Thinking of Moving to Spain? Don’t Forget to Fill in Form 720 | Mayo Wynne Baxter
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Thinking of Moving to Spain? Don’t Forget to Fill in Form 720

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Data obtained from the National Statistics Institute in Spain indicates that around 4.6 million foreigners live in Spain, around 1.8 million of which hail from the European Union. Around 306,000 of these persons are UK-born, according to European statistics agency, Eurostat. Numbers have grown since European recovery from the financial crisis, and indeed do not represent the totality of Brits who spend a considerable part of the year in Spain – many own ‘second homes’ without adopting Spanish residency. The idea of retiring in sunny Spain continues to appeal, yet those wishing to change their residence should be aware of their tax duties, which include filling in Form 720 for the Tax Department.

The declaration of Form 720 is a relatively new obligation under Spanish law. Introduced in 2012, it requires Spanish tax residents with overseas assets valued at over €50,000 to declare these assets. The first deadline for payment was April, 2013 (for the 2012 tax year). Those failing to submit the form face hefty fines of €5,000 for each piece of missing or wrong information, with a minimum fine imposed of €10,000. A resident is anybody who spends over 183 days in the country.

The Form is actually rather polemic; after receiving various complaints, particularly from foreign residents who have had to pay large fines, a case was brought to the European Commission in Brussels, who deemed Form 720 “illegal” because it “infringes Community rights”; stating the fines is imposes are “disproportionate” when compared to other sanctions. The EC also noted that the obligations imposed were not subject to any statute of limitations; so that Spanish tax authorities have an unlimited time frame in which to investigate a case – this could also possibly go against EU law. The EC has already opened an infringement procedure against Spain for the Form, and if the Spanish response is not deemed adequate, the Commission will probably bring the case to the European Court of Justice.

Thus far, Form 720 (which is mainly informative in nature) continues to be obligatory in Spain – values in the following categories amounting to more than €50,000 must be declared:

  • Any real estate owned abroad. Those who have a mortgage have the same obligation to declare as those who fully own a home. The same applies to those who co-own a home or who share a mortgage on a home overseas. If the property has a value of over €50,000 and each of the owners is resident in Spain, both parties will have to declare the property in their respective Form 720. They should also declare the type of property it is, the date of purchase and the purchase price. Foreign residents often worry about the extent to which the security of their mortgage can be affected by the declaration – the Form is merely informative in its scope; it does not impose any sort of tax to property per se.
  • Bank accounts.
  • Investments – this includes stocks, bonds, and other values. Any savings in insurance companies should also be declared.

If you have just become resident in Spain or you have been resident for a few years and have not yet declared, it is important to obtain professional advice so that Form 720 can be declared correctly. The fines which you could face if you were inspected are considerable. You may have a penalty imposed if you did not file Form 720 in past years, but the penalty is much smaller than it would be if an inspection were carried out. The risk of losing a significant amount of your wealth is simply too high; it is vital to declare your assets as obliged by the law.

* There is no automatic need to file Form 720 every year – however, you will need to do so again if the value of any existing asset has grown by over €20,000 or if you sold an asset, purchased a new asset or closed an account.

* You should also be aware of your obligation to prepare a wealth tax declaration if your net wealth exceeds €700,000 or if your gross assets exceed €2,000,000 (even if your net assets are lower than €700,000). If you are a non-resident, you will be taxed only on your Spanish net wealth. If you are resident, you will be exempt up to €300,000 of the value of your home.

 

By Gemma Abrahams- Freelance Contributor

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