*January 31, 2025: deadline to submit the AEAT Model 165.
The AEAT Model 165 is an informative declaration that newly created or recently established companies are required to submit to the Tax Agency to report the investments received through capital increases (including incorporation in some cases) by individual investors during 2024, and must additionally issue individual certificates to their partners or shareholders so that in the 2024 income tax campaign, the investment made in the company appears in the draft income tax return. If they fail to do so, both the company and partners could face potential adjustments and/or penalties.
This procedure allows investors to benefit from tax deductions in their income tax return, according to what is established in the Entrepreneurs Law.
Who is required to submit it?
Entities newly created or recently established that have issued individual certificates to their partners or shareholders are required to submit Model 165. This includes public limited companies, limited liability companies, labor public limited companies, and labor limited liability companies.
Deadline for submitting Model 165
Model 165 must be submitted annually between January 1 and 31, reporting on share or participation subscriptions made in the previous year.
Submission procedure
Submission is done electronically and in this form we must include information about the partners or shareholders, detailing their Tax ID (NIF), full name, amount and date of acquisition of the shares, and percentage of participation in the company.
Individual certificates
In addition to the informative declaration, the company must issue an individual certificate for each partner or shareholder, stating that they meet the necessary requirements to obtain the tax benefit. This certificate will serve as proof in case of inspection or verification.
Regulatory updates
It is important to highlight that regulations related to Model 165 may undergo changes. For example, the Order HFP/1284/2023, of November 28, introduced changes in the registration designs of various forms, including 165. Therefore, it is important to stay updated on the latest changes that may affect how to submit it or the requirements.
Deduction for investment in newly or recently created companies:
Individual investors can deduct 50% of the investment made in newly or recently created companies.
According to what is established in the Law 28/2022, of December 21, promoting the ecosystem of emerging companies, the article 68.1 of Law 35/2006, of November 28 on Personal Income Tax and partial modification of the laws on Corporate Tax, Non-Resident Income Tax, and Wealth Tax (hereinafter, “LIRPF”), taxpayers may deduct for fiscal year 2023, 50% of the amounts paid in incorporation and capital increases, up to a maximum base of 100,000 euros annually, provided the following requirements and conditions are met:
1) That the shares or participations acquired by the taxpayer were acquired through incorporation or capital increase formalized before a Notary, generally within five years following such incorporation, or within seven years following such incorporation in the case of emerging companies referred to in section 1 of article 3 of Law 28/2022, of December 21, promoting the ecosystem of emerging companies;
2) That the investment is made in a PLC, LLC, labor PLC, or labor LLC;
3) That the invested company is not listed on an organized market, whether a regulated market or multilateral trading systems;
4) That it carries out an economic activity with the necessary personal and material means. It cannot have as its activity the management of movable or real estate assets, in any of the tax periods of the entity concluded before the transfer of the participation;
5) That the amount of the entity’s equity cannot exceed 400,000 euros at the beginning of the tax period in which the taxpayer acquires the shares or participations.
6) That the shares or participations acquired must be held for a period longer than three years and less than twelve years.
7) That the investment is not made through a company that carries out the same activity previously conducted under a different ownership;
8) The direct or indirect participation of the taxpayer, together with that held by their spouse or any person related to the taxpayer by consanguinity or affinity up to the second degree, cannot exceed 40% of the company’s share capital or voting rights on any day during the years.
However, this requirement does not apply to founding partners of an emerging company referred to in the Law 28/2022, of December 21, promoting the ecosystem of emerging companies, that is, those that hold the emerging company certificate issued by ENISA.
For informational purposes, the maximum deduction base is 100,000 euros annually and will be formed by the acquisition value of the subscribed shares or participations.
It is important to consider that for cases where the company is part of a group of companies under the meaning of the article 42 of the Commercial Code, regardless of residence and the obligation to prepare consolidated annual accounts, the equity amount will refer to the entire group of entities belonging to said group.
Amounts paid for the subscription of shares or participations will not be part of the deduction base when the taxpayer applies a deduction established by the Autonomous Community under the powers provided by the Law 22/2009, of December 18, regulating the financing system of the Autonomous Communities with ordinary regime and Statutory Cities and modifying certain tax regulations.
Conclusion
Model 165 is an essential tool for investors in newly created companies to access tax deductions. Companies must ensure they meet the established requirements and submit the declaration within the indicated deadline to enable their partners or shareholders to benefit from these tax advantages.
If you have questions about how to submit Model 165, at Metricson we can help you with the process and analyze if both the company and its partners qualify for the deduction. Just contact us by clicking here or writing to contacto@metricson.com.
Article written by:
Lawyer – Tax Specialist and M&A
jose.perezfuster@metricson.com
About Metricson
With offices in Barcelona, Madrid and Valencia, and a significant international presence, Metricson is a pioneering firm in legal services for innovative and technological companies, where you will find experts who can help you comply with your tax obligations, such as submitting Model 165.
If you want to contact us, do not hesitate to write to us at contacto@metricson.com. We look forward to talking with you!