The 31st March 2018 is the deadline for residents of Spain to submit their annual Form 720 (‘Modelo 720’) listing their overseas assets is upon us, you must act now.
If you have previously submitted a form, you only need to declare assets if they have been sold or or appreciated in value.
Who needs to declare?
If you were a Spanish resident in 2017 (see tax residency rules) then you need to consider the below stipulations as laid out by the Agencia Tributaria:
If you hold assets in any of the following areas which have a value in excess of €50,000 then you are required under Spanish law to declare them using the Modelo 720, failure to do so or an inaccurate declaration could lead to punitive measures being imposed upon you.
- Bank Accounts held overseas with a cumulative total in excess of €50,000.
- Overseas property in excess of €50,000.
- Investments held outside of Spain in excess of€50,000.
In most cases, assets are valued using the wealth tax rules as at 31st December each year. For assets held within financial institutions (e.g. bank accounts), you also need to declare the average balance over the last three months of the year.
You need to report the value of the assets in Euros, so any investments held in other currencies need to be converted using the official exchange rate as at 31st December of the relevant year.
If you have already submitted Form 720 in the past few years, you only need to report again if:
- The value of an existing asset grew by more than €20,000, or
- You sold an asset/closed an account, or
- You obtained a new asset
Penalties
As a resident of Spain, you are legally obliged to correctly report all your overseas assets on Modelo 720. There are punitive penalties for failing to do so:
- For failing to file Modelo 720 or filing it incorrectly: €5,000 per infraction (minimum fine of €10,000 for each group of assets).
- Voluntary, late submission: €100 per item (minimum €1,500 for each group of assets)
- In addition, the undeclared assets are treated as unrealised capital gains and consequently included in the general base of the income tax return for the earliest year Modelo 720 was established
- An additional penalty of 150% of the unpaid income tax is also levied.
It is of critical importance to declare your income/gains and assets in Spain, whether through Form 720 or on your income and wealth tax returns. This has taken on a new dimension with the new global automatic exchange of information between tax authorities, omissions and inaccuracies will be uncovered by the Spanish tax office easily.
Note where tax evasion exceeds €120,000 in a tax year it becomes a criminal offence in Spain and can result in a one to four years prison sentence.
Challenge to Form 720’s legality
There is an ongoing legal challenge to the 720 as a result of the investigation by the European Commission which focused on the punitive areas of the submission and whether this infringes upon EU law, however it is not clear that this represents sufficient grounds on which to contest potential fines and we therefore advise all clients to submit this form in a timely manner with accurate information.
Need some advice?
If you would like to consult one of our English qualified accountants, please contact us on info@end2end.eu