If you are a Spanish tax resident with bank accounts, investments, pensions or property abroad, you may need to report them through Modelo 720. This guide explains who must file, which assets are covered and what happens if you fail to comply.
If you have moved to Spain, you may still hold bank accounts, investments, pensions or property abroad. As a Spanish tax resident, you could be required to report some of these assets under the Modelo 720 declaration.
Understanding whether the rules apply to your situation will help you avoid unnecessary complications and stay compliant with your reporting obligations.
What is Modelo 720?
Modelo 720 (Form 720) is mandatory information return in Spain used to report certain assets and rights held outside Spain. Submitted in addition to income and wealth tax returns, the general rule is that you must declare foreign assets when the total within set categories exceeds €50,000. The form is completed online.
While no tax is paid through the Modelo 720 itself, the Spanish tax authorities use the information as part of their wider review of taxpayers’ affairs.
The deadline is 31 March each year, covering the assets you held as at 31 December the previous year. Penalties are imposed for late or incorrect filing.
Who needs to submit a Modelo 720?
The reporting obligation applies to Spanish tax residents who own, control, benefit from, or have signing authority over certain overseas assets. This can include:
- Asset owners
- Beneficiaries
- Authorised signatories
- Individuals holding powers of attorney
- Certain assets held through trusts or similar arrangements
You are considered a resident in Spain for tax purposes if any of these criteria apply to you:
- You spend 183+ days in Spain in a calendar year, or
- Your ‘centre of economic interests’ is in Spain, or
- Your ‘centre of vital interests’ is in Spain (i.e. your spouse and/or dependent children live here).
There is no split year treatment, you are either resident or not resident for the whole tax year.
Which overseas assets must be reported?
Modelo 720 covers three main categories of assets:
- Bank accounts – current, savings, deposit and any other accounts held with foreign financial institutions.
- Investments and financial assets – such as shares, bonds, investment funds, certain life assurance policies, and certain annuities and income-generating arrangements.
- Property – all types of immoveable property, whether residential, rental, land or other real estate, and certain rights over property.
If the total value of assets in any one of the three categories exceeds €50,000, all assets within that category must be reported.
Importantly, the threshold applies separately to each category. For example:
- €60,000 in overseas bank accounts would trigger reporting for the bank account category.
- €40,000 in bank accounts and €40,000 in investments would not normally trigger reporting, as neither category exceeds €50,000.
- €55,000 in investments would require reporting of the investment category.
With joint assets, each owner needs to declare the full value (even if your share is less than €50,000) and indicate your percentage of ownership.
What about UK and other overseas pensions?
A Spanish 2015 ruling indicates that certain UK pensions, including some SIPPs and QROPS arrangements, may be reportable where the member has a contractual right to access or surrender the underlying capital in a manner comparable to a life assurance policy.
As treatment can vary according to the specific pension and its features, specialist advice should always be sought before assuming a pension does or does not need to be declared.
The exact information depends on the type of asset involved, but may include:
1) Bank accounts
- Financial institution details
- Account numbers
- Opening date
- Balance as at 31 December
- Average balance during the final quarter of the year
2) Investments
- Provider details
- Number of shares or units
- Acquisition date
- Value as at 31 December
- If closed during the year, the date of closure and value at that date
3) Property
- Property full address
- Acquisition date
- Acquisition value
- Ownership percentage
- Value at 31st December where there are usufruct, ‘nuda propiedad’ or other property rights
Do you need to submit the declaration every year?
Not necessarily. After filing Modelo 720 for the first time, a further declaration is generally only required if:
- The value of a previously reported asset category increases by more than €20,000.
- You dispose of or close an asset previously listed.
- You acquire assets worth more than €50,000 in a category not previously been reported.
If none of these circumstances apply, a new declaration may not be required. However, it is still advisable to review your position each year. As assets must be reported in euros, significant movements in the pound-euro exchange rate could increase the reported value of your UK-based assets, even if their value in sterling remains unchanged.
What happens if you don’t file?
It is important not to overlook this reporting requirement simply because no tax is payable through the declaration itself. Financial penalties apply for late, incomplete or incorrect filing.
The fixed penalty is €20 for each item of information omitted or reported incorrectly, with a minimum fine of €300 and a maximum of €20,000.
The Spanish tax authorities receive information annually on residents’ overseas assets through international information-sharing agreements, making accurate reporting essential.
The key message
Many expatriates living in Spain hold bank accounts, investments, pensions or property in other countries. If you are a Spanish tax resident, make sure these assets and any related income are reported correctly on your tax returns and through Modelo 720 as required.
Reviewing your overseas assets early can help you understand your reporting obligations and avoid last-minute complications and stress.
The more separate assets you hold, the more time-consuming the reporting process can become. Consolidating investments could reduce this compliance burden considerably, while providing opportunities for more tax-efficient planning in Spain.
For guidance on submitting Modelo 720, speak to your tax accountant. If you would like advice on structuring your assets to make the most of the tax rules available in Spain, a Blevins Franks adviser can review your arrangements and identify opportunities to improve your tax position and simplify your affairs, for yourself and your heir in future.
Talk to Blevins Franks for effective tax planning solutions in Spain.
