The 31st of March 2021 is the deadline for filing the annual information return on assets and rights located abroad (Form 720), corresponding to the 2020 financial year.
Individuals and legal entities resident in Spanish territory, permanent establishments in Spanish territory of non-resident individuals or entities and the entities referred to in Article 35.4 of the General Tax Law, must submit Form 720 to the Tax Administration when the balance or value at 31 December of any of the following blocks of information exceeds 50,000€:
a) Information on accounts located abroad opened in entities engaged in banking or credit transactions of which they are the holders or beneficiaries or in which they appear as authorised or in some other way hold power of disposal.
b) Information on securities or rights representing participation in the capital or equity of any type of legal entity, on securities representing the transfer of equity capital to third parties, on securities contributed for management or administration to any legal instrument, including trusts and trusts or assets, which, although lacking legal personality, may act in the course of business, and on shares and holdings in the share capital or equity fund of collective investment institutions, of which they are holders and which are deposited or located abroad. As well as the life or disability insurance policies of which they are policyholders and the life or temporary annuities of which they are beneficiaries because of the delivery of capital in money, movable or immovable property, contracted with entities established abroad.
c) Information on immovable property and rights over immovable property owned by them and located abroad.
These obligations extend to those who are considered to be the real owners in accordance with article 4.2 of Law 10/2010 on the prevention of money laundering and the financing of terrorism.
There is no obligation to report on any of the categories of assets set out in sections, a), b) or c), when the joint value per block at 31 December (or average balances of the last quarter, in the case of bank accounts) does not exceed 50,000€.
It should be borne in mind that tax legislation establishes a very severe regime of infringements and penalties, with financial fines, related to non-compliance with these reporting obligations. Failure to file Form 720 entails the imposition of penalties and tax consequences for personal income tax purposes.
For example, in the case of non-compliance with the obligation to report on accounts in credit institutions located abroad, the penalty will be 5,000 euros for each piece of information or set of information referring to the same account that should have been included in the return, with a minimum of 10,000 euros. However, the penalty will be 100 euros for each piece of information or set of data referring to the same account, with a minimum of 1,500 euros, when the return has been filed after the deadline without prior request from the Tax Administration.
Have you filed the Form 720 in any of the previous years?
If the return has been filed in any of the previous years, filing the return in subsequent years will only be compulsory when any of the joint balances at 31 December, or the average balance in the case of bank accounts, has increased by more than €20,000 with respect to the last return filed for any of the categories a, b or c.
There is also an obligation to re-file the return if any of the blocks of information had never been declared and in the financial year 2019 the balances or values at 31 December, or average balances of the fourth quarter in the case of bank accounts, exceed 50,000€.
Are companies and other entities obliged to report the assets and rights they hold abroad?
The obligation to report such assets located abroad also affects companies and other entities resident in Spanish territory. However, they are exempted from filing the return when they have recorded the assets and rights held abroad in their accounts. In any case, accounting must be understood in a broad sense, and it is valid for them to be recorded in ancillary accounting documents if they are consistent with the annual accounts and give consistency to them. In any case, it must be possible extract information on the existence of the asset or right abroad.
We would like to take this opportunity to remind you that, if you have to file form 720 and you need advice on how to do so, please do not hesitate to contact us.