Spain has become a popular destination for foreign investors and entrepreneurs, offering a range of opportunities and tax incentives, such as the Beckham Law. However, one of the key compliance aspects for foreign residents and businesses is the Model 720 Spain (Form 720).
This form is a mandatory declaration that aims to increase transparency about overseas assets held by Spanish residents.
What is the Modelo 720?
The Modelo 720 is a tax form used in Spain to report assets held outside of the country. Specifically, it is required for Spanish tax residents who own assets or bank accounts abroad, with values exceeding specific thresholds. These thresholds are:
- €50.000 for financial accounts (bank accounts, investments, etc.)
- €50.000 for real estate properties
- €50.000 for other assets such as shares, life insurance, and pensions
Once your assets surpass the threshold in one category, you need to file the form and declare all of your assets in that category. However, you don’t need to declare any assets of the other categories if you don’t surpass the threshold for that particular category.
The purpose of the Modelo 720 is to prevent tax evasion and ensure that Spanish tax authorities are aware of the assets of residents, even when they are located outside Spain.
You can find the Modelo 720 on the website of the Spanish Tax Agency.
Who Needs to File the Modelo 720?
Spanish residents who hold assets abroad above the above-mentioned thresholds are required to file the Modelo 720 by March 31st of the year following the one in which the assets are held.
This includes individuals, companies, and entities that are considered tax residents in Spain. The form must detail the location, value and type of each asset.
You’ll have to file the form for the year you surpass one of the thresholds for the first time. After that, you need to file Modelo 720 again on an annual basis if the value changed with €20.000 or more. If the value didn’t change during a particular year, you don’t have to file the form for that year.
What About Foreigners Under the Beckham Law?
The Beckham Law (Ley 35/2006) provides tax benefits to foreign workers and entrepreneurs in Spain, particularly those relocating for work. It grants them the status of Non-Tax Resident for all taxes, including income and wealth taxes.
Therefore, individuals under this regime are not obligated to submit this form.
Key Considerations and Penalties
Failing to file the Modelo 720, or providing false information, can lead to severe penalties.
Spain imposes hefty fines for non-compliance, which can be up to €5,000 per asset or bank account not reported. These penalties highlight the importance of proper compliance with Spanish tax laws.
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