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What Is the Modelo 720?
The Modelo 720 is a declaration of overseas assets that all Spanish tax residents are required by law to file if they have assets outside of the country of a value greater than €50,000. This declaration of assets is strictly informative and no tax will be charged upon filing. However, failure to file or filing incorrectly can result in exorbitant fines.
Approved on October 29, 2012, the Modelo 720 is an adaptation of European financial regulations for the prevention of fraud. At the time, tax agencies began to provide tax information for residents of the EU to their respective countries.
An agreement to exchange fiscal information was signed between Spain and the United States and, since January 1, 2018, both the Internal Revenue Service (IRS) and the Agencia Estatal de Administración Tributaria (AEAT) have exchanged information automatically. A similar agreement has been signed between more than 100 countries.
Who Must File the Modelo 720 in 2021?
The Modelo 720 must be filed by all Spanish tax residents, Spanish permanent establishments owned by non-residents and all Spanish entities such as community properties and estates when any of the following categories exceed €50,000 in 2020.
- Accounts (deposits, credit, etc.) for holders, authorized, beneficiary, etc.
- Stocks, bonds, values, financial rights, insurance, shares.
- Real estate and rights over real estate.
If the total sum of any of the above mentioned groups does not exceed €50,00 then you don’t have to declare these overseas assets. For example, if you have €40,000 in a savings account, stocks valued at €30,000 and you also have property valued at €45,000, then as they are in separate categories and each category’s total value does not exceed the €50,000 threshold, you would not be required to file the Modelo 720.
When Do You Have to File the Modelo 720?
The due date for the Modelo 720 is March 31, 2021 reporting on assets as of December 31, 2020. Applications can only be submitted electronically, not in person. Don’t wait until the last minute; this isn’t a form you can fill in the night before the deadline. Make sure to give yourself plenty of time to understand the form itself and the information you need to have in order to file correctly.
When Do You Have to File It Again?
Once you have filed it, you will not have to file the Modelo 720 again unless: the value of any of the three above categories increases by €20,000 or more above the initial value declared; you bought more assets; or, if you sold any of the reported assets.
What Specific Assets Need to Be Reported?
You are required to disclose any joint assets that exceed €50,000 even if your personal share is less than €50,000. For example, if you own 20% of an asset that is valued at €55,000, you must disclose the asset’s full value and your ownership percentage.
Assets under the community property marital regimen must be declared by both spouses even if there is only one formal holder.
Category 1 Bank Accounts
All accounts in financial institutions abroad, including: current accounts, savings accounts, term deposits, credit accounts, etc. must be disclosed if they exceed €50,000. Information on each account should include: the balance of these accounts as of December 31, the average balance for the last quarter of the year, date of opening account(s) and all authorized holders. Any beneficiaries or authorized account holders who have been removed from the accounts within the year must report the balance of the account(s) as of the last date of access.
Category 2 Stock and Investments
All stocks, bonds, values, financial rights and savings in insurance companies, deposited, managed, or obtained abroad must be disclosed if they exceed €50,000. Information on investments should include: date of acquisition, purchase price, value as of December 31, sale price and date of disposition, capitalization and rescue value on December 31.
Category 3 Real Estate
All types of real estate and rights over real estate abroad, which include: ownership of a property, bare ownership (usufructo) rights over real estate, timeshares, part-time property or similar formulas on real estate or other rights over real estate must be disclosed if they exceed €50,000.
Are There Any Penalties for Not Filing the Modelo 720?
Yes, the penalties can be significant. The penalty for not filling can be €5,000 per datum (minimum of €10,000). The penalty for late submissions, filing an incomplete form or filing with inaccurate data is €100 per datum (minimum of €1,500). The penalty for undeclared assets can be up to 150% of the value of the assets.
The penalties are so steep that the European Commission has initiated proceedings against Spain, deeming that the fines are both excessive and that they impede the free movement of persons and capital, which is a one of the fundamental principles of the European Union. However, for the time being, the issue remains unresolved, so it is still required by Spanish law to file the Modelo 720 or face steep fines.
If Spanish is not your first language, you may have some trouble filling out this form and you should consider speaking with an experienced tax adviser that can help you submit the Modelo 720 to avoid these steep penalties.
If you have doubts or questions about your filing obligations, please do not hesitate to contact the professionals at U.S. Tax Consultants. With over 50 years of experience helping US citizens with tax preparation, they will make sure that you and your company comply with all the legally established tax filing requirements.
You can learn more about U.S. Tax Consultants at ustaxconsultants.net.
Sponsored by U.S. Tax Consultants.