Model 720 - Declaration of assets and ownership overseas
Declaration of wealth outside Spain: Form 720
We know that Form 720 for declaring your foreign assets can be complicated and can result in severe penalties if filed incorrectly. At Pellicer&Heredia, a law firm specialising in tax advice and international law, we understand the challenge of filing this informative tax return correctly to avoid penalties.
Below, we have prepared the following informative guide for declaring assets you have outside Spain. It includes a section on frequently asked questions about Form 720 with real cases and specific examples to clarify any doubts you may have.
Declare your international assets without complications
At Pellicer & Heredia, we can analyse your tax situation on an individual basis and advise you on the best course of action to suit your needs.
Who is required to submit Form 720?
If you are a tax resident in Spain, i.e. you have resided there for more than 183 consecutive days during a calendar year, you must inform the Spanish tax authorities of your assets and rights located abroad.
Date and deadline for submitting Form 720
Form 720 must be submitted between 1 January and 31 March of the year following the one to which the information on the form refers. Tax residents in Spain must file an informative declaration of their assets outside the country using Form 720. At Pellicer & Heredia, we can answer any questions you may have regarding this process.
What assets outside Spain must I declare?
Once the details of tax residence in Spain have been clarified, this information form must be submitted by anyone who has at least €50,000 in any of the following three categories of assets covered by this information return:
Accounts held with financial institutions located abroad.
Securities, rights, insurance policies and income deposited, managed or obtained abroad.
Real estate and rights over real estate located abroad.
Do I need to submit a Form 720 for each type of asset?
Although the three reporting obligations constitute different reporting obligations, they are declared using the same form, reporting all assets and rights for which there is a reporting obligation.
Does the restriction apply exclusively to those accounts, properties or rights of which I am the sole owner?
Spanish regulations stipulate that when a resident of Spain is the holder or authorised user of one or more current accounts located abroad, which individually or collectively total €50,000, it is irrelevant whether there are other holders of such accounts or assets: the balance as at 31 December must be reported, without limitation to the percentage of ownership of the declarant.
Penalties for failing to submit Form 720
Penalty for failing to submit Form 720 on time
Penalties ranging from €200 to €20,000, depending on the severity and number of omitted details (Art. 198 LGT).
Penalty for incorrect or incomplete submission
Fixed and proportional penalties of up to 2% of the value of undeclared assets or transactions, with a minimum of €500 (Art. 199 LGT).
Classification as unjustified capital gains
Undeclared assets may be considered unjustified capital gains.
150% tax
Application of a penalty surcharge of 150% on the tax liability resulting from said capital gain.
Significant changes to the regulation of Form 720
In its judgment of 27 January 2022, case C-788/19, the Court of Justice of the European Union (CJEU) ruled on the action for failure to fulfil obligations brought by the European Commission on 23 October 2019. The CJEU has argued that Form 720 is contrary to EU law, that the conditions and penalties set out in the regulations are ‘disproportionate’ and that Spain has failed to fulfil its obligations under the free movement of capital, as they may discourage the acquisition of property abroad.
Form 720 was introduced in 2013 and will now remain in force with significant changes to the limitation periods and amounts of penalties. The changes introduced will mean that the penalties and limitation periods set out in the General Tax Law will apply to this regulation, so that offences under Form 720 will be time-barred after four years, as is customary for tax offences, and penalties may not exceed 50% of the amount defrauded, in accordance with the general regime of the regulation. Fines will be subject to the general regime, but the obligation to report remains. These fines range from 150 to 250 euros.
The Minister of Finance, María Jesús Montero, explained that the CJEU does not question the model, which will remain in force. The plenary session of Congress unanimously approved the new penalty regime for the Declaration of Assets Abroad, Form 720, modified through an amendment in the Senate to eliminate its imprescriptibility and reduce its penalties, following the ruling of the Court of Justice of the European Union (CJEU).
Taxpayers may recover the amount of penalties under this tax model. The Treasury will have to refund the penalties even if they are final and uncontested, by way of the State’s financial liability.
The Tax Agency has already confirmed that there is no obligation to file an informative declaration on the form without the relevant regulatory development on cryptocurrencies. Therefore, there is no need to report cryptocurrencies on Form 720 for 2021.
For further information, please do not hesitate to contact a multidisciplinary professional firm specialising in international taxation. At Pellicer & Heredia, we can analyse your tax situation on an individual basis and advise you on the best course of action to suit your needs.
Form 720 frequently asked questions
In the event that the pension plan is redeemed, must the income obtained be reported?
There is no obligation to provide information on pension plans (or contributions thereto) until the event giving rise to the payment of the pension in the form of a temporary or life annuity occurs.
The definition of pension schemes under Spanish law is as follows:
Rights of persons who are entitled to receive income or capital for retirement, survival, widowhood, orphanhood or disability.
Therefore, and in accordance with this definition, such rights are not included in any of the three categories of assets and rights located abroad that must be reported (accounts/deposits, securities/insurance and real estate, in general).
In summary, in order for a foreign financial product to qualify as a pension plan, for the purposes of its exclusion from Form 720, the requirement must be met that the contingency covered must be exclusively for retirement, survival, widowhood, orphanhood or disability, and contributions may not be available without any of these circumstances occurring.
Is there an obligation to file a tax return when joint ownership of a bank account opened abroad is shared, where the balance as at 31 December exceeds €50,000 but ownership is shared between several people?
There is an obligation to report the bank account when this limit is exceeded (and none of the other exceptions to the reporting obligation apply), regardless of the number of account holders. The total balances shall be reported without apportionment, indicating the percentage share.
The same shall apply to any of the types of assets and rights covered by these three reporting obligations where there are several owners.
Is there an obligation to report stock options?
No.
Is there an obligation to report assets such as works of art, boats, gold bullion (physical), jewellery, and cash not deposited in accounts?
There is no obligation to provide information on these assets as such.
Is there an obligation to report on: loans granted to foreign entities, credits from commercial or service operations, joint accounts or any other type of loan or credit?
There is only an obligation to report the transfer of own capital to third parties if this capital is represented by securities.
If a person owns a property that they have acquired as a result of a donation or inheritance, what is the acquisition value that should be taken into account for the purposes of determining (and, where applicable, declaring) whether they are required to declare it?
In the event that the property was acquired through donation or inheritance, the acquisition value shall be recorded, understood as the actual value of the property at the time of acquisition.
If a person holds an account abroad whose balance is in a currency other than the euro and is required to file a Form 720 information return, what exchange rate should be applied to determine each of the balances to be reported?
You must report the balances corresponding to the current account using the exchange rate in force on 31 December of the financial year to which the reported information corresponds. This same reference shall be used in relation to the valuation of the average balance for the last quarter corresponding to each account.
Should taxes and incidental expenses related to the purchase be included in the acquisition value of a property?
Yes, the acquisition value will include expenses inherent to the purchase and taxes.
When should the value of assets located abroad be calculated in order to apply the €50,000 limit? What must be declared in these cases?
With regard to bank accounts: Account balances as at 31 December and average balances for the last quarter.
With regard to securities: The balances of securities as at 31 December.
With regard to shares or units in Collective Investment Institutions: Net asset values as at 31 December.
With regard to insurance: Surrender values as at 31 December.