Filing your taxes in Spain

Filing your taxes in Spain. | cze

Cathal Rochford, Partner Blevins FranksPalma20/03/2023 12:08
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Long-term residents of Spain will be familiar with Modelo 720 (Form 720), but newer residents may be unclear on what they have to do. Penalties are imposed for late or incorrect filing (though now less draconian than they were), so you need to get it right. The deadline is 31 March.

If you were tax resident in Spain in 2022 you are legally obliged to submit a Modelo 720 declaring the assets you own outside Spain. This is not a tax return as such; you need to complete it over and above your income and wealth tax returns.

You have to report all assets in a particular category if the value of your total overseas assets in it amounts to over €50,000. The three categories are:

1. Accounts held with financial institutions (banks)

2. Investments

3. Immovable property

With joint assets, each owner needs to declare the full value (even if your share is less than €50,000) and indicate your percentage of ownership.

You are obliged to report assets if you are the owner, a settlor of a trust, an effective beneficiary from a trust, authorised signatory, or you have the authority to dispose of the asset. This includes assets held by a company, trust or fiduciary.

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Assets are valued using the wealth tax rules as at 31st December each year. For bank accounts you also need to declare the average balance over the last three months of the year. Investments held in other currencies need to be converted to Euros using the official exchange rate.

Your 2023 declaration

For your 2023 form, you declare the assets owned as at the end of 2022. If you have already submitted Modelo 720 in recent years, 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 new assets.

While many British retired expatriates are wary of Spain’s tax regime, it can be a tax efficient country if you take specialist advice. Using compliant tax planning structures can save you tax and provide peace of mind. You should review your assets now to make sure they are in the best structures going forward, and also consider consolidating investments to make completing Modelo 720 easier in future.

Summarised tax information is based upon our understanding of current laws and practices which may change. Individuals should seek personalised advice.

Keep up to date on the financial issues that may affect you on the Blevins Franks news page at www.blevinsfranks.com