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Reporting Overseas Assets : The Modelo 720

The Modelo 720 was introduced in November 2012. The intention is that all fiscal residents of Spain report details of assets held overseas if they exceed certain values. No tax will be levied on these assets, BUT the records will be used and compared against income tax returns, to ensure that income generated from these assets is being reported for example rental income, which is typically not reported. The return is submitted each year by the 31st March in respect of assets held at the 31st December of the previous year. Please note that with regards to bank accounts, the final quarter information from your bank will also be taken into account. So it could be that 4th quarter statement exceeds 50.000 euros, the 31st of December statement is under that amount. Obligation to report still exists. See this FAQs from the Agencia Tributaria website.

The assets are divided into three groups, Accounts, Investments and Property. If you have assets which exceed €50,000 in any of these groups, then you need to report them. If the assets are held in joint names, then each individual needs to submit a report and declare the total value and their share, e.g 50%. If the assets are in foreign currency, then they are converted at the rate of exchange on the 31st December. Note you only have to report the Groups in which your assets exceed the reporting limit. With regard to property the value is the purchase of the property, not the current value.

To add, it´s the value of the asset or total value of several assets in same ´category´ that is the determining factor for yes/no declaring, irrespective of joint or single ownership. So a property of 52.000 euros would have to be declared, even if jointly owned by spouses and both their shares would only amount to 26.000. In the same way, 2 properties that on their own would not exceed 50.000 euros value, but added will, need to be declared.

In subsequent years you are required to report the following changes : your assets have increased in value by €20,000 or more in any group previously declared. Note, this includes increases as a result in the change of exchange rate.

Finally, the fines for non reporting are quite draconian, although there have been no reports of actual fines being levied.

Non-presentation/ false information – fine of €5,000 for every piece of information with a minimum fine of €10,000

Late presentation or incorrect information – fine of €100 for each piece of information with a minimum fine of €1,500

UPDATE June 2017.

Just to add that the EU is corresponding with Spain with regard to the fines, although it’s not clear what the outcome will be. Having said that it been ongoing since 2014, as these types of issues with the EU seem to take an awfully long time to resolve. I have seen reports of people being fined the €1,500 for late reporting, but be aware the fine notification can be up to a year after submission.

This was the latest press release from the EU. It gave Spain 2 months to respond, but they didn’t.

“The European Commission sent a reasoned opinion to Spain today requesting to change its rules on assets held in other EU or the European Economic Area (EEA) Member States (“Modelo 720″). While the Commission takes the view that Spain has the right to require taxpayers to provide its authorities with information on certain assets held abroad, the fines charged for failure to comply are disproportionate. As fines are much higher than penalties applied in a purely national situation, the rules may deter businesses and private individuals from investing or moving across borders in the single market. Such provisions are consequently discriminatory and in conflict with the fundamental freedoms in the EU. In the absence of a satisfactory response within two months, the Commission may refer the Spanish authorities to the Court of Justice of the EU.”

Update June 2019:

The European Commission has decided to take Spain before the Court of Justice of the European Union (CJEU) for the disproportionate sanctions that are established in case of not complying with the obligation to inform of the assets and rights that are held abroad, say, in case of not correctly completing the Model 720.

The decision of the European Commission to take the Model 720 before the Court of Justice of the European Union should suppose the suspension of all sanctioning procedures that are currently underway. “To force this decision, it is convenient that taxpayers who are in this situation ask the Treasury to agree on the suspension of the deadline to resolve,” according to a legal professional.

Rulings from the Court of Justice of the European Union will usually take effect retro-actively, so in this case that would be going to back to 2012 when the obligation to declare overseas assets on Modelo 720 came into effect. It is expected that a ruling that confirms that the fines are in fact discriminiatory and in conflict with the fundamental freedoms in the EU, will open “the path of patrimonial responsibility of the legislative State” (so the possibility to file a claim against the Spanish State) for having approved a regulation that has been declared contrary to the European Union Law. For those who have already been subjected to fines and paid them and also for those who have contested, but lost their appeal.

Link to the form to file online. Scroll down to ´formularios´.

LINK

Video with explanation on how to fill out the form and obtain ´borrador´/draft.

HERE

Extensive list with FAQs re Modelo 720 on the Agencia Tributaria website

HERE

Frequency of declaration

HERE

Update 27.7.2018 Jurisprudence about a case where ´sleeping´ accounts, with currently 0 euros, were not reported, argued by the Spanish Tax Office that they should have been. Result: if the total of your accounts, where you are either holder of the account, or have authorised access to, exceeds the limits as outlined above, you need to report ALL your accounts, sleeping or not. If they do not exceed the limits, then nothing to do with the Tax Office.

Please note: The information provided is based upon our understanding of current legislation. It is not legal advice but is provided freely to enable you to be properly informed. We recommend that if you are considering taking action, you should seek professional advice.

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