What is it?
Modelo 720 is a tax form that requires you to declare all your foreign assets to the Spanish tax authorities (also called ‘Hacienda’) that exceed a value of €50.000. This includes accounts, investments (including cryptocurrencies), properties, securities, life insurances and annuities held at the 31st of December of the previous year. The Modelo 720 should be submitted every year before the 31st of March.
Important to note is that even when your share of assets is lower than €50.000, you will still need to report it if the joint amount exceeds the €50.000. With joint assets, each owner needs to declare the full value and indicate their percentage.
Exception: If you have filed the Modelo 720 last year and the average balance or joint balances on the 31st of December have not increased with €20.000, with respect to the previous declaration, you do not need to file it again.
The Modelo 720 was initially introduced in 2012 to help Spain fight tax evasion. Previously, not declaring your foreign assets with a value exceeding €50.000, could result in a very high fine. However, the European Court of Justice has recently (2022) ruled that the restrictions on the free movement of capital that Modelo 720 imposes are disproportionate and that the fines were awfully high. According to the ruling, Spanish legislation “goes beyond what is necessary” to guarantee effective tax controls and fight against fraud and tax evasion.
While this model now still needs to be filed, the hefty fines have now been removed and debts will expire after 4 years.
Where can I find it?
You can file the Modelo 720 via the website of the tax authorities, however, our advice would be hire an accountant. Since it is very easy to make mistakes, bringing in experts could save you a lot of money. Additionally, an accountant will also be able to align the Modelo 720 with your income tax return. This is important since both forms declare the same information, but in a different way. Hence, it is very critical that these two match.
To conclude, the Modelo 720 is about informing the Spanish tax authorities about your assets abroad, before the 31st of March of every year. Although these assets are not taxed, you can risk a fine if you do not declare them.