I filed a M720 last year. Do I have to file again this year?


There is no automatic obligation to file an M720 each year, so if you declared the ownership of a foreign assets in a previous year you may not need to follow this painful process this year.

However, if there have been any changes to the foreign assets you own, you may have to file again.

Spanish tax residents have the obligation to file this special declaration and disclose the ownership of all non Spanish assets if their value, taking each asset category separately exceeds 50.000 € in value. The three categories are as follows:

  • Category 1.- Properties and rights over properties owned outside Spain.
  • Category 2.- Bank accounts outside Spain (applicable to all current accounts, savings and deposit accounts).
  • Category 3.- Shares, bonds, annuities, insurance products and all types of investment assets and investment products.

If you filed the M720 last year, you will only have to file again this year if:

  • The value of your non-Spanish assets, taking each category separately, has increased by at least 20.000 € compared to the previously filed M720 declaration.
  • If the value of one of the three categories has exceeded 50.000 € for the first time.
  • If any asset previously declared has been sold.

However, you do not need to declare assets again if the value of the category remains the same or decreases in value, unless a disposal has happened.

This looks nice and simple (doesn’t it?!), but remember that, even if assets are identical to last year, the 20,000 € rule may be triggered by currency exchange rate movements. You need to carefully check Euro values originally declared and compare to the current value. Triggering the 20.000€ limit by revaluation to current exchange rates does not apply to real estate assets, only to bank and investment assets.

One of the more unusual aspects of this declaration is that it can be required in the case of any kind of involvement with trusts, foundations or similar structures. Declaration may be required where a person is a settlor, beneficiary or trustee of a trust with non-Spanish assets.

Also, simply having powers of attorney to manage foreign assets or a mandate to operate foreign bank accounts may also be declarable.

The deadline to file the M720 each year is 31 March.

The rules for this declaration are often confusing and illogical and even innocent mistakes are punished by severe fines. The fines for failing to make a filing altogether is very severe indeed with a minimum fine of 10.000 € being imposed. If in doubt it is especially important to check the facts with us.

The good news is that EU Commission is in the process of prosecuting Spain for the fines imposed by the M720 regime, which it considers goes against the fundamental rules of freedom of movement of capital within the EU.

Also under attack by the EU is a nasty twist in the M720 rules that sidesteps the usual 4 year rule of prescription for tax offences for income tax errors. In effect the tax office can assess tax for any past error in income disclosure, applying the general rates of tax, even if the offence related to investment income, which would usually be taxed at rates that are about half of general income tax rates.

Spence Clarke & Co specialises in the provision of Spanish tax, legal, audit and accountancy services, mainly to foreigners with interests in Spain. Our cross-border knowledge helps clients adapt to the Spanish system with the minimum of doubt and disruption. If you have any questions about this article or any other matter contact us, with no obligation, to see how we can help you.