In 2012, legislation, (LEY 7/2012, de 29 octubre, de prevención y lucha contra el fraude fiscal), was passed in Spain requiring Spanish residents to make an overseas assets declaration, notifying the authorities of the worldwide assets that they own or control.
Failure to make an overseas assets declaration, or submission of an inaccurate one, can result in costly penalties. Unreported overseas assets that are later discovered by the authorities, may be treated as undeclared income on which tax should have been paid. The fines and penalties for such can amount to more than 150% of the undeclared asset value.
Whilst the law is aimed at deliberate high level tax evaders, the fact it allows penalties to be imposed simply for non-declaration of overseas assets, means that expats and other foreigners living in Spain, who are likely to have such assets, really need to understand the implications of this law, make their declaration correctly, so as not to fall foul of this rather intrusive legislation.
The overseas assets declaration is an information gathering exercise, and not a tax return, so someone making or considering an overseas assets declaration should be aware that they are not declaring assets so that they can be directly taxed. They should however be mindful that declaration of certain types of assets, may make the authorities aware of sources of income or capital gains for example, that could be deemed to be subject to tax in Spain. It is also important therefore, to make sure that assets are organised efficiently in order to avoid paying additional tax or amounts unnecessarily.
An overseas assets declaration is made by completing a form known as ‘Modelo 720’. The deadline for submitting the form is the 31st of March. Generally speaking the declaration only needs to be made once, as subsequent declarations are only necessary if assets have been acquired, or disposed of, or if existing declared assets have increased in value above a given amount.
The legal requirement to make an overseas assets declaration in Spain and the potentially high penalties for not doing so, brought a massive change for both foreign and Spanish nationals resident in Spain. Some have even made the decision to leave the country as a result – these were primarily those whom the law is aimed at – individuals for whom making the declaration would implicate them in tax avoidance or indeed evasion.
Whilst this law and reporting requirement might seem intrusive, it is in reality only a small move by the authorities, in their steps to counter the country’s rampant tax evasion. For British expats, in particular retirees, Spain can actually be tax efficient. If you have concerns relating to the overseas assets declaration, we recommend that you consult a relevant and suitably qualified professional.