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Last Updated: 9 July 2013
Article by Mariano Gomariz
Ecija & Asociados
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Spain: Special Tax Alert On Newly Introduced Reporting
Obligations Regarding Assets And Rights Located Abroad
0
Spanish Law 7/2012, of October 29th 2012, amending tax and budgetary legislation and adapting financial legislation to step
up proceedings to prevent and fight fraud (hereinafter, Law 7/2012 or "the Law") was published in the Official State Gazette on
October 30st, 2012 and became effective on October 31, 2012.
This new Law includes a new obligation to report assets and rights located abroad to the Spanish Tax Authorities. In order to
fulfill the new obligation a new Tax Form No. 720 has been approved. The deadline to file Tax Form No. 720 expires by the end
of March of each year. However, for 2013 the filing period has been extended to April 30st. 2013.
Even though the scope of its application could be expanded in the future, the new obligation currently applies to tax resident
companies and individuals that are taxed on their worldwide income (i.e., those subject to the Spanish Personal Income Tax as
ordinary tax resident individuals) and consists on disclosing the following assets and rights located abroad:
• Accounts located abroad held at institutions engaged in banking or lending transactions where the taxpayer is the
account-holder or beneficiary or has the power to operate the account.
• Any certificates, assets, securities or rights, representing the capital stock, equity or assets of all kinds of entities, or
representing the transfer to third parties of own capital owned by the taxpayer, and which are held or located abroad.
• Life or disability insurance for which the taxpayer is the policy-holder, and life or temporary annuities for which it is the
beneficiary, arranged with entities established abroad.
• Real estate and rights in real estate located abroad, owned by the taxpayer.
There is an exempt threshold of Euro 50.000 for each category of assets. The disclosure obligation will also apply to anyone
who is deemed to be the beneficial owner.
The Law also introduces a very burdensome regime of infringements with extremely high penalties ranging between Euro
5,000 and Euro 10,000. Those penalties can be dramatically reduced in case of a late filing without a prior demand.
Aside from the fines referred to above, in the case of Spanish Personal Income Tax payers, the failure to timely comply with
this new reporting obligation will allow considering the unreported assets as unjustified capital gains and included in the general
taxable base of the most distant period not covered by the statute of limitation.
In the case of Corporate Income Tax payers, the assets and rights will be treated as being acquired out of undisclosed income,
which will also be allocated to the earliest tax period among those that are not statute-barred and can be reassessed. This rule
applies to all fiscal years ending on or after October 31, 2012.
This is a new allocation rule that replaces the statute of limitation rule and applies even if the taxpayer can prove that those
assets or rights derive from a statute-barred year.
The penalty deriving from the application of the aforesaid allocation rule is a proportional monetary fine at 150% of the amount
of the gross tax payable.
In conclusion, as a consequence of the hefty consequences arising from the breach of the new reporting obligation it is of
outmost importance to analyze if this obligation exists and, if affirmative, to comply with the Law timely and in an extremely
precise manner.
In Barcelona, March 13th, 2013
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about
your specific circumstances.
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