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Blog post copyrighted © 2019. Plagiarism will be criminally prosecuted.
By Raymundo Larraín Nesbitt
Lawyer - Abogado
1st of September 2019
Tax form 720. Only this form has been single-handedly responsible for a mass exodus of expatriates, let alone Brexit and the CRS.
The Spanish daily El País reports that over 5,000 taxpayers have been fined as a result of non-compliance with the now infamous tax form 720.
We publish this gentle reminder on who is obliged to submit this tax form. Please note that on submitting it, there is NO tax to pay, it is just for reporting purposes only.
On being tax resident in Spain, you are already taxed on submitting once a year your IRPF (personal income tax) and, if you are affluent, you are also taxed by Patrimonio (Wealth tax) in some regions. In Madrid no one pays for Patrimonio, which goes on to explain the huge concentration of HNWI and UHNWI in the capital. Hopefully, Andalusia will soon follow suit and suppress it as well, becoming Spain’s leading low taxation area.
Who needs to declare?
All Spanish tax residents who own assets overseas over €50,000.
E.g. Mr. and Mrs. Smith live all year round in Mijas Costa, Spain. They own two houses in Berwickshire, England, have open bank accounts in the UK and receive UK-based pensions.
Mr. and Mrs. Smith are in fact tax resident in Spain and they both need to submit tax form 720.
Again, and for the avoidance of doubt, if you are non-resident in Spain you do NOT need to file this tax form; it’s only for residents.
Who is considered tax resident in Spain?
The Spanish Tax Office applies - amongst others - the following broad criteria:
Obligation to report?
You must report all assets in a particular category if the value of your total assets in it exceeds €50,000.
There are three reporting categories: bank accounts, investments and immovable property.
If you have already filed tax form 720 in the past
You only need to file it again if:
Penalties for non-compliance
The disproportionate fines levied are (very) stiff.
The Common Reporting Standard and you
Please take good note that with the advent of the Common Reporting Standard (CRS), signed by over 100 countries to combat tax evasion, as from the 1st of January 2018, the Spanish Tax Office is being spoon-fed fiscal information by your home tax office.
For example, both HM Revenue & Customs and Ireland’s Revenue Commissioners are busy supplying the Spanish Tax Office with detailed information (and vice versa) on all your overseas assets and reported income derived abroad as from the 1st of January 2018.
We strongly advise you to submit tax form 720 if you are resident in Spain to avoid steep penalties.
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Please note the information provided in this blog post is of general interest only and is not to be construed or intended as substitute for professional legal advice. This article may be posted freely in websites or other social media so long as the author is duly credited. Plagiarizing, whether in whole or in part, this article without crediting the author may result in criminal prosecution. VOV.
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