What is the Form 720 form and what is its purpose?
Form 720 is a mandatory informative declaration in Spain for natural and legal persons with assets and rights abroad. Its main objective is to increase tax transparency and prevent fraud by rigorously controlling the assets that taxpayers own outside Spanish territory.
Since its introduction in 2012, this model has been a key tool in the fight against tax evasion. Although it does not entail the payment of taxes, its non-compliance or incorrect presentation can lead to severe penalties.
Who is required to submit Form 720?
They must submit this declaration:
- Natural and legal persons resident in Spain.
- Permanent establishments in the Spanish territory of non-resident entities.
- Entities included in article 35.4 of Law 58/2003.
The duty of information falls on holders, representatives, authorised persons, beneficiaries and any person with powers of disposal or beneficial ownership of the assets. For example, a holder may be the owner of a foreign bank account, a representative could be a financial manager with authorized access, a beneficiary can receive income from foreign life insurance and a person with power of disposition could be a legal representative with authority to operate with assets abroad.
What assets and rights should be included on Form 720?
The form covers three broad categories of financial and real estate assets located abroad:
- Overseas bank accounts
- Includes accounts in banking or credit institutions where the declarant holds ownership, representation, authorization or status of beneficiary.
- Not only current accounts, but also fixed-term deposits, securities accounts and any other account with a monetary balance are considered.
- Securities, rights, insurance and income located outside of Spain
- It includes shares in investment funds, bonds, shares of foreign companies and life insurance contracted with non-resident entities.
- Ownership rights over interests in foreign entities are also included.
- Real estate and rights over real estate abroad (key “B”)
- It includes real estate and any right of usufruct, bare ownership or other real right over real estate outside of Spain.
When is Form 720 required?
The obligation to submit this declaration arises when the total value of the goods in any of the categories exceeds 50,000 euros. In this case, all assets in that group should be reported.
- Bank accounts: The balance at 31 December and the average balance of the last quarter of the year are considered.
- Securities and insurance: The market value at 31 December must be declared.
- Properties: The acquisition value must be reflected.
If the taxpayer has submitted Form 720 in a previous year, they must only do so again if the value of the previously declared assets increases by more than 20,000 euros in any of the categories.
What is the deadline and form of presentation of Form 720?
The Form 720 must be filed between 1 January and 31 March of the year following the relevant financial year.
- The presentation is made exclusively electronically through the electronic headquarters of the Tax Agency.
- It is recommended to make the declaration in advance to avoid errors and possible penalties for delays or inaccuracies in the information provided.
What are the penalties for non-compliance with Form 720?
Penalties for failure to file or for errors in the statement have been the subject of controversy. Initially, the penalties were considered disproportionate by the Court of Justice of the European Union, which led to its review.
Currently, the fines are:
- Fine of 20 euros for each omitted or erroneous data, with a minimum of 300 euros and a maximum of 20,000 euros.
- In cases where an intention to conceal assets is detected, the Tax Agency may impose harsher sanctions, including more rigorous tax inspections.
If the taxpayer detects an error in the information presented, he can rectify the declaration by presenting a complementary or substitute form. However, this should be done before a check or inspection procedure is initiated to avoid additional penalties.
Is it advisable to have tax advice for Form 720?
Given the complexity and tax implications of this declaration, it is highly recommended to have a tax advisor specialized in international taxation. Having the tax advice of the Certus team will ensure compliance with regulations, avoid errors in the presentation and help prevent unnecessary sanctions.
If you own assets overseas, it is critical to assess whether you are required to submit Form 720 by March 31. Fulfilling this obligation will allow you to avoid tax complications and ensure transparency with the Spanish Tax Agency.
