate, electronic DNI or Cl@ve.

Once received, the report does not stay in Spain. European automatic exchange regulations require it to be communicated to other administrations within 15 months of the last day of the group's fiscal year, and 18 months when it is the first report. In other words: a piece of data that does not add up does not stay in a drawer at the Tax Agency, it reaches the administration of every country where the group operates.

It is advisable to fit these deadlines with the rest of the company's calendar: form 200 for Corporation Tax is submitted from 1 to 25 July when the financial year closes on 31 December, and form 232 for related-party transactions and transactions with tax havens, from 1 to 30 November of the year following the financial year and without extension. They are different returns from 231 and none replaces the others.

Here is the fundamental change of recent financial years. Form 231 has ceased to be a statistical obligation to become the piece that decides whether or not your group is exempt from the full calculation of the Complementary Tax.

Ley 7/2024 del Impuesto Complementario (Law 7/2024 on the Complementary Tax) subjects multinational groups and large-scale domestic groups with €750 million in consolidated turnover in at least 2 of the 4 previous tax periods to a minimum taxation level of 15% in each jurisdiction. Calculating it jurisdiction by jurisdiction is expensive, and that is why there is a transitional safe harbour that relies precisely on country-by-country information.

That transitional safe harbour operates during tax periods starting from 31 December 2023 to 31 December 2026. For a jurisdiction and a period, the complementary tax will be zero if just 1 of these 3 criteria is met: that the group's gross income there is €10 million or less and the profit before tax is €1 million or less; that the simplified effective tax rate of the jurisdiction equals or exceeds the transitional rate for the period, which is 15% for periods starting in 2023 and 2024, 16% for those starting in 2025 and 17% for those starting in 2026; or that the profit before tax does not exceed the substance-based income exclusion of that jurisdiction. The first and third criteria are also considered met when the result is zero or negative.

The entry condition is that there is an admissible country-by-country report, prepared and submitted to the administration with acceptable financial statements and received by the Spanish tax administration. If the report is not admissible, or if the jurisdiction's figures do not withstand the contrast, the safe harbour falls away and the group is forced to do the detailed calculation of the Complementary Tax in Spain.

That is why today a careless form 231 is much more expensive than the fine: it takes away the shortcut.

They are 2 different obligations that get confused because they are called almost the same and share the €750 million threshold. It is advisable to separate them in the internal calendar.

Form 231 is confidential: it goes to the Tax Agency and is exchanged between administrations, it is not published. The other is the report on corporation tax regulated in the Ley de Auditoría de Cuentas (Account Auditing Act), and it is public.

The public report must be prepared by the ultimate parent company subject to Spanish law that formulates consolidated accounts and has exceeded €750 million in consolidated turnover in each of the last 2 consecutive financial years. It also reaches Spanish subsidiaries of parent companies not subject to the law of a Member State and branches in Spain of non-EU companies, with exceptions for small entities and for groups operating in a single tax territory.

The mechanics are corporate, not tax-related, and the deadlines are chained: the report is approved with the annual accounts within the first 6 months following the close of the financial year and is deposited in the Mercantile Registry, together with the documents that make up the annual accounts, within the month following that approval, so that the deposit can arrive up to 7 months after the close. Furthermore, it must be kept accessible free of charge on the website for at least 5 years. The responsibility for this happening lies with the administrative body.

This obligation applies to financial years starting on or after 22 June 2024, so that for a group with a financial year coinciding with the calendar year, the first public report is that of the 2025 financial year.

Form 231 and the prior notification are informative returns, and they are covered by the general penalty regime for these returns. Failure to submit on time is penalised with €20 for each piece of data or set of data referring to the same person or entity that should have been included, with a minimum of €300 and a maximum of €20,000.

If you go ahead and submit out of time without the administration having required you to do so, the penalty and both limits are reduced by half. That margin disappears as soon as the requirement arrives, so in the face of an oversight the sensible thing is to submit now.

Submitting incompletely, inaccurately or with false data, when it comes to data expressed in monetary magnitudes, is penalised with up to 2% of the amount of the undeclared or incorrectly declared operations, with a minimum of €500, according to a scale that rises as the weight of the error over the total that should have been declared grows.

Even so, the penalty is not the main risk. The main risk is losing the Pillar Two safe harbour due to an inconsistency, and it is that the administration of another country receives a report from the Spanish one that does not match what your group declared there.

Managora prepares and submits the prior notification and form 231 to the Tax Agency for you, squares the figures with your form 200 for Corporation Tax and with form 232 for related-party transactions, and checks that the report withstands the contrast of the safe harbours. If the case has a fundamental doubt that should be closed before declaring, we also draft and submit a binding written consultation to the Directorate General for Taxation: the law sets a 6-month deadline for a reply, although in complex matters the administration usually takes longer, and the lack of a response within that period does not equate to a favourable reply. When it arrives, the reply binds the administration in the terms of the consultation raised. You can see the updated amount for each service on its file.