What is Form 165
Its official name is the information return on individual certificates issued to partners or members of newly or recently created entities. The company reports to the Tax Agency the certificates it has issued and to whom, so that the AEAT can cross-check them with the partners' income tax returns.
It is an information return: nothing is paid and no base is declared. Its purpose is to enable the tax authority to verify that the deductions claimed by investors are backed by a real, certified contribution.
Who is required to file it
Newly or recently created entities that have issued individual certificates to their partners or members for contributions giving the right to the deduction for investment in newly or recently created companies (Article 68.2 of the Personal Income Tax Law) are required to file it.
If the company did not issue certificates, there is no obligation. And an important nuance: the deduction is part of personal income tax, so it only affects individual investors; contributions from legal-person partners do not generate a certificate or Form 165.
Filing deadline: January each year
The deadline is the month of January each year, for certificates issued during the previous year. It is filed electronically through the Tax Agency's electronic headquarters.
It is one of the shortest deadlines in the family of annual information returns. If you brought in investors in December, the certificate is issued that same year and the form is due the following January: it is advisable to have the process prepared before the year ends.
Penalties and consequences of not filing it
Not filing it, filing it late or filing it with errors is penalised under Articles 198 and 199 of the General Tax Law: a fine of €20 for each omitted or incorrect item, with a minimum of €300 and a maximum of €20,000. If it is filed late without a prior request from the tax authority, the penalty is usually lower.
The most costly practical effect is borne by the partner: without the form, the AEAT has no record of the certificate and may reject the deduction the investor claimed on their income tax return, or request additional documentation. The refund is delayed and the process becomes more complicated.
How it fits with the deduction for investment in new companies
An individual who contributes money to a newly or recently created company can deduct part of the amount invested from their personal income tax, subject to annual limits and investment holding requirements. The company issues the individual certificate that proves the contribution, and Form 165 is the summary that the tax authority cross-checks against the partner's income tax return.
For the company, filing it on time is simple and inexpensive. Omitting it, however, puts at risk the tax benefit of the person who trusted their money to the company: a bad signal for the next investment round.
