Declaring Foreign Assets in Spain
For expats residing in Spain, understanding tax obligations related to foreign assets is essential. The Modelo 720 is an informative tax declaration required by the Spanish Tax Agency (Agencia Tributaria) to report overseas assets. Below, we explain what this model entails, who must file it, and how to declare rental income from foreign properties.
What is the Modelo 720?
The Modelo 720 is an annual mandatory tax declaration for individuals and entities residing in Spain who hold assets abroad. Its primary goal is to combat tax fraud and money laundering by providing the Spanish authorities with detailed information on foreign assets.
Who Must File the Modelo 720?
- Expats and residents in Spain must file the Modelo 720 if, by December 31 of the corresponding year, they own, are authorized to manage, or benefit from any of the following:
- Bank accounts in foreign financial institutions exceeding €50,000 in total.
- Securities, rights, insurance, or annuities held abroad with a combined value over €50,000.
- Real estate properties or property rights located outside Spain worth more than €50,000.
Once this declaration is submitted, it only needs to be updated if the value of reported assets increases by more than €20,000 in subsequent years. However, it should also include that an update is needed if there are changes in ownership (e.g., if the asset is sold or transferred).
Deadlines and Submission Process
The Modelo 720 must be submitted electronically through the Spanish Tax Agency’s website. Paper submissions are not allowed, making electronic filing mandatory. The annual deadline is from January 1 to March 31 of the following year. For example, foreign assets owned in 2024 must be declared by March 31, 2025.
Penalties for Non-Compliance
Under the previous penalty regime, the fines for late or incorrect submissions were extremely high. However, following the ECJ ruling, Spain introduced a new, more proportionate system:
- Late submission or failure to file may result in penalties based on the general Spanish tax law, typically ranging from €150 to €250 for minor infractions.
- More severe infractions (e.g., deliberate non-disclosure) can still lead to higher penalties, but they are no longer as excessive as before.
- The Tax Agency retains discretion in determining penalties, meaning that fines can still be imposed depending on the circumstances.
- Personal Income Tax (IRPF) Declaration: Rental income from foreign properties is considered real estate income and must be declared in your annual IRPF tax return.
- Foreign Tax Credit: Spain has double taxation agreements with many countries, allowing expats to deduct foreign taxes paid on rental income, avoiding double taxation. However, the deduction is subject to specific conditions within each treaty. It is advisable to check the relevant double taxation agreement for precise rules.
- Deductible Expenses: Maintenance, repair costs, insurance, and other expenses related to rental activity can be deducted, provided they are properly documented.
How Entre Trámites Can Help
Navigating Spain’s tax system as an expat can be challenging, but you don’t have to do it alone. Through our partnership, Entre Trámites and Her Expat Life provide expert guidance to help you stay compliant with tax obligations. Whether you need support with foreign asset declarations, personalized tax planning, or assistance with your annual filings, we’re here to make the process easier. Join our global community of expats and professionals who trust us to simplify their tax matters. If you’re ready to ensure compliance and optimize your tax situation, schedule a consultation today and let’s get started!