1rst of April is the deadline for the annual informative declaration on assets and rights located abroad (Form model 720)

Form 720

We remind you that Personal Income Tax or Corporate Taxpayers who are owners of assets and rights located abroad at December 31^st may be required to submit the declaration of assets and rights located abroad (model 720) until 1rst of April 2024.

This model must be submitted electronically (Internet), and paper submission is not possible. Those who, for technical reasons, cannot submit form 720 online within the established period, may submit it during the four calendar days following the end of said period.

For those who previously presented Form 720, the presentation will only be mandatory when any of the joint balances of the three different blocks of assets that are required to be reported (bank accounts, shares, or real estate) have experienced an increase of more than 20,000 euros compared to those that determined the presentation of last year’s declaration. In any case, the presentation of the declaration will be mandatory for those assets already declared and with respect to which the taxpayer loses the condition that determined the obligation to declare.

Taxpayers must report on the assets and rights they have abroad, including accounts in financial institutions, real estate, securities, rights, insurance, and income deposited, managed, or obtained outside of Spain. This obligation to declare is excluded when their value does not exceed 50,000 euros for each type of asset or right.

 

What types of assets and rights must be declared?

Real estate and rights over real estate located abroad. Its identification, situation (country, town, street, number), the date of acquisition and the acquisition value will be detailed (it will depend on whether it is full ownership, usufruct, bare ownership, or other cases).

Accounts in financial institutions located abroad. The name of the banking entity, its address, the identification of the accounts, the dates of opening or cancellation, the balance at 31rst December, the average balance of the last quarter, the date on which the condition ceased to be included must be included of owners, representatives, authorized persons, beneficiaries, or person with power of disposition.

Securities, rights, insurance, and income deposited, managed, or obtained abroad.

In the case of securities, the company name of the entity or the third-party transferee must be stated, as well as the address, balance at 31rst December and number, class of shares and value.

Regarding insurance, it is necessary to inform about the name of the insurance company, the address, and the surrender value of the policy at 31rst December.

Regarding temporary or life annuities, information must be provided on the company name of the insurance entity, its address, and the capitalization value at 31rst of December.

In relation to the assets and rights that must be declared, there are various nuances that you must consider, such as those detailed below:

 

• Bank accounts in which there is shared ownership must be declared when there is a balance on December 31 of more than 50,000 euros.
• Shared ownership of real estate must also be declared when the acquisition value exceeds 50,000 euros at 31rst of December.
• Attention: If you presented form 720 last year because you had bank deposits, securities (shares, investment funds, insurance, etc.) or real estate abroad valued for more than 50,000 euros, between January and March of each year, you must re-apply. present said model in any of these two cases:
  • If the value of your assets increases by more than 20,000 euros.
  • Or if you have ceased to be the owner or authorized owner of any of the assets previously declared.

 

What subjects are obligated?

Natural and legal persons residing in Spanish territory, permanent establishments in said territory of non-resident persons or entities and entities in attribution of income (communities of property, civil partnerships, recumbent inheritances…) will be required to present this annual informative declaration, if they are holders or authorized accounts abroad whose joint balance is greater than 50,000 euros.

Likewise, holders of securities, shares, funds, life insurance, real estate or any other assets located or deposited abroad, for an aggregate amount greater than 50,000 euros, are required to declare the information. In addition to the legal owners, and unless an exemption applies that must be carefully analyzed, those known as real owners are required, that is, those who own or control more than 25% of the assets through entities with or without legal personality.

There can be many obligated people, particularly resident foreigners, because it is enough to have a small part (even 1%) of one or more foreign accounts with a balance greater than €50,000 (or even to have nothing and be a simple authorized person) or have a small part of a property with a value greater than said amount.

 

Sanctions regime

Law 5/2022, of 9^th of March, and with effect from March 11, modified the wording of several tax regulations with the status of law (IRPF, IS and LGT Law) in order to eliminate aspects of the regulation of the obligation to provide information on assets and rights located abroad that had been declared contrary to European Union Law by the recent ruling of the Court of Justice of the European Union (CJEU) of January 27, 2022 (case C -788/19). The ruling concluded that the specific sanctioning regime associated with non-compliance with the obligation to declare assets and rights abroad (model 720) is contrary to European Union Law for establishing a disproportionate restriction on the free movement of capital.

Instead of reintroducing its own and differentiated sanctioning regime, the legislator has limited itself to eliminating the wording of the provisions considered by the CJEU to be incompatible with the free movement of capital, which, in practice, only has a purely formal scope.

 

Specifically:

Fixed monetary fines are eliminated for not reporting on time or for reporting incompletely, inaccurately or with false information.

The provisions that classified the value of assets not declared on time as unjustified capital gain or as undeclared income attributable to the oldest tax period among those not prescribed are eliminated.

The proportional financial fine of 150% on the tax amount derived from unjustified capital gains or undeclared income is eliminated.

Since the above has not been replaced by a specific regime, possible breaches of the reporting obligation are subject to the general sanctioning regime provided for failure to submit on time or incorrectly statements that do not cause economic damage to the Public Treasury.

 

It must be remembered that:

The eliminated sanctions consisted of the imposition of a fixed monetary fine of 5,000 euros for each data or set of data, with a minimum of 10,000 euros, or 100 euros for each data or set of data, with a minimum of 1,500 euros, for cases of late submission without prior request.

In addition to this sanction, the regulations established another serious consequence for not complying with the obligation to report and also for doing so after the deadline, and that is that the Treasury may consider that assets abroad are unjustified capital gains and charge for Personal Income tax a quota up to its maximum marginal rate or in the Corporate Tax, on its value plus an additional penalty of 150% on said quota. Moreover even if those goods and rights come from prescribed periods.

You can contact this professional office for any questions or clarifications you may have in this regard.

 

JDA/SFAI