Form 720: what it is and how to file it
Do you have income, assets or bank accounts abroad? Then it is very likely that you have to file Form 720.
Let’s see exactly what it consists of, how often you have to file it, exceptions and most importantly: all the monetary penalties that not filing it or filing it improperly can entail.
What is Form 720?
Form 720 is an informative declaration on the assets and rights that a resident in Spain has abroad. It is an annual declaration, and it is very important that it is a declaratory model, since unlike other models (such as the quarterly VAT declarations), in this case the 720 does not pay taxes.
That is, it only serves to inform the Spanish tax authorities of the assets and income you have in other countries, but this will not involve any direct tax burden (although you will almost certainly have to pay taxes on income obtained abroad, but not through this model).
Its purpose is to inform the Spanish Tax Agency of all the assets and income you have in other countries, whether they are assets or rights over them, securities, insurance, or bank accounts with money. Basically, it is to record your wealth abroad and the assets that generate income and benefits, as well as to report their value.
What does Form 720 include?
On a general level, this declaration includes all the movable assets (money), shares, financial products or real estate (such as a house) that you have abroad.
More specifically, it includes 3 main groups:
- Bank accounts
- Financial securities
- Real estate
You can see them separated in the following list:
- Accounts you have abroad, as well as the bank in which you have such account.
- Securities or equity or capital holdings abroad.
- If you operate with any type of broker, whether for example to invest in the stock market or to invest in cryptocurrencies, this is most likely to be abroad.
- Shares or participations in the share capital of collective investment institutions.
- Securities representing the transfer to third parties of own capital abroad.
- Life insurance when you are the policyholder or insured, contracted with an institution in a third country.
- Real estate or rights over real estate owned in another country.
- Life annuities or temporary annuities of which you are the beneficiary and which come from abroad.
Assets that you do not have to declare in model 720
- Those owned by companies totally exempt from Corporate Tax.
- When they do not exceed 50.000€ in value.
- Assets registered in their ownership in the accounting.
- Current accounts opened in foreign entities with headquarters in Spain.
Relationship of the 720 model with the Income Tax Return
Note that the 720 model must be aligned with the Income Tax Return, as it is the same information presented in a different way.
In the Income Tax Return you specify the income received during the year. As it is logical, this income has been generated by the goods and assets you own, including those you have abroad and which are included in the 720 model. Therefore, it is very important that the information matches in both.
That is why we recommend you to use Centre Gestor for the filing, so that the information is the same in both models. We advise you on tax matters and file both forms for you, making sure that you comply with all the deadlines and all the tax obligations that apply according to your particular case.
Who must file Form 720?
As a general rule, both individuals and legal entities that are tax residents in Spanish territory (who spend more than 183 days a year in Spain) must file this form.
In addition, the law establishes that permanent establishments, communities of goods and civil societies (as well as other entities provided for in article 35.4 of the General Tax Law) must also file this form.
However, there is an exception. As long as the balances or amount of assets or income for each block and as of December 31 or the average balances of the last quarter do not exceed together €50,000, you will not have to file this form.
This exception works according to the 3 blocks that we have previously seen independently (bank accounts, financial securities and real estate). If in one of the 3 you exceed this €50,000, you will have to file the tax return.
When is it presented?
The filing period is from January 1 to March 31 of the following year of the information.
The return must be sent to the Tax Administration, and can be made online with a digital certificate or electronic ID.
Do you have to submit every year?
No. Imagine that in 2021 you made your 720 tax return. Do you have to repeat it in 2022?
You will only have to do it if the average balance or the joint balances at 31 December of the previous year have increased by 20,000€ with respect to the previous declaration, and per block.
In addition, if you have had a cancellation in one of the 3 blocks, you will also have to resubmit the form.
Penalties for failure to file Form 720
If you are a tax resident in Spain and have assets or income of more than €50,000 abroad, it is essential that you file this form, as the monetary penalties that the Government may impose are very high.
These penalties can be applied if:
- You do not file the model on time
- You do not file the form
- Missing information
- You have not filled in the form correctly
In case of not filing the form, the minimum penalty is 10.000€. (5.000€ for each piece of information or set of information not declared).
If it is an extemporaneous declaration without previous requirement, the penalty will be 100€ for each data or set of data not declared, or for each erroneous data.
But in addition, if the tax authorities discover any undeclared assets abroad, there is an additional financial penalty of 150% of the amount resulting from the regularization of the capital gain not justified in the tax return. This in addition to having to pay the tax on capital gains not disbursed by not declaring, (ranging from 19% to 23%), and an interest for late payment (3.75% per annum).
Implications of the 720 model in other taxes
The 720 model may have implications beyond its own contents, and these implications should be taken into account. The main related taxes are:
Wealth Tax is levied on assets held by a taxpayer both in Spanish territory and in the rest of the world. Regarding the assets located abroad, they are exactly the same as those contained in the form 720.
The assets declared in the 720, therefore, are declared in their entirety in the Wealth Tax, as long as the requirements of obligatory nature in Wealth are fulfilled. As a general rule, if the valuation of the assets exceeds 500,000 euros, it is very likely that it is compulsory to file Wealth Tax.
The Income Tax Return may also be related to the declaration of assets abroad, mainly for 2 reasons:
If the assets contained in the model 720 generate some kind of movement, it must be declared in the IRPF.
Do not forget that in the Income Tax Return, the taxpayer declares for his worldwide income, that is, for the income obtained anywhere in the world.
The D6 model is closely related to the 720 model. If in the 720 Declaration foreign securities are declared for a value equal to or greater than 50,000 euros, they must also be declared in the D6 model.
It must be filed in the event that the amount of the transactions with non-residents declared in form 720 exceeds one million euros. If the amount does not exceed this amount, the taxpayer is exempt from the obligation to file this form, unless the Bank of Spain requests it.
Differences between form D6 and form 720
The model D6 and the model 720 are 2 declarations of assets and/or securities abroad that investors must file at the beginning of the year, but there are some differences between them:
- Form 720 is a declaration of assets and rights abroad. Model D6, on the other hand, is a declaration of investments abroad. This means that in the first one (form 720) you must indicate accounts and deposits, as well as shares, insurance, financial products and income abroad, in addition to real estate.
- Form 720 must only be filed if the total value of the investments abroad exceeds 50,000 euros (or has had an increase of more than 20,000 euros with respect to the previous declaration of form 720). Form D6 must be filed by all investors who hold securities or operate with a broker based abroad.
- The D6 form is filed during the month of January of each year, while the 720 form can be filed until March 31.