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Modelo 720 as at March 2017
Wednesday, 01 March 2017


Modelo 720 penalties under challenge but taxpayer obligations remain

There may be some relief ahead from the threat of Modelo 720 sanctions for taxpayers in Spain.

What has happened?

On 15th February, the European Commission gave the Spanish government a two-month ultimatum to make Modelo 720 penalties fairer. While the Commission accepts that Spain has the right to require taxpayers to declare their overseas assets, it disagrees with the severity with which it punishes late or inaccurate submissions.

Sanctions under Modelo 720 law include, among others, a minimum €10,000 charge on incorrect declarations and an additional 150% penalty on unpaid capital gains. In some cases, taxpayers have faced large fines for just minor errors or omissions in completing the form. With penalties being so disproportionate to those imposed for other defaults (such as late submission of Spanish income and wealth tax returns), the Commission claims it is discriminatory and in conflict with EU freedoms.

The Commission has been arguing with Spain about the fairness of Modelo 720 for the last two years. As no agreement has yet been reached, they have taken this step to force a resolution.


What happens in two months' time?

If there is no satisfactory response from the Hacienda within the deadline, the Commission will bring the case to the Court of Justice of the European Union (CJEU) to further their challenge.

While sources from the Spanish government claim they are willing to defend Modelo 720, they have also hinted they may potentially soften some sanctions, such as capping the fine for errors in completing the form. They also suggested a possible reduction in penalties for failing to declare assets based in EU countries or in states that have signed automatic exchange of information agreements with Spain.

What does this mean for Spanish taxpayers?

Nothing has changed in terms of the obligations to declare correctly and on time. That means Spanish residents with overseas assets totalling over €50,000 still need to submit Modelo 720 or face existing penalties.

While we need to wait and see how the case unfolds, it is highly likely that the authorities will maintain the Modelo 720 system. After all, it is not the process of declaring overseas assets itself that is under question, but the penalties that are imposed. It is possible however, that the Hacienda may revise their approach to reduce the threat of such punishing fines for errors or late submissions.

What you need to do to meet your obligations

If you are tax resident in Spain and own any non-Spanish assets, like UK property, make sure you are ready to meet the upcoming 31st March deadline for your 2016 declarations. If you have submitted a Modelo 720 form before, you only need to declare assets if they have grown by more than €20,000 or you have sold or closed them.

There are three reporting categories - bank accounts, investments and immovable property. If the value of your total assets in any category totals over €50,000, you have to report all overseas assets in that category. 

Generally, you must report assets if you are the owner, a beneficiary, an authorised signatory, or you have the authority to dispose of the asset. This includes assets held by a company, trust or fiduciary. 

You need to report even if your personal share of assets is less than €50,000. With joint assets, each owner needs to declare the full value (not pro-rated) and indicate their percentage of ownership.

In most cases, assets are valued using the wealth tax rules as at 31st December each year.  For assets held within financial institutions (e.g. bank accounts), you also need to declare the average balance over the last three months of the year. As you need to report in Euros, the value of assets held in other currencies should be converted using the official exchange rate as at 31st December of the relevant year. 

If in any doubt, seek guidance to ensure you meet your obligations. This is also a good opportunity to assess whether you are holding your assets in the most tax-efficient vehicles for Spain. If you have investments which were set up with UK taxation in mind, you may be paying more tax in Spain than you need to. Take personalised, professional advice from an adviser with cross-border experience to get the best results.


David Bowern, Partner, Blevins Franks
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Tel: 952 809 212


Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; an individual is advised to seek personalised advice.


To keep in touch with the latest developments in the offshore world, check out the latest news on our website www.blevinsfranks.com


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