“In this world nothing can be said to be certain, except death and taxes”.
Benjamin Franklin, 1789
Even Benjamin Franklin could never have forseen Modelo 720, this unpopular, perplexing and even frightening tax declaration that has been in force in Spain for a year now.
This is not a tax declaration as such because no tax is payable. It is a requirement for all residents of Spain to declare their foreign assets which exceed 50,000 Euros in any of three categories.
Why, you might ask yourself ? Is it meant to target those naughty rich tax evaders who hide their assets in offshore accounts and other complex structures ?
Well, I can’t see how. With a low declaration threshold of 50k Euros, it would seem to be targeted at the tens of thousands of more modestly-endowed residents of Spain who have savings, life insurance or a property abroad, normally in a country which an information-sharing agreement in Spain.
The real tax evaders won’t be scared by this declaration. They with the help of their well-paid tax advisers will find a way to hide their assets in an offshore structure where the Agencia Tributaria will never find them.
Meanwhile, the common law-abiding citizens will make this tax declaration including full details of all their assets, in fear of making even the slightest unintentional error, knowing that this could lead to a fine of thousands of Euros.
Whether Modelo 720 is a clumsy attempt to raise government revenue in tax penalties or a misguided effort to target tax evaders, it is unfortunately here and we have to deal with it.
This blog post is about the general requirements of this declaration.
For further information and specific guidance please visit our website .
Obligation to declare
Spanish residents with foreign assets or income in any of the following categories exceeding 50,000 Euros on 31st December.
- Accounts in any kind of financial institution e.g. banks, building societies.
- a) Investments/ rights of representation in foreign companies or other entities. b) Investments in foreign collective investment institutions (e.g. unit trusts). c) Foreign life/ invalidity insurance; income from foreign annuities.
- Property and rights to property.
Note that the threshold is for the total value of each of the three categories.
Where assets are jointly held (e.g. with a spouse), it is the total value of the asset which is relevant. A separate return must be submitted for each person.
This tax return must be submitted by 31st March following the end of the year in which the taxpayer is obliged to declare.
Frequency of declarations
The Agencia Tributaria guidelines state the following:
After the initial return is presented, a new return must be filed when the total of any category of assets/ income increases by 20,000 Euros or more, either at 31st December or during the last quarter of the year.
Valuation of assets
Property: purchase price;
Investments which are traded on the open market: market value as at 31st December;
Other investments: value on last published balance sheet.
Penalties for non-disclosure
The guidelines mention “minimum” penalties of 30,000 Euros for non-disclosure ! I can’t envisage how such big penalties could be applied, or even if they would be enforceable if challenged under EU law.
Information is, in principle, shared very easily between financial institutions and Tax Offices in both EU and non-EU countries these days; this means that, in theory at least, the figures that you declare can be checked by the Agencia Tributaria.
The Agencia Tributaria FAQ’s imply that even the slightest error, even unintentional (e.g. in a bank account number) will be punished by a minimum fine of 10,000 Euros !
This would appear to be nothing more than scaremongering. But the fact is, we don’t know. To date we have not heard from any prospective clients who have received a fine, so at this point we can only conjecture.
For more information and guidance, please visit our website.