Navigating Modelo 720: A Comprehensive Guide for Expats in Spain
Are you a tax resident in Spain with financial interests abroad? Understanding Form 720 is crucial for compliance with Spanish tax laws. This comprehensive guide will delve into what Form (Modelo) 720 is, its requirements, and the implications of non-compliance. Whether you’re a seasoned expat or newly relocated to Spain, this information is essential to ensure you’re meeting your fiscal responsibilities.
Alex Radford speaks to Pedro San Nicolás González who is provides in-house advice for Clients around tax matters.
What is Modelo 720?
Modelo 720, or the ‘Declaración Informativa sobre Bienes y Derechos Situados en el Extranjero,’ is an informative declaration of foreign assets. It’s a requirement for individuals and legal entities residing in Spain to report certain assets held outside the country. Contrary to common misconceptions, it is not a tax, so filing it doesn’t incur a direct financial cost. Instead, it serves as a transparency measure for the Spanish Tax Agency.
Who Must File Modelo 720?
The obligation extends to any tax resident in Spain, both individuals and legal entities. Being a tax resident typically means you spend more than 183 days a year in Spain or have your main economic interest here. If you fall under this category, it’s crucial to assess your foreign assets to determine if you need to file Modelo 720.
Types of Assets to Declare:
Modelo 720 categorizes foreign assets into three main groups:
- Bank Accounts: This includes any accounts you hold with financial institutions outside of Spain.
- Investments: This covers a broad range of financial interests, such as stocks, bonds, capital rights, and life or disability insurances.
- Real Estate: If you own property abroad, it needs to be reported under this category.
The filing requirement is triggered if any of these categories exceeds €50,000 in value. It’s important to note that if you only meet the threshold for one category, you’re only obliged to report that category.
Valuation and Reporting Timeline:
The value of these assets is assessed based on their worth as of December 31st each year. The filing period for Modelo 720 is from January 1st to March 31st of the following year.
Annual Filing Requirements:
You’re not required to file Modelo 720 every year unless there’s a significant increase in the value of your assets. Specifically, if the value of any of the three categories increases by more than €20,000 compared to your last declaration, you need to file again.
Penalties for Non-Compliance:
Historically, the penalties for failing to file Modelo 720 were steep, including fines up to 150% of the undeclared asset’s value. However, in 2022, the Court of Justice of the European Union deemed these fines disproportionate. This ruling opens a window for those previously fined to appeal and potentially recover funds. As of now, general penalties of the General Tax Law apply, including €150 for late filing and variable fines for incorrect or missing information, with a minimum of €300 and a maximum of €20,000. These penalties could change, so staying updated with Spanish tax regulations is essential.
Filing Modelo 720 can seem daunting, but it’s a vital part of complying with Spanish tax laws for expats and residents with international financial interests. Understanding the requirements and deadlines helps avoid potential penalties and ensures peace of mind. Should you need assistance or have specific questions, consulting with a tax professional experienced in Spanish tax law is always advisable.
My Lawyer in Spain is dedicated to providing comprehensive legal support and tax advice to ensure your life in Spain is problem free. Pedro is here to help you – contact us today.
Disclaimer: This article is for informational purposes only and does not constitute legal advice. Please consult with a qualified legal professional for personalised guidance on your specific situation.
