Obligation to report assets and rights located abroad (Form 720)

Following the global trend to prevent tax evasion, the Spanish Government established in 2012 the obligation of residents in Spain to report assets and rights located abroad (720 form).

Some countries such as France and Italy do also have this kind of reporting obligation. US has also implemented an equivalent form called Foreign Accounts Tax Compliance Act (Fatca).

Despite of the European Commission is investigating if the form accomplishes the European law, the 720 form and its penalties regime are still applicable. Not filling the form could result in high penalties from the Spanish Tax Office.

Let’s imagine that a house worth 150.000 euros is not declared in the form 720 corresponding to year 2015 and this is found out in year 2017.
The value of the assets which has not been fulfilled will be considered a taxable capital gain and integrated into the overall tax base of the oldest non prescribed year (in this case the oldest non prescribed tax year is 2013). That means that the Spanish Tax Office will considered than in the year 2013 you had an undeclared capital gain of 150.000 euros.

In that year the first 6.000 euros of capital gains were taxed at 21% and the rest at 25%.

Capital gain year 2013 = 6.000 x 21% + 18.000 x 25% + 126.000 x 27% = 39.780 €
Interests= 39.780 x 4 years x 4,5% average interest rate = 7.160,40 €
Penalty = 39.780 x 150% = 59.670 €
Penalty for not declaring = 10.000 €
Total to be paid in 2017 = 116.610,40 €

This will only be avoided if the taxpayer can prove that those rights or assets were acquired with income earned in tax years in which the tax payer was not a taxpayer in Spain of the Personal Income Tax.

Also the Spanish Tax Office will apply a system of penalties for cases in which the filling is not submitted on time, or submitted with incomplete, inaccurate or false information, or presented by means other than electronic, computer or telematics.

The obligation to report the assets abroad affects any person or company who is tax resident in Spain and is the owner, title holder, representative, authorized person, beneficiary, or has disposal powers of the assets located out of Spain with a higher value of 50.000,00 Euros.

There will be no reporting obligation for those assets or rights whose value is lower than 50.000 euros considering all assets owned in the same category.

If you have already filled a declaration in a previous year, in the following year the information returns should be filed only if:

– There are new assets or rights.
– The values of assets or rights already reported have increased more than 20.000 euros,
– In certain cases in which ownership in those assets or rights is relinquished.

Please, take into account than the increment can come from the exchange rate. As of December 31st, 2015 official exchange rate is 1 EUR = 0,73395 GBP.

Therefore, you should review your 2.012, 2.013 or 2.014 or all of them submitted forms and check in you are in one of this situations as of December 31st 2.015