Spanish Tax Office to fine 5,000 taxpayers over tax form 720

Raymundo LarraĆ­n Nesbitt, September, 1. 2019

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By Raymundo Larraín Nesbitt
Lawyer - Abogado
1st of September 2019

 

Tax form 720. Only this form has been single-handedly responsible for a mass exodus of expatriates, let alone Brexit and the CRS.

The Spanish daily El País reports that over 5,000 taxpayers have been fined as a result of non-compliance with the now infamous tax form 720.

We publish this gentle reminder on who is obliged to submit this tax form. Please note that on submitting it, there is NO tax to pay, it is just for reporting purposes only.

On being tax resident in Spain, you are already taxed on submitting once a year your IRPF (personal income tax) and, if you are affluent, you are also taxed by Patrimonio (Wealth tax) in some regions. In Madrid no one pays for Patrimonio, which goes on to explain the huge concentration of HNWI and UHNWI in the capital. Hopefully, Andalusia will soon follow suit and suppress it as well, becoming Spain’s leading low taxation area.

Who needs to declare?

All Spanish tax residents who own assets overseas 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 file this tax form; it’s only for residents.

Who is considered tax resident in Spain?

The Spanish Tax Office applies - amongst others - the following broad 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.

 

Obligation to report?

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

Reporting categories

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

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.

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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.

We strongly advise you to submit tax form 720 if you are resident in Spain to avoid steep penalties.

 

Larraín Nesbitt Lawyers offers this tax service: Tax form 720

 

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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) 951 894 675 or by completing our contact form to book an appointment.

 

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