Larraín Nesbitt Lawyers is a Marbella-based independent law firm specialized in property conveyancing, taxation, litigation, probate and succession. Expert native English-speaking lawyers and economists blend legal and practical advice providing tailored assistance on your matter. Our range of services cover the greater Marbella area, Sotogrande and Costa del Sol.


The firm focuses advising foreign investors on acquiring residential property in Spain both from a legal and fiscal point of view. Our no-nonsense approach to business coupled with our commitment to clients ensures easy-going transactions. We pride ourselves in putting our clients’ interests at the forefront of everything we do.


Larraín Nesbitt Lawyers, your legal partner in Spain.

Last Article:

Tax form 720 – Modelo 720

Raymundo Larraín Nesbitt, February, 5. 2020

Lawyer Raymundo Larraín gently reminds us of the tax obligation to submit tax form 720 (modelo 720, in Spanish) over the next weeks if you qualify. Last day for submission is the 31st of March 2020.

The following tax article has been summarised to avoid unnecessary tax technicalities. The quoted tax rates are subject to change from one year to the next. Seek professional legal advice on your matter – see disclaimer below.

Copyrighted © 2018, 2019 and 2020. Plagiarism will be criminally prosecuted.

Photo credit: courtesy of Self Bank

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Lawyers
21st of February 2020

 

In 2013 the Spanish Tax Office implemented a new tax obligation whereby all tax residents in Spain, who hold over €50,000 in assets abroad, need to complete this tax return before end of March 2020 deadline.

By 2018, over 5,000 taxpayers had already been (heavily) fined on failing to disclose they held substantial assets abroad. This figure continues to increase year on year. We stress the fines for non-compliance are the steepest we’ve ever seen. In fact, so much so, they have been challenged at Brussels. The infamous modelo 720, despite being the object of heated controversy, remains very much an active tax obligation with which taxpayers must contend with. If you fall within its scope, I strongly advise you to comply or else face the risk of stiff fines.

It should be stated this tax form is only for reporting purposes; you do NOT pay any tax on submitting it. Resident taxpayers already pay income tax on submitting their annual I.R.P.F. tax returns once a year.

You also have Mark Stucklin's pungent article explaining it which - unlike mine - doesn’t pull any punches.

I have structured my article as a FAQ for ease of comprehension.

Brexit and the new wave of British residents in Spain

Unless you have been living under a rock for the previous four years, you will know the UK vowed to leave the EU by the 31/01/2020. As a consequence, thousands of non-registered expats (who were effectively living in Spain under the radar, whether purposely or not) have now stepped forward into the limelight and rushed to apply for Spanish residency over the last year.

Applying for Spanish residency is a self-admission that you are in fact tax resident in Spain; the residency procedure is monitored continuously by the Authorities to ensure you retain your resident status (i.e. so they can turn down renewals when the applicant no longer complies with the residency requirements).

As scores of new residents will be entirely oblivious of their new tax obligations, i.e. submitting tax return 720, it has prompted me to write this short article to shed some light on the matter and act as a gentle reminder on their newly-acquired tax obligations with the taxman.

Who needs to declare?

All Spanish tax residents who own assets overseas on or over €50,000.

E.g. Mr. and Mrs. Smith live all year round in Mijas Costa, Spain. They own two houses in Berwickshire, England, have open bank accounts in the UK and receive UK-based pensions.

Mr. and Mrs. Smith are in fact tax resident in Spain and they both need to submit tax form 720.

Again, and for the avoidance of doubt, if you are non-resident in Spain you do NOT need to submit this tax return; it is only for residents.

Who is considered tax resident in Spain?

The Spanish Tax Office applies - amongst many others - the following broad criteria:

  • You spend more than 183 days within a calendar year in Spanish territory.
  • Your centre of financial interests is located in Spain.
  • Your spouse and/or underage children live in Spain.

 

Reporting categories

There are three reporting categories: bank accounts, investments and immovable property.

Obligation to report

You must report all assets in a particular category if the value of your total assets within it exceeds €50,000.

2020 tax submission period

From the 1st of January until the 31st of March 2020.

Can I file it after the submission period?

Yes, but hefty penalties apply. Ask us.

If you have already filed tax form 720 in the past

You only need to file it again if:

  • The value of an existing asset grew by more than €20,000, or
  • You sold an asset, or
  • You obtained a new asset.

 

Penalties for non-compliance

The disproportionate fines levied are (very) stiff.

  • Failing to file 720 or filing it incorrectly: €5,000 per infraction.
  • Minimum fine of €10,000 for each group of assets.
  • Penalty of 150% on unpaid income tax.

 

The Common Reporting Standard and you

Please take good note that with the advent of the Common Reporting Standard (CRS), signed by over 100 countries to combat tax evasion, as from the 1st of January 2018, the Spanish Tax Office is being spoon-fed fiscal information by your home tax office.

For example, both HM Revenue & Customs and Ireland’s Revenue Commissioners are busy supplying the Spanish Tax Office with detailed information (and vice versa) on all your overseas assets and reported income derived abroad as from the 1st of January 2018.

In plain English, your home country’s tax office will likely have already informed the Spanish Tax Office of the assets you hold abroad. It is in your best interests to be pro-active and come clean before you are served with a legal notice imposing humongous fines on you; as it’s happened already to over 6,000 unsuspecting taxpayers. The tax office likes waiting till the last moment before imposing fines to rake in as much interests as is legally admissible before the statute of limitations kicks in. Fines on non-compliance start at five figures and often are six-figures, or higher.

The last word

We strongly advise you to submit tax form 720 if you are (tax) resident in Spain to avoid steep penalties. If you plan to submit it, please contact us well ahead of the submission deadline (31st of March 2020) as it takes days to prepare and process. If you are unsure if you qualify for it, just give us a buzz and one of our friendly staff will answer your queries to allay your fears.

 

Larraín Nesbitt Lawyers offers the following competitively-priced taxation service:

Tax form 720

 

"No one is too small to make a difference.” Greta Thunberg

Greta Thunberg (2003). Pronounced ‘tOOn-bairyeh.’ Swedish 16-year-old climate change activist. Known for her forward speaking manner which does not hold any punches addressing world leaders. She has successfully led an international campaign to fight climate change, galvanizing the interest of the young (and not so young!) which has garnered much media attention. She is the youngest person to date to hold the prestigious Time Person of the Year 2019, sorry Trump.

If only we had more Greta’s and less dumps, what a wonderful world this would be.

 

Larraín Nesbitt Lawyers, small on fees, big on service.

Larraín Nesbitt Lawyers is a law firm specialized in taxation, conveyancing, inheritance, and litigation. We will be very pleased to discuss your matter with you. You can contact us by e-mail at info@larrainnesbitt.com, by telephone on (+34) 952 19 22 88 or by completing our contact form to book an appointment.

Related tax articles

Tax form 720 – 20th April 2018
Tax form 720 – 21st March 2019
Spanish Tax Office to fine 5,000 taxpayers over tax form 720 – 1st September 2019

Tax form 720 – Modelo 720 – 21st of February 2020

 

Article originally published at Spanish Property Insight: Tax form 720 – Modelo 720

Please note the information provided in this article is of general interest only and is not to be construed or intended as substitute for professional legal advice. This article may be posted freely in websites or other social media so long as the author is duly credited. Plagiarizing, whether in whole or in part, this article without crediting the author may result in criminal prosecution. Voluntas omnia vincit.

2.018, 2.019 and 2.020 © Raymundo Larraín Nesbitt. All Rights Reserved

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Last Blog Entry:

Rentals climb for fifth consecutive year in Spain!

Raymundo Larraín Nesbitt, February, 12. 2020

Article copyrighted © 2020. Plagiarism will be criminally prosecuted

 

By Raymundo Larraín Nesbitt
Lawyer - Abogado
12th of February 2020

Spain has one more year pulverized its own records; for the fifth year in a row rental prices climbed 5.1% YOY. But that’s not all, the price per rented square metre has reached unprecedented levels since 2007! Source: El Mundo daily. Given how rental yields have soared year-on-year across the board over the past five years, this has translated into a 50% increase, which is quite substantial. The average annual rental yield in Spain equates to 5% of a property’s value.

As we published back in October 2019 (8 Tips for Buy-To-Let Success), Buy-To-Let in Spain has proven a very successful investment for savvy investors. Scores of landlords make large amounts every tax quarter. You can realistically expect to rent out nine months a year in Spain as a holiday rental, with huge landlord tax breaks of 70%, or more, on (rental) income tax. This lenient tax relief also extends to non-resident landlords.

The rental money can be used to offset overheads and maintenance expenses, including mortgage repayments. No other investment is giving a 5% yield/year safely.

But that’s not all, it only gets better!

Besides soaring rental yields, you also need to factor in the capital appreciation of property (the increase in value of real estate over time). Properties in Spain have seen their value increase over the previous five years at an average rate of 5% pa. Source: Moody’s

Pro-tip: When you combine both soaring rental yields and capital appreciation, you reach the conclusion that Spanish real estate is giving a safe two-digit return year on year. In plain English, that's over a 10% yield every year safely. This is ideal for retirees who are afraid of sharp stock market fluctuations and seek a save investment in bricks for their pension pot.

At Larraín Nesbitt Lawyers we can represent you buying properties and dealing with their non-resident taxation. We can also put you in touch with other reputed professionals that will assist you to choose and make the most out of your property portfolio, maximizing your ROI.

 

 

"Leave nothing for tomorrow which can be done today." – Abraham Lincoln

Self-taught American lawyer, strategist and politician who would rise to serve as the 16th US President. He resolutely ensured a pro-Union victory, strengthened the federal government, modernized the economy, brought about the emancipation of slaves and preserved the Union. A true statesman that would always put ahead of any consideration the best interests of his people, by tearing down divisive walls and fostering at every opportunity union. Likely the greatest American of all time, towering above the rest.

Larraín Nesbitt Lawyers, small on fees, big on service.

Larraín Nesbitt Lawyers is a law firm specialized in taxation, inheritance, conveyancing, and litigation. We will be very pleased to discuss your matter with you. You can contact us by e-mail at info@larrainnesbitt.com, by telephone on (+34) 952 19 22 88 or by completing our contact form to book an appointment.

Legal services Larraín Nesbitt Lawyers can offer you

 

Rental-related articles

 

Please note the information provided in this blog post is of general interest only and is not to be construed or intended as substitute for professional legal advice. This article may be posted freely in websites or other social media so long as the author is duly credited. Plagiarizing, whether in whole or in part, this article without crediting the author may result in criminal prosecution. VOV.

2.020 © Raymundo Larraín Nesbitt. All Rights Reserved.

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Last Press Entry:

5 Reasons to Invest in Real Estate in Spain

Costa del Home Magazine, January, 21. 2020

Costa del Home Magazine is the single largest property advertising publication on the Costa del Sol packed with properties for sale and rent, real estate news, features and analysis. CHM kindly published our article on 5 Reasons to Invest in Real Estate in Spain in its October 2019 issue.

Full article can be found on page 55. Link to our article: 5 Reasons to Invest in Real Estate in Spain

Original article can be found published in our website: 5 Reasons to Invest in Real Estate in Spain

Larraín Nesbitt Lawyers' :

Conveyancing service: Conveyancing – Buying

Taxation service: Resident and Non-Resident taxation services

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