The infamous Modelo 720 (tax form) is Spain’s worldwide asset reporting requirement for all Spanish residents with assets worth €50,000 or more held abroad, which has a disproportionate impact of foreigners living in Spain. With massive fines for failing to report, or even making innocent mistakes in the declaration, all foreigners living in Spain with assets abroad need to take the Modelo 720 tax form very seriously.
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By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Abogados
8th of January 2022
In 2013 the Spanish Tax Office implemented a new tax obligation whereby all tax residents in Spain, who hold over €50,000 in assets abroad, need to complete this tax return before end of March 2022 deadline.
By 2018, over 5,000 taxpayers had already been (heavily) fined on failing to disclose they held substantial assets abroad. This figure continues to increase year on year. We stress the fines for non-compliance are the steepest we’ve ever seen. In fact, so much so, they have been challenged at Brussels. The infamous modelo 720, despite being the object of heated controversy, remains very much an active tax obligation with which taxpayers must contend with. If you fall within its scope, I strongly advise you to comply or else face the risk of stiff fines.
It should be stated this tax form is only for reporting purposes; you do NOT pay any tax on submitting it. Resident taxpayers already pay income tax on submitting their annual I.R.P.F. tax returns once a year.
I have structured my article as a FAQ for ease of comprehension.
Who needs to declare?
All Spanish tax residents who own assets overseas on or over €50,000.
Again, and for the avoidance of doubt, if you are non-resident in Spain you do NOT need to submit this tax return; it is only for residents.
Who is considered tax resident in Spain?
The Spanish Tax Office applies – amongst many others – the following broad criteria:
- You spend more than 183 days within a calendar year in Spanish territory.
- Your centre of financial interests is located in Spain.
- Your spouse and/or underage children live in Spain.
There are three reporting categories: bank accounts, investments and immovable property.
Obligation to report
You must report all assets in a particular category if the value of your total assets within it exceeds €50,000.
2021 tax submission period
From the 1st of January until the 31st of March 2022.
Can I file it after the submission period?
Yes, but hefty penalties apply. Ask us.
If you have already filed tax form 720 in the past
You only need to file it again if:
- The value of an existing asset grew by more than €20,000, or
- You sold an asset, or
- You obtained a new asset.
Penalties for non-compliance
The disproportionate fines levied are (very) stiff.
- Failing to file 720 or filing it incorrectly: €5,000 per infraction.
- Minimum fine of €10,000 for each group of assets.
- Penalty of 150% on unpaid income tax.
The Common Reporting Standard and you
Please take good note that with the advent of the Common Reporting Standard (CRS), signed by over 100 countries to combat tax evasion, as from the 1st of January 2018, the Spanish Tax Office is being spoon-fed fiscal information by your home tax office.
For example, both HM Revenue & Customs and Ireland’s Revenue Commissioners are busy supplying the Spanish Tax Office with detailed information (and vice versa) on all your overseas assets and reported income derived abroad as from the 1st of January 2018.
In plain English, your home country’s tax office will likely have already informed the Spanish Tax Office of the assets you hold abroad. It is in your best interests to be pro-active and come clean before you are served with a legal notice imposing humongous fines on you; as it’s happened already to over 6,000 unsuspecting taxpayers. The tax office likes waiting till the last moment before imposing fines to rake in as much interest as is legally admissible before the statute of limitations kicks in. Fines on non-compliance start at five figures and often are six-figures, or higher.
Brexit and obtaining Spanish residency
Scores of UK nationals applied for a Spanish residency permit in the run up to Brexit. Unbeknownst to them, many will be now regarded as tax residents in Spain. Any UK national who is tax resident, and holds over 50,000 euros in assets abroad, must file tax form 720.
If you want peace of mind, you should sort out your tax affairs and submit this tax return to avoid humongous fines.
The last word
We strongly advise you to submit tax form 720 if you are (tax) resident in Spain to avoid steep penalties. If you plan to submit it, please contact us well ahead of the submission deadline (31st of March 2022) as it takes over a week to prepare and process. If you are unsure if you qualify for it, just give us a buzz and one of our friendly staff will answer your queries to allay your fears.
Larraín Nesbitt Lawyer’s taxation service:
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Related tax articles
- Tax form 720 – 20th April 2018
- Tax form 720 – 21st March 2019
- Spanish Tax Office to fine 5,000 taxpayers over tax form 720 – 1st September 2019
- Tax form 720 – Modelo 720 – 21st of February 2020
- Modelo 720 – Tax form 720 – 8th of January 2021
Article also published at Larraín Nesbitt Abogados: Modelo 720 – Tax form 720
Please note the information provided in this article is of general interest only and is not to be construed or intended as substitute for professional legal advice. This article may be posted freely in websites or other social media so long as the author is duly credited. Plagiarizing, whether in whole or in part, this article without crediting the author may result in criminal prosecution. VOV.
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