Informative obligations in Spain, do I need to comply with any?

Many of our clients, when they have assets and investments outside of Spain, ask about this type of obligations. They want to know the different types, which are the differences, if all of them need to be filed and when and how to file. 

We will summarize the different type of obligations that an individual with assets, properties or financial investments located outside of Spain need to comply. 

Nonetheless, it is always necessary to look for expertise advise that can help us to understand the different obligations that foreign investments can imply, both from an informative and tax perspective. 

Informative form of assets and rights located outside of Spain (Form 720) 

This tax Form is an informative return that needs to be filed before the Spanish Tax Authorities and intends to control the assets located outside of Spain (properties, shares, insurances, bank accounts, etc), as having these assets may also have implications for personal income and net wealth tax obligations. 

To determine the obligation to file or not this form, the assets and rights located outside of Spain are categorized into three groups:  

• bank accounts and deposits in financial entities in entities located outside of Spain. 
• securities, rights, insurances, or income, located, managed or obtained abroad.
• real estate located abroad or rights over that real estate. 

Based on this classification, tax residents in Spain will be required to file a Form 720 in the following cases: 

• If the form has never been filed before, if the value of any of the groups of assets previously described exceeds the value of 50,000 Euros. 
• If the form has been previously filed and there has been an increase of 20,000 Euros in any of the groups already informed, or if any of the groups have not been yet informed, when it happens to have a value greater than 50,000 Euros. 
• The ownership of goods, assets or rights informed in a previous form is extinguished. 

Individuals who are considered non-tax residents in Spain, nor those who, even though they are tax residents in Spain, have opted for the Special Tax Regime (known as the Beckham Law) will not be required to submit form 720. 

The obligation to file form 720 must be fulfilled between January 1 and March 31 of the year following the end of the tax year to which the return refers. 

One of the biggest issues around form 720 are the related sanctions and that can be imposed by the Spanish tax authorities for failure to file or for late submission. 

Despite being an informative return, as filing does not entail the payment of any amount, the penalties for failure to comply in case of being obliged can be 150% of the personal income tax and 5,000 Euros for each data or set of data, with a minimum of 10,000 Euros. In case of late filing, the penalties will be lower, but in any case, the taxpayer would be facing a minimum of 1,500 Euros. 

Foreign investments form (Ds Form) 

These forms must be filed to the “Foreign Investment department of the Ministry of Economy” for administrative, statistical, or economic purposes. 

In general, investments will be informed once they have been made, to provide the Spanish Administration with knowledge of foreign investments in Spain or Spanish investment outside for statistical and administrative purposes. 

However, there will be an obligation to file a prior form in the cases of investments from/in tax havens, in which investments themselves are not declared but investment projects. This declaration will be necessary except in the cases certainly excluded. 

Foreign investments are classified in two groups: 

• Foreign investment in Spain

The cases of filing may be the following:

1. Individuals not resident in Spain (Spanish or foreigners, domiciled abroad or who have their main residence outside of Spain).
2. Corporations domiciled abroad, as well as public entities.  

The investment will be informed by the non-resident holder. Additionally, when the operation has been managed by a Spanish public notary, the latter will also inform it.   

Depending on how and in which asset the investment is done, there will be different parties obliged to declared and the forms will be different.  

• Spanish investments abroad 

This obligation may affect to the following holders of Spanish investments abroad: 

1. Individuals residing in Spain, understood as Spanish or foreigners with domicile or main residence in Spain. 
2. Corporations located in Spain. 

Spanish investments abroad can be made through any of the following operations: 

1. Participation in foreign companies.
2. The creation outside of Spain of branches of Spanish companies. 
3. Securities of non-Spanish companies.
4. Participation in foreign investment funds.
5. The acquisition of real estate located abroad when exceeding certain values or under certain requirements.
6. Any other investments in foreign entities, corporations or similar. 

There are a lot of different forms which will be used each one depending on the type of investment. 

Foreign transactions survey (ETE Form) 

In this form the Bank of Spain must be informed of economic transactions and balances of financial assets and liabilities abroad and which at the end of the year exceed the value of 1 million Euros. 

The obligation to file the ETE form is for individual or corporations residing in Spain whose value of financial balances (initial and final) and the amount total transactions carried out (revenues and payments) in the period exceed one million euros. This form is not applicable to certain financial entities which are registered in the official records of the Bank of Spain, 

The filing deadlines of the ETE form will be of different frequency (monthly, quarterly or annually) depending on the amount of the total transactions with non-residents carried out during the previous year, or the final amount of financial balances as of December 31st. In general terms, if the amount of the transactions does not exceed 1,000,000 Euros in the corresponding tax year, the statement will be filed before January 20 of the year following the end in which the investments are made. 

The information must be sent to the Statistics Department of the Bank of Spain, by electronic means so a “personal digital certificate” will be needed.