Tax model 720 is a new tax form adopted in Spain on January 30th 2013. The aim is collecting, mainly from the Spanish resident´s (although not only, as it is exposed later on), the data on the assets and rights located in the foreign countries. Adopted as a mean of prevention and combat against the tax fraud, the new regulation will provide the Tax Authorities with the relevant information, on all types of assets and rights necessary for establishing a certain level of control.
In order to obtain sufficient information, referring to assets and rights of Spanish residents located abroad, the form 720 also clarifies the instruments of improving mutual support with other countries. The exchange of information among states necessary for tax payments, so as for collaboration in general, is essential for bringing into life this declaration.
Who is obliged to submit this tax form? (Order 72/2013, art. 2)
The taxpayers who must report their assets and rights held abroad, in accordance with the new regulation are:
- Individuals and legal entities residents in Spain;
- Individuals or legal entity, non-residents in Spain, with permanent establishment in the Spanish territory if they belong one of the following groups: holder, representative, authorized, beneficiary, individual or entity with powers of disposal or real beneficial owner.
What must be declared? (Order 72/2013, art. 3)
As for data that need to be reported to the Spanish Tax Office new obligation includes specific information on assets and rights situated abroad comprising:
- Bank accounts of banks located abroad;
- Stocks, rights, incomes and insurance deposited, managed or gained abroad;
- Real estate and rights on real estate located abroad.
Each of previous points implies an autonomous obligation of declaration, so, for instance, a taxpayer will have to declare bank accounts albeit she/he would not have stocks or real estate abroad.
However, there will be no obligation of submitting tax form for accounts of banks located abroad if neither the final balance (on 31st December), nor the average balance reaches a total of 50.000,00 EUR. The submission of the disclosure in successive years will only be obligatory when this limit has been increased by more than 20,000 EUR in a year. In respect to the obligation to declare stocks, rights, insurance and incomes deposited, managed or gained abroad and also for properties or rights on real estate located abroad similar limits are applied.
Deadline to file the tax form (Order 72/2013, art. 7)
In order to comply with these obligations, the tax form has to be filed during the first quarter of each year, starting from 2014. Exceptionally, the period of presentation of the model, in respect of 2012, is from February 1st to April 30th 2013.
How it must be declared? (Order 72/2013, art. 4 to 6)
The tax declaration form must be registered electronically, via Internet. Namely, each set of information (bank accounts/stocks/real states) that must be reported, constitutes a separate obligation of presentation. However, all the blocks of information will be filed through a single information model (only one tax model 720 and not three models).
What are the penalties? (eighteenth additional provision of General Tax Law 58/2003 of December 17)
Notably, a strict penalty regime has been adopted. If a taxpayer disobeys the regulation a heavy fines will be imposed.
Firstly, in the case of failure to comply with the obligations to provide tax authorities with the information on all three categories (bank accounts of banks located abroad; stocks, rights, revenue and insurance deposited, managed or gained abroad; real estate and rights on real estate located abroad), the minimum penalty will be 30.000,00 EUR.
Secondly, in the case of existence of the obligation to provide the tax authorities with the information referring to just one of the mentioned categories, if the declaration is not presented will be the minimum penalty 10.000,00 EUR.
Thirdly, if a taxpayer has omitted to:
– report a piece of information,
– has submitted incomplete information,
– has submitted inaccurate information or
the penalty for breaching any of the obligation abovementioned will be 5.000,00 EUR, with a minimum of 10.000,00 EUR.
The Order HAP/72/2013 represents one step towards more restrictive tax regulation. Misunderstandings of the Tax Declaration 720 may result in a heavy fine, and therefore errors are strongly undesirable. Moreover, the submission of incomplete or imprecise data entails same penalties.
For the enforcement of this Order the key will be developed and efficient cooperation with foreign states. Information flow between different countries is increased once time more.
In conclusion, this informative declaration that refers mainly to tax residents in Spain, designed to fight a tax fraud, represents a very complex and severe regime, which can result highly compromising for a taxpayer.