According to Article 42 of the Commercial Code a group exists when one company has control over one or more other companies. Companies that are part of a corporate group are treated differently from the rest as regards transactions with other companies in the group, both for accounting and tax purposes.
What is a tax group?
A tax group is a group that applies the special regime, which is voluntary and is defined as such in the LIS.
The aforementioned regime is configured by the result of the sum of the tax bases of the entities resident in Spain. A typical example of this situation would be that derived from a holding company. A holding company is a financial company that owns the majority of the shares and manages the administration of a group of companies engaged in various activities.
What are the requirements for the formation of a tax group?
1. That there is a shareholding of at least 75% between them
2. That there is a majority in terms of voting rights
3. That they are entities resident in Spain
4. The application of the regime is optional and will be applied until expressly requested to be waived.
What documentation must be prepared?
The entity representing the group must present for tax purposes: the balance sheet, the profit and loss statement, a statement of changes in equity and a consolidated cash flow statement.
In turn, the tax returns that must be filed are, firstly, the corporate income tax that will be filed through the parent entity, so that this will be the result of the taxable bases of the group companies. The tax return form 220 of the tax consolidation regime will be filed. Secondly, the entities forming the group are subject to individual tax obligations.
What are Consolidated Financial Statements?
Consolidated financial statements are documents that reflect the financial position of an economic group. The documents seek to reflect a true and fair view of the company, with the particularity that the consolidated presentation is the annual accounts of the group as if it were a single entity.
Why are consolidated financial statements prepared?
Firstly, they are prepared in order to provide public administrations and public bodies with monitoring and control of the group's operations, in order to prevent tax evasion. The aim is to guarantee a true and fair view of the group as a whole.
Secondly, in the case of multinationals, the aim is to integrate the information at a global level, as this information will be of vital interest to shareholders and stakeholders.
What are the benefits of such accounts?
- True picture of the group
- Facilitates the granting of credit
- Improves the management of the group
- Allows the determination of resources
- Guarantees financial information for investments.
Who is obliged to file them?
It is the parent company that is obliged to file them. A parent company is considered to be a parent company if and only if. Effective control is deemed to exist when:
- The parent company has the majority of voting rights or can dispose of them.
- When it has the power to appoint or dismiss members of the management body.
- When it has appointed the majority of the members of the management body.
Are there any other cases in which they are required to be submitted?
- Sub-groups of companies: one company controls several companies, but is controlled by another group of companies. The parent company of the holding company has the obligation in this case.
- Multi-group companies: companies that are jointly controlled by one or more group companies.
- Associated companies: companies that, without belonging to a group, exercise influence over the management of a company that is not included.