As every year in March, it is time to file the Form 720. The declaration of assets abroad through which residents in Spain (both individuals and legal entities) must declare their assets abroad.
It is worth highlighting the very harsh penalty regime of this tax and the issues related to the so-called imprescriptibility of the debt.
Broadly speaking, the three groups of assets to be declared are:
- Accounts located abroad opened with institutions engaged in banking and credit transactions
- Securities, assets, securities or rights representing the share capital, own funds or equity of all types of entities, or the transfer to third parties of own capital, of which they are holders and which are deposited or located abroad. This includes, for example, life or disability insurance for which they are policyholders.
- Immovable property and rights thereon situated abroad. This includes timeshare and similar contracts.
What is the Form 720 Foreign Assets Declaration?
Form 720, or declaration of assets abroad, is an informative declaration that declares the assets, goods and rights that the taxpayer has abroad. As it is informative, this declaration never entails the payment of any tax liability, but failure to file it entails penalties.
The penalties imposed by the Inland Revenue for failure to file or for late filing of Form 720 can reach very high amounts. From €1,500 to €10,000, not to mention the penalties provided for in IRPF for some cases, which can reach 150% of the amount not declared.
Who must file the Form 720?
As a general rule, individuals and legal entities with assets abroad valued at more than €50,000 must file Form 720.
Individuals and legal entities resident in Spanish territory, when they are in any of the following situations, will be obliged to file this form:
- Who are holders, representatives, beneficiaries or have powers of disposal of accounts in financial institutions located abroad. Such as, for example, persons or legal entities with a direct or indirect relationship with current or non-current accounts in banks located outside Spanish territory.
- When they hold securities or rights representing participation in any type of legal entity, securities representing the transfer to third parties of their own capital or securities contributed for management or administration to any legal instrument. This includes trusts and trusts or bodies of property which, although lacking legal personality, may act in the course of trade. This affects taxpayers who hold securities or shares in entities located outside Spanish territory, mainly foreign brokers, shares…
- If they are holders of shares and units in the share capital or equity fund of collective investment undertakings located abroad.
- When they are policyholders on 31st December of each year of life or disability insurance when the insurance company is located abroad. When they are beneficiaries on 31st December of each year of temporary or life annuities as a consequence of the delivery of a capital sum in money, of rights of economic content or of movable or immovable property, to entities located abroad.
- If they hold or are deemed to hold title to immovable property and rights to immovable property situated abroad.
There are of course some exceptions to the obligation to declare which must be reviewed on a case-by-case basis but the harsh penalty regime leaves no room for error so we strongly recommend that, if you have not already done so, you contact us if you believe you are obliged to file.