Spanish tax resident individuals are obliged to report (720 Form) the following assets and rights located outside of Spain to the Tax Authorities:
- Accounts in which the individual is the titleholder, or in which he is representative, authorized person or beneficiary, or in which he has disposal powers.
- Securities, rights, insurance and life or temporary annuities.
- Real estate or rights on real estate.
There will be no reporting obligation for those assets or rights which value (considered in aggregate for each group of assets listed above) is lower than Euros 50,000. The deadline for filing the 720 Form is from 1 January to 31 March of the year following that for which the information must be reported.
In subsequent years you will need to re-submit the modelo 720 if any of the accounts are closed or if the value in any of these three categories increases by 20,000 Euro or more.
This is a form which is quite tricky to fill in, especially for foreigners, and the fines are ridiculously high in the case of mistakes, late submissions or forgetting to submit it altogether. Hence it’s worth paying close attention to it and making sure you do it right, especially if it’s the first year you’re submitting it. I highly suggest you approach a reputable tax consultant to help you out. Note that many accountants, gestores and tax consultants don’t provide help on this form, as they have relatively low demand for it compared to the other services they provide. Expect to pay between 400 and 500 Euro per declaration if you hire a tax consultant to fill it in for you. You will still need to provide all the documents and details to the consultant, what he will be able to do is guide you on what data is needed and actually fill in and submit the form for you.
Many expats simply do not declare the modelo 720, and many are not even aware of it. Unfortunately, they are exposing themselves to serious trouble and harsh penalties. We have seen several cases of financial ruin in the past years due to failure to declare this form or declaring it with erroneous data. The penalties are so harsh that a Spanish consultancy company has denounced Spain to the European Court a few years ago. There are some indications that Hacienda has been softening its hand in terms of fines after the EU requested them to do so, but the case is ongoing.
The EU has in fact taken action against Spain and ordered it to modify the modelo 720’s penalties, although they have also deemed it lawful for Spain to request this information about assets located outside its territories. Many consider this to be a law that goes against the freedom of movement of humans and capital within the EU, and thus a breach of human rights. It is expected that the modelo 720 will either be removed or heavily modified in the coming years to comply with the requests made by the EU. In the meantime, however, it is wise to keep on submitting the modelo 720 as usual if you are required to do so.
If you would like to learn more about the modelo 720, refer to the FAQs here. There are many questions and answers and your doubts will probably be answered there. Below I have also listed a few common questions and answers that expats, in particular, have when filling in this form. They are not official Q & As, just cases I’ve heard about and how they’re dealt with (as far as I know).
Question: Do you need to report money invested in crowdlending platforms like Mintos, Twino, Bondora etc?
Hacienda clarifies that you don’t need to do this. You only need to declare such loans if they are denominated by shares. For example, when you give loans on property crowdfunding platforms like Property Moose or Property Partner, you will be assigned shares pertaining to that loan, and in that case, you would have to declare those participations.
Source (Question 37)
Question: Should your spouse fill in the modelo 720 if the assets are in your name?
If you were married with the community of property regime, then both spouses have to declare the assets. If, say, a bank account is in the name of one of the spouses, that spouse will declare a 100% participation, while the other spouse will fill in the same bank account details (including the same total balance, not half of it), but note down a 50% participation.
Question: Should bank accounts with a balance of zero be declared?
Yes, you need to declare all accounts outside of Spain once the sum total is 50,000 euro or higher. Empty accounts will still have to be declared.
Question: Should you declare life assurance accounts held with banks?
Question: Should cryptocurrencies be declared?
Most tax consultants agree that cryptocurrencies should not be declared in the modelo 720 as the geographical location of such assets cannot be easily established. There is no official position from Hacienda on the matter.
Question: A resident in Spain is a partner of a non-resident society (first level) that in turn is a partner of other non-resident societies (second level) What obligations to inform does the resident have with respect to the non-resident organisations and the goods owned by said organisations?
The resident must declare his or her participation in the first non-resident company. The prior must be applied as long as the non-resident companies carry out an economic activity through the corresponding organisation of material resources and staff, that is, that they do not have an instrumental character whose purpose is merely the indirect control of the goods on behalf of the real owner.
Question: Do uo need to declare the bank accounts of a foreign corporation in which I am a 100% shareholder?
Yes, since you would be considered the beneficial owner of the bank accounts, even though they are in the name of your company.
Question: Do you need to declare money I have in virtual bank accounts such as TransferWise or Revolut?
If the virtual account has all the details of a traditional bank account, you should probably declare it with the rest of your bank accounts.
Question: Do you need to declare the balance of your PayPal account?
No, PayPal accounts don’t fit any of the category definitions that apply to the modelo 720 and are thus not included. UPDATE: refer to this comment; if you have significant amounts of money in your PayPal account it might be wise to obtain advice on whether you should include it or not.
Question: How is the value of a foreign company determined, given that it is not quoted on any stock exchange and is hence a private company.
The valuation will be calculated with the rules established in the Spanish Law 19/1991 regarding Wealth Tax. Insofar as it is not a company with representative securities traded on organized markets or other specific features, it is necessary to refer to article 16 on other securities that represent the participation in equity of any type of entity.
“En el caso de que el balance no haya sido auditado o el informe de auditoría no resultase favorable, la valoración se realizará por el mayor valor de los tres siguientes: el valor nominal, el valor teórico resultante del último balance aprobado o el que resulte de capitalizar al tipo del 20 por 100 el promedio de los beneficios de los tres ejercicios sociales cerrados con anterioridad a la fecha del devengo del Impuesto”.
This article indicates that the valuation of this type of participations will be carried out at the theoretical value resulting from the last approved balance, provided that it has been submitted to review by auditors. If this is the case of the company, the valuation must be made in accordance with the last approved and audited balance sheet available. As an aside, note that for wealth tax purposes, you can use either the value of the company as at 31st December of the previous year, or the value of the company as determined by the latest published accounts, even if they were published after the 31/12, as it is deemed that the later accounts would be even more accurate as a valuation method. See this page (in Spanish) where this update is explained.
The theoretical value is obtained by dividing the net equity figure by the number of shares, by performing the following operation:
Theoretical value = Net equity / Number of shares in which the share capital is divided.
However, in case the last approved balance has not been audited, the valuation should be made for the greater value of the following three:
- The nominal value.
- The theoretical value resulting from the last approved balance.
- The result of capitalizing at a rate of 20% the average of the net profits of the three fiscal years closed prior to the date of accrual of the tax.
This is a simplified way of valuing a company, when compared to more complex methods used by investors, but it’s the one we need to use to calculate the value for the modelo 720 form.
Note that this is just a summary of my research on the topic and my discussions with various tax consultants. It should not be taken as tax advice. When in doubt, you should always consult a trusted tax consultant to help you fill out this submission.