We are approaching that time of the year again, when anyone who is resident in Spain needs to submit their annual Form Modelo 720 listing their overseas assets.
The deadline is the 31st March, so you need to understand what you need to declare this year. If you have previously submitted a form you only need to declare assets if they have grown a certain amount, or you have sold them. If you have investments in Sterling you need to take exchange rate into account, which may mean you need to declare assets you did not expect to.
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Summary of the Spanish tax rules
There are three reporting categories, based on bank accounts, investments and immovable property, and you have to report all offshore assets in a particular category if the value of your total assets in that category amounts to over €50,000.
You are obliged to report assets if you are the owner, a settlor who can benefit from a trust you settled, authorised signatory, or you have the authority to dispose of the asset. This includes assets held by a company, trust or fiduciary.
You need to report even if your personal share of assets is less than €50,000. With joint assets, each owner needs to declare the full value (not pro-rated) and indicate their percentage.
In most cases, assets are valued using the wealth tax rules as at 31st December each year. For assets held within financial institutions (eg, bank accounts), you also need to declare the average balance over the last three months of the year.
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Tax declaration in 2015
On your 2015 Form 720 you need to declare the assets owned as at 31st December 2014.
If you have previously submitted a Form 720, you only need to report again if:
• The value of an existing asset grew by more than €20,000, or
• You sold an asset/closed an account, or
• You obtained a new asset.
You need to report the value of the assets in Euros, so exchange rate movements have to be taken into account.
The Pound to Euro exchange rate at 31st December 2013 (so for your last Form) was 1.20. If at that date you had Sterling denominated assets of £250,000, they were valued at €300,000.
On 31st December 2014 the £/€ exchange rate was 1.28. So your £250,000 investment is now worth €320,000. The increase of €20,000 means that you need to report the growth on this year’s form.
Exchange rates may play an even bigger part this year, depending on how central bank policies play out. At the time of writing in mid-February the exchange rate is 1.34, making £250,000 worth €335,000. This shows what a difference exchange rate movements can make. It is something you need to be aware of and plan for if necessary.
Are you liable to pay tax in Spain? Find out about the changes in Spanish taxation in 2015 and how it will affect your personal circumstances. […] Spanish tax for foreigners in 2015 (Part 1)
The introduction of the obligation to report all overseas assets in Spain – and the penalties are very high if you do not – was a huge change for residents of Spain, whether Spanish or foreign nationals. Many are paying more tax as a result – particularly those who declared assets for the first time, or incorrectly declared them previously. These assets will now be assessed for wealth tax, and any income they produce for income tax, and you have to declare them accordingly.
Combined with higher taxes and wealth tax, some expatriates have considered leaving Spain. However, with specialist advice from Blevins Franks Spain remains a tax efficient country for British retired expatriates. Form 720 need not necessarily be such a concern either. Blevins Franks have in depth knowledge of the Spanish tax regime and the opportunities for legitimate tax mitigation. We would be happy to review your assets now to make sure they are in the best structures going forward.
Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; an individual is advised to seek personalised advice.
Will you inherit spanish assets? How do you declare spanish assets? Are you moving from Spain? Here are the changes in Spanish taxation for foreigners in 2015 and how it will affect you. […] Spanish tax for foreigners (Part 2)
For more information and personalised advice, contact Blevins Franks on +34 971 719 181.
To keep in touch with the latest developments in the offshore world, check out the latest news on Blevins Franks Tax & Wealth Management Specialists.
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This article was written on the 03th of March, 2015.