What is Modelo 720?
Modelo 720 is an informative tax declaration that Spanish tax residents must file to disclose their foreign assets. Introduced by the Spanish tax authorities (Hacienda), this regulation aims to combat tax fraud and ensure transparency regarding offshore wealth.
Who is Obliged to File Modelo 720?
Any individual who is a tax resident in Spain must file Modelo 720 if they own or control foreign assets in any of the following three categories, provided that their total value exceeds €50,000 per category:
- Bank accounts held abroad.
- Real estate properties outside Spain.
- Investments and financial assets (e.g., stocks, bonds, investment funds, insurance policies, pension plans with early withdrawal options).
A person is considered a tax resident in Spain if they meet one of the following criteria:
- Spend more than 183 days in Spain within a calendar year.
- Have their main economic interests in Spain (e.g., main source of income or business activity).
- Their spouse and dependent children reside in Spain.
Key Deadlines and Filing Process
- First declaration: If you become a tax resident in 2024, you must file Modelo 720 between January 1 and March 31, 2025.
- Subsequent declarations: You do not need to file every year unless:
- The value of assets in any declared category increases by more than €20,000.
- You sell or close an asset that was previously declared.
Does Filing Modelo 720 Mean Paying Taxes?
No. Modelo 720 is not a tax payment form; it is purely an informative declaration. However, the disclosed assets might be relevant for:
- Personal Income Tax (IRPF) – if those assets generate income (e.g., rental income or dividends).
- Wealth Tax (Impuesto sobre el Patrimonio) – depending on the region where you live. Some regions like Madrid, Andalucía, and Valencia (from 2024) have abolished wealth tax, while others still apply it.
- Capital Gains Tax – if you sell a foreign asset, you may need to pay taxes on the gain.
What Happens If You Fail to File?
In the past, penalties for non-compliance were extremely high. However, following a ruling from the European Court of Justice, Spain reduced the fines to standard late-filing penalties (typically between €100 and €200).
Common Questions
1. Do I Need to Declare My Foreign Pension Plan?
- Yes, if it is a private pension with early withdrawal options.
- No, if it is a state pension or a locked retirement plan that cannot be accessed freely.
2. What If I Have a Joint Bank Account?
You must declare the total balance, indicating your percentage of ownership. Even if you only own part of the account, the total balance is considered for the €50,000 threshold.
3. I Have Already Declared My Assets. Do I Need to Do It Again?
Only if:
- The value increased by €20,000 or more.
- The asset was sold, closed, or cancelled.
Tax Planning Advice
If you are moving to Spain, it is essential to plan your taxes in advance. Key strategies include:
- Understanding the double taxation treaty between Spain and your home country.
- Exploring the Beckham Law (if applicable) for tax benefits.
- Deciding when to sell foreign assets before becoming a Spanish resident.
Need Help?
Filing Modelo 720 can be complex, especially if you have multiple assets abroad. Consulting with a tax expert can help ensure compliance while optimizing your tax situation.