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.
How to Declare Rental Income from Foreign Properties
If you are an expat in Spain earning rental income from properties abroad, you
must adhere to the following tax obligations:
● 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!
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