720 Form – Foreign Assets and Rights

In respect of the obligation to report cryptocurrencies in the Informative Declaration of assets and rights located outside of Spain (Form 720), articles/studies that have been published conclude the following:

• Cryptocurrencies are based on cryptography and on the blockchain, which is a single record, agreed and distributed in several nodes of a network (that is, it would be like the accounting book in which transactions are recorded). Consequently it would be difficult to determine where the cryptocurrencies are located.
• Cryptocurrencies do not have a fit in any of the three blocks of assets/rights about which there could be a reporting obligation. Obviously they are not real estate.
• On the other hand, the wallet is not considered an account in a financial institution. And finally, even though there is a figure of exchange houses that can manage the exchange of cryptocurrencies, in no case is there a transfer of our funds to these exchangers.

Thus, in relation to Model 720, there will be no obligation to report on investments in cryptocurrencies.

One of the biggest issues around form 720 are the related sanctions 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.

RSU’s are considered a right to receive a number of shares of the Company, after a corresponding vesting period (in this case, the vesting period is 1/3 of the units every year).

There is no obligation to report RSU’s in the For 720 until shares are delivered and assuming this will be at a foreign bank.

Form 720

Resident taxpayers who have assets located outside of Spain may be subject to a reporting obligation (Form 720).

For the purpose of this reporting obligation, the return is divided into three different groups of information: (i) Bank Accounts (ii) Investments and (iii) Properties.

As a general rule, and individual is subject to this reporting obligation in the following situations:

• When the value at December 31^st, of any of the three groups is more than 50.000 euros.
• After the first obligation, when there is a cancellation or an increase in the value of any of the groups of 20,000 euros or more, or if any of the groups not reported in previous years reaches the 50,000 euro threshold.

Among others, the following will be required to file this return:

• Individuals resident in Spanish territory, unless they have been granted with the Special Regime.
• Communities of assets and inheritances.
• Real owners of the assets at any time of the year to which the declaration refers.
• The holders, representatives, authorized, or beneficiaries of financial accounts located abroad, or
• those who have had disposition powers over them, or who have been real holders, at any time of the year to which the declaration refers.

This return is informative and no payment will arise at the time of filing. However, the penalty regime for not filing or late filing is very strict and may lead significant penalties.

In addition to the possible penalties for the not filing or late filing, all those assets and rights that the taxpayer is required to report, which are informed late, may be included as an unjustified capital gain for Personal Income tax purposes.

The deadline for submission is from January 1 to March 31 following the end of the corresponding year. Electronic filing is mandatory for this tax return.

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:

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

National Spanish Bank (ETE) and other informative Forms before the Spanish Authorities

The ETE FORM (Survey of Foreign Transactions) is an informative declaration to be filed before the Bank of Spain.

Individual and corporate residents in Spain that carry out operations/transactions with non-residents, or maintain assets abroad for a value greater than 1,000,000 euros are required to submit this form.

It is necessary to inform about the values and variations of the value of assets, as well as the operations with non-residents regardless of their nature and regardless of how the operations take place.

Annual submission will be required and must be done no later than January 20 following the year of assessment, provided that the amount of the transactions during the immediately preceding year or the values of assets and liabilities at December 31^st, were less than 100,000,000 euros. If this is not the case, the submission deadlines may vary and have a higher recurrence.

Finally, there is an obligation for Spanish residents when there are foreign partners or investments abroad, or also for holders of shares in foreign companies or branches, as well as for Spanish companies, in whose shareholders a foreigner participates and makes some foreign investment in Spain.

Such situations lead to the obligation to file forms D4, D6, D8, D5A, D5B, D1, etc. to the General Directorate of Trade and Investments.

The deadlines vary depending on the form that needs to be completed.

The Foreign investments form (Ds Form) 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:

• Individuals not resident in Spain (Spanish or foreigners, domiciled abroad or who have their main residence outside of Spain).
• 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:

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

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

• Participation in foreign companies.
• The creation outside of Spain of branches of Spanish companies.
• Securities of non-Spanish companies.
• Participation in foreign investment funds.
• The acquisition of real estate located abroad when exceeding certain values or under certain requirements.
• 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.

In the Foreign Transactions Turvey (ETE 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.

Form 720 has to be filed in March of the year following the year of assessment.

The purpose of this Form is to to report the assets and rights held overseas by Spanish Residents.

There are three different groups of assets: Bank accounts, investments, and properties.

In general, if the value of any of this group is higher that 50.000 Euros, an individual is obliged to file the Form 720.

For subsequent years, a filing obligation will arise in the case that the value of any previously reported group increases in more than 20.000 Euros, or if there is any cancelation/sold of any of the assets previously reported, or in case that the value of a unreported group reaches 50.000 Euros.

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.