Reporting Assets Outside Spain. Form 720

Tax regulations and links to understand how to fill new Spanish tax form-720.

Form 720: Declaration of Assets Abroad. This form must be filled by all spanish residents owning assets abroad over 50.000 euros. This obligation must be fulfilled during first quarter of each year. Although this first year it is possible to fill until April 30th 2013.

• Link to official text of the regulation: http://www.boe.es/boe/dias/2012/11/24/pdfs/BOE-A-2012-14452.pdf
• Link to Ministry Order 72-HAP-2013 governing the presentation of form-720
• Link to government web-application for filling form 720: https://www.agenciatributaria.gob.es/AEAT.sede/tramitacion/GI34.shtml
• Instructions model 720. Design of model and fields
• Official exchange rates that should be used for assets nominated in non euro currencies: BOE-Bank of Spain resolution

In the model must be declared,

1. accounts abroad in financial institutions,
2. stocks, bonds, values, financial rights, and savings in insurance companies, deposited, managed or obtained abroad
3. all types of Real Estate and rights over Real Estate abroad.

Each of the three blocks of goods, constitutes an obligation of different information to be provided, but the three reporting obligations are articulated through the same form. In this way three reporting obligations would be fulfilled by completing the form 720 informing all goods and rights with respect to the obligation to inform

It is excluded from this obligation to declare when the value thereof does not exceed 50,000 € for each type of assets. The presentation in successive years, after presenting form 720 for the first time will be mandatory when the value declared increases by more than 20.000 €.

The Declaration includes a record for each property situated abroad. For each record indicating its type and subtype:

‘C’:Accounts opened in  banking or credit entities located abroad.

1. Current account.
2. Savings account.
3. Term deposits.
4. Credit accounts.
5. Other accounts.

·”V”: Securities or rights located overseas representative of participation in any type of legal entity, values located overseas representative of the transfer of capital to third parties or provided for its management or administration to any legal instrument, including trusts and “trusts” or mass though lacking legal personality, capable of acting in the course of trade.

1. Values or rights of participation in any type of legal entity. As shares and participations in companies.
2. Representative values of the transfer of capital to third parties. Bonds …
3. Values provided for its management or administration to any legal instrument, including trusts and “trusts” or mass heritage which, though lacking legal personality, capable of acting in the course of trade

· ‘I’: shares and participations in share capital or equity fund of collective investment institutions located abroad. In this case there is no subtype.

· “S”: life insurance (savings not risk) or disability and pension time or annuities, whose insurance companies are located overseas.

1. Insurance life or disability, whose insurance company is located abroad.
2. Temporary or life income generated as a result of the deposit of capital, abroad.

· “B”: ownership and real rights over properties located abroad.

1. Ownership of the property.
2. Actual use or enjoyment and bare ownership rights over real estate.
3. Timeshares, timeshares shifts, part-time property or similar formulas on real estate.
4. Other rights in rem over real estate. In this case you must describe it.

It must file a return if any of those paragraphs (1:C, 2:V, I, S, or 3: B) exceds the figure of 50,000 euros, and only those sections in which the figure is over 50,000 euros.

Information to provide

Information to supply include, open accounts in financial institutions, the balances of these accounts on December 31st, the average balance for the last quarter of the year and the date of opening. All holders, authorized…  at 31 December shall declare the balance at 31 December and average balance. … Authorized holders who have ceased to be during the year, indicate only the balance of the day ceased to be holders, authorized…

In terms of the ownership of the account should be indicated if the declarant is:

1. Holder
2. Representative
3. Authorized
4. Beneficiary
5. Usufructuary
6. Taker
7. With power of disposal
8. Other forms of real property

In the case of Real Estate shall include the date and the value of acquisition, and the date of opening or cancellation of right over Real Estate and, in the case of values, rights, insurance and income deposited or managed abroad, the balance at 31 December of each year. And where appropriate the amount of transfer or sale.

The breach of this obligation has consequences on income tax and corporation tax.

Assets not declared, that cannot be proved its ownership arousing from declared income or assets, will be considered income to be taxed, and a 150% punishment over the value of them.

Penalty for not filling, filling incomplete, filing with non accurate data, will be punished with 100 euros per data with a minimum of 10.000 euros.

Cooperation with other States

On the other hand, Royal Decree approved today partially to Spanish law transposes the Community directive on administrative cooperation in the field of taxation. Thus, reinforcing cooperation in the exchange of information between countries needed for the liquidation of taxes.

Among other issues, is attributed to the tax agency competition to formulate requests for mutual assistance to other States or international organizations. This provides legal security to be achieved greater agility in the process of mutual assistance.

And already a few years ago the tax agency began to provide tax information for citizens of the EU to their respective countries through the model 299 which is filled by Spanish financial institutions, collected and processed by Tax Authority, and information send to respective countries.

The Government aims to deepen in the coming months in this type of agreements for the exchange of information, both to improve the collection of taxes, and to enhance the fight against tax fraud.

Example of filling in data for a current account

Frequently asked questions:

Important note: the obligation to submit a declaration in the case of co-ownership of a good, relies on the value of the asset, not in the value of the percentage owned.

the following questions and answers are taken from the AEAT website:http://www.agenciatributaria.es/AEAT.internet/Inicio_es_ES/La_Agencia_Tributaria/Campanas/Declaraciones_informativas_2012/_INFORMACION/Ayuda/Preguntas_frecuentes__Modelo_720/Obligacion_de_declarar/Obligacion_de_declarar.shtml

1.-Must be filed a Form 720 when ownership of a bank account abroad is shared  and  whose balance at 31 December exceed the €50.000, but whose ownership corresponds to several people?

• There is a reporting obligation on the bank account when this limit is exceeded (if none of the other exceptions to the obligation to declare apply) regardless of the number of the account holders. Must be informed total balances, indicating the percentage of participation.

 2.-Must be filed a Form 720 when sharing ownership of Real Estate located abroad whose acquisition value exceeds the €50,000, at 31 December but whose ownership corresponds to several people?

• Yes, there is a reporting obligation on the property when this limit is exceeded (if none of the other exceptions to the obligation to declare apply) regardless of the number of owners. Must be informed total acquisition value, indicating the percentage of participation.

3.-If a person ceases to be authorized in an account of a financial institution located abroad on June 2012 must file form 720? in that case, which has to be balance and the date to be reported?

• There is obligation to declare if the balance that existed in the account on the date of the revocation of the authorization, if happened by the end of year would had determined obligation to declare by 31 December.
• The content of the Declaration in connection with this account in the event that there is obligation to declare it must inform about:
  • Business name or full name of the Bank or credit as well as his home.
  • The complete identification of the account.
  • The date of the revocation of the authorization.
  • The account balance at the date in which I leave be authorized.

4. Do I need to declare pension schemes contracted abroad?

• There is no obligation of information about pensions plans  (for contributions to them or capital into them) as long as is not fulfilled the requirement that is covered by the scheme and capital is withdrawn.

5-When an individual moved abroad once started the exercise and must file the tax on the income of natural persons by this exercise. Are you required to file also the information model with respect to the property and rights abroad?

• Yes, provided in accordance with the regulation of these three obligations of information is obliged to fill form 720

6.- If a person is the “owner” of an account abroad whose balance at 31/12 is € 40,000 and is also “authorized” in other current account whose balance at 31/12 is €30,000, there is obligation to declare?

Yes, provided that no if no cause of exoneration.

7. Form Field “Tax Number in the country of fiscal residence”. There are no instructions what should be put in this box?

The instructions on how to fill concrete boxes are in the link that is up on the design of the model 720 records:

• It will indicate the tax identification number of the entities declared in the previous field, assigned in the country or territory of residence tax.
• This field will be blank when the “type of asset” take the value “B”.

Example: in the case of an account in the Bank Espirito Santo of Portugal, will be the VAT Number of this entity in Portugal.

8. Do I need to declare asset which have been sold during the financial year, and before 31 December has been reinvested in other assets?

No. When the loss of the status of owner or real owner referred to in the last paragraph of article 42 ter.1 have his origin in the transmission of values and rights, and the amount obtained had been entirely used in the acquisition of other securities or rights which must be declared, You only must declare balances at 31 December.

9. What exchange rate is used to value goods in foreign currency?

• The European Central Bank official exchange rate will be used at December 31, for the balance at 31 December and for converting into euros fourth quarter average balance. BOE-Bank of Spain resolution
• In the case of cancellations of accounts, the official rate on the date of cancellation will be used.
• In the case of real estate, the value of acquisition, as well as in the rest of goods and rights subject to Declaration, must conform to the exchange rate prevailing on the date of December 31 for the year corresponding to the declared information.