Tax form 720

Raymundo LarraĆ­n Nesbitt, April, 20. 2018

The following blog post 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.

Blog post copyrighted © 2018. Plagiarism will be criminally prosecuted.

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Lawyers
20th of April 2018

 

This tax form is only for reporting purposes, you do not actually pay any tax on filing it. I have structured this blog post as a FAQ for ease of comprehension.

Who needs to declare?

Spanish residents who own overseas assets over €50,000.

E.g. Mr and Mrs Smith live in Mijas Costa all year round. They own two houses in England, have open bank accounts in the UK and receive UK-based pensions. They consider themselves non-residents in Spain and only pay taxes in the UK.

Mr and Mrs Smith are in fact tax resident in Spain and need to file each a tax form 720.

Again, and for the avoidance of doubt, if you are non-resident in Spain you do NOT need to file this tax form.

Who is considered tax resident in Spain?

The Spanish Tax Office applies the following criteria:

  • You spend more than 183 days in 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, based on 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 in it exceeds €50,000.

2018 submission period

From the 1st of January until the 2nd of April 2018.

Can I file it after the submission period?

Yes, but penalties may 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 fines levied are 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.

 

Tax form 720 challenged in Brussels

The disproportionate fines have led to it being challenged in Brussels. And rightfully so.

In the meantime, this tax form is enforceable.

If you haven’t been filing it, for whatever reason, but you voluntarily file it before the tax office inspects you, the above fines are vastly reduced (you pay 15 - 20% as opposed to 150%). Which is why we strongly advise you to come clean and file it, even after the deadline.

The Common Reporting Standard

Please take good note that with the advent of the Common Reporting Standard, 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 the HRMC and the (Irish) Revenue Commissioners are supplying the Spanish Tax Office with detailed information (and vice versa) on all your overseas assets and reported income derived abroad as from January 2018.

We strongly advise you to file tax form 720 if you are resident in Spain.

 

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.

 

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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.

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