Form 720: what it is and how to file it.

All individuals and legal entities resident in Spanish territory (including the foral territories (territorios forales)) who are holders, beneficiaries, or authorized persons in respect of assets and rights located abroad must file Form 720 (return on assets and rights held abroad).

If you live in Spain (including Navarre, Álava, Bizkaia, and Gipuzkoa) and have assets or rights abroad, such as bank accounts or properties, you must report them to the Spanish tax authorities through Form 720. This applies to both individuals and companies.

Like any tax return or form, its main purpose is to inform the public authorities about assets located outside Spain. More specifically, Form 720 reports on three blocks:

• Securities (such as shares), insurance, and annuities deposited abroad.
• Real estate and rights over real estate located abroad.
• Accounts with banks located abroad

There is a reporting obligation when the €50,000 threshold is exceeded (and none of the other exceptions to the reporting obligation applies), regardless of the number of holders of the same asset. In addition, the total balances must also be reported without proration, indicating the percentage of ownership.

Who is required to file Form 720?

The following types of taxpayers are required to file Form 720 if they fall within any of the three cases listed in the next section:

1. Individuals and legal entities resident in Spain.

2. Permanent establishments in Spain of non-resident individuals/legal entities.

3. Entities referred to in Article 35.4 of the General Tax Law (LGT), such as estates in abeyance (herencias yacentes) and co-ownership arrangements (comunidades de bienes).

Cases that trigger reporting in Form 720

1. Bank accounts: Being the holder, joint holder, representative, authorized person, or beneficiary of accounts with financial institutions located abroad whose average balances for the last quarter or balances at December 31 jointly exceed €50,000.

2. Securities: Being the holder or beneficial owner of securities, rights, insurance, and annuities deposited, managed, or obtained abroad, when they jointly exceed €50,000. Pension plans are exempt.

3. Real estate: Real estate and rights over real estate located abroad, subject to the joint threshold of €50,000.

Filing Form 720 in subsequent years

You will only need to file it in those years in which any of the three types of assets (bank accounts, securities, or real estate) has increased in value by €20,000 relative to the value reported in the Form 720 already filed.

You will also have to file Form 720 again when you sell a property or close a previously reported account.

When is Form 720 filed?

The return on assets held abroad is filed between January 1 and March 31. The information provided always relates to the immediately preceding year.

How is Form 720 filed?

This return can only be filed electronically. To file Form 720, you must have a digital certificate or any other secure form of electronic identification accepted by the Spanish Tax Agency (AEAT).

Exemptions from filing Form 720

As a general rule, Form 720 need not be filed when the value in none of the blocks of the return exceeds €50,000. If €50,000 is exceeded in any of them, whether individually or collectively (for example, in the case of joint ownership of accounts or properties), the filing obligation remains.

Nor is it required, in the case of a legal entity, when these assets are recorded in its accounts, provided that they are duly identified and individualized. This exemption releases the holder (the legal entity), but not the authorized persons, attorneys-in-fact, responsible persons…

Therefore, this exemption releases legal entities from the obligation to file Form 720, provided that the assets are correctly recorded in their accounts.

How do I know whether I must file Form 720 with the tax authorities?

As we have seen above, there is a reporting obligation when the €50,000 threshold is exceeded (and none of the exceptions applies), regardless of the number of holders of the same asset. If you meet this requirement, you must file this form with the tax authorities.

It should also be noted that you will only be required to file Form 720 again when: you close an account or there is an increase in the value of your assets.

What happens if I do not file it?
Failure to file Form 720 carries a series of penalties. However, the case law of the Court of Justice of the European Union (CJEU) must be taken into account. Thus, the CJEU ruled in favor of the European Commission, which had brought an action against Spain over the disproportionate penalty regime attached to Form 720. The grounds for the action were that the penalties were contrary to EU law.

The new penalties may not exceed 50% of the tax evaded. In addition, the offense arising from failure to file Form 720 will become time-barred after 4 years, as is the case with all other tax offenses. This change is highly significant, since before the CJEU case law these debts were not subject to a statute of limitations.

In short, the fixed penalties for failure to file Form 720 are eliminated. In addition, the penalty regime of the General Tax Law will apply. Not only that: the rules on the imputation of unjustified increases and undeclared income will also be eliminated. In summary, failure to file Form 720 will carry fines of between €150 and €250.