Updated Information after the ruling of the European Court of Justice

Tax Declaration 720 – Must be declared

08 / Mar

As in other years, it is time to file again the Model 720, an informative tax declaration of residents in Spain. This declaration has been included in the law since 2012 and consists of reporting certain assets and rights abroad (outside Spain) that have a total value of more than 50,000 euros. The assets to be declared are, for example, bank accounts, company shares, securities portfolios, life insurance, annuities, or real estate.

The deadline for filing the tax return for 2021 is 31 March 2022.

The obligation to file this return applies to all those who have been tax residents in Spain in the year to which the return refers. The declaration must be made between 1 January and 31 March of the year following the tax year in question. This year, therefore, all those who were Spanish taxpayers, or “tax residents” in 2021, must file a return, if the circumstances are met.

It is not necessary to repeat this declaration every year. It only needs to be made for the first time when there are assets or rights outside Spain in excess of €50,000. Declarations in subsequent years are only mandatory when the value declared in the previous declaration has changed by €20,000 or more.

The following are understood as assets, goods, rights that must be declared:
– Bank accounts of which one is the holder, or of which one is the beneficiary or holds the use.
– Shares, bonds, funds or similar.
– Disability or life insurance taken out with financial institutions abroad.
– Assets owned or held in your name or for which you are the beneficiary or authorised signatory.

Many details must be provided, such as the correct description, date of acquisition and other details, as well as the value at 31 December and the average value over the last three months of the tax period to which the declaration refers.

This obligation to declare the 720 model began in 2012, with disproportionate penalties, contrary to EU law, for any errors or omissions in the information provided. This year, following a ruling by the Court of Justice of the European Union, the aim is to reduce these penalties (from 150% to 50%), and to eliminate the non-applicability of statutes of limitation, so that declarations will now have a 4-year statute of limitation. Although it has not yet been published, everything points to these modifications coming into force before 31 March 2022 (deadline to file the declaration).

There are penalties that can be imposed for:
– Filing the tax return after the deadline:
– Providing incomplete or inaccurate information;
– Failure to file the declaration correctly (Internet, form).

Any missing assets will be considered as undeclared profits and their value will be taxed at around 52-56%. In addition, for each missing item you may face high fines, plus additional fines for missing or inaccurate information.

Ruling European Court of Justice
The news reports seem to say that Form 720 has been declared null and void by the Court of Justice of the European Union, but this is not the case. The ruling does not declare this informative declaration of assets and rights outside Spain null and void. It only cancels certain aspects and above all the excessive sanctioning regime:
– It nullifies the non-applicability of statutes of limitation, i.e. the Administration’s right to demand the declaration is extinguished after 4 years;
– It nullifies the sanctioning regime, considering it excessive and contrary to the right to free movement of capital;

Although the new regulations have yet to be published, Lex Foris advises its clients that they are therefore obliged to file the declaration.

Lucia Guillen Molina